This article is third in our five-part special series on the India-China dispute and its impact on the Indian Economy and the Technology Sector. The second article can be accessed here.
The Road Ahead
India seems geared up to get back to its ‘Swadeshi’ roots amidst the pandemic, after the recent India-China standoff and the ever-increasing tensions between the two countries, has led to an outraged citizenry and the ruling party. The government has already made its first move, in a rather unprecedented, but welcome move, by putting a ban on 59 odd Chinese apps in lieu of the threat to the integrity and sovereignty of the country that these apps posed, by invoking Section 69A of the IT Act. But certainly, this is not enough, and hopefully, this isn’t the only trick that the Government has in its books to tackle our dependence on China and its products and services. While China needs to learn its lesson, there’s a lot at stake for India’s economy too, and the government needs to consider each and every aspect in order to make a well-grounded plan.
The facts stand as they are, China is the largest source of import for India (around 14% of India’s total import comes from China), while these constitute only 3% of China’s exports. Further, India depends on China for almost everything, from vehicle accessories to pharmaceutical products. However, the telecom sector and the mobile phone companies remain on top. The combined sales of Chinese mobile phone companies in India crossed a whopping Rs. 50,000 crores in 2017-18 according to the Brookings research. Furthermore, three out of four phones sold in India are Chinese and this domination extends even to other industries, including the Smart TVs industry, where Xiaomi holds 27% market share, according to Counterpoint Research. There is no doubt that since 2014, the Chinese capital has transformed the trade and investment regimes in India. Therefore, in the midst of the growth of Chinese technology and products in the Indian market, a sudden urge to boycott all “made in China” products need in-depth scrutiny.
The quintessential step towards a calculated way forward would be to first analyze the International take on the Chinese products, in order to formulate a well-grounded plan.
The International Scenario
Chinese telecom companies like Huawei and ZTE have come under scrutiny by various countries, especially the United States of America again in recent years. Despite the massive dominance around the globe, it is not a lesser-known fact that Huawei’s presence is virtually invisible in the US. The government has time and again expressed concerns of national security, as a company that is “beholden to foreign governments which don’t share the values of the USA” is a risk. This position of power would allow them “the capacity to control telecommunications and maliciously steal information and provide them with the capacity to conduct undetected espionage.” Along with the US, several other countries including Australia, Japan, and Vietnam have also expressed these concerns and have blocked the use of its equipment in their 5G network.
This boycott of the two telecom giants around the globe comes off as a big opportunity for India to join hands with the other world powers post the border skirmish. However, the question still remains; is it the right time for India to turn to other service providers given the large market share of the Chinese companies in the Indian markets? These products are known for their affordability, combined with the new technology they offer. In light of the same, the Indian government needs to review all its policies with regards to China, very carefully before going through with them.
Time to Propagate Aatma-Nirbharta?
Speculations about the Indian government banning Chinese telecoms like Huawei and ZTE have seen a rise in the past few days after consultations regarding the same have been doing the rounds with the Indian government officials. This comes after the government blocked a plethora of Chinese apps in lieu of its attempt to boycott China. These steps bespeak about India’s tryst to become self-reliant, which is undoubtedly a gradual process drawn over a couple of years.
Looking at the telecom market, we see China being a player of utmost importance in the global supply chains. However, at a glance, with the world’s continued mistrust of China, the time is ripe for India to gear for incentivizing its local markets for new technologies.
First, the government needs to prioritize investments in the telecom sector. A lot of investments need to be shifted from already established companies to local companies in order to move up the value chain. In order for Indian mobile companies like Micromax, Spice, and Karbonn, which seem to have lost the market, to compete with the giants in the international market, they need to be provided with support and money to get a hang of the developed technologies, used by their competitors. Some of these brands had partnered with Chinese manufacturers in order to gain a place in the market, however, the victory was short-lived and the consumer interest shifted to other big companies. The need of the hour is to gauge at the practices that made the Chinese mobile phone companies dominant and loved in the Indian market, the company’s initiative in Make in India scheme and its tactics to mold its product to the user’s interests. India’s people have become habituated to the high-end technologies that the big brands offer. In order for the local companies to reach that level, huge investments in research and development, more jobs, and marketing strategies need to be put on focus. The government has already started to work in this direction when it recently approved a long-term policy decision under the Make in India initiative to provide Rs. 41,000 crore in the coming five years for boosting the locally manufactured mobile phones and their components in their production-linked incentive. These initiatives shall go a long way in countering China, which seems to have set its foot in the mobile phone market of India.
Secondly, with the government itching to ban Chinese telecom giants in India and with the rolling out of 5G tests in the coming months, the big companies need investments to bring about their own plans. It is a known fact that India has done seemingly well in its telecom sector because of the connectivity revolution in its Information technology. The giants, Bharti Airtel and Vodafone Idea had submitted applications to undergo the 5G tests with various vendors, including Huawei, which however seems impossible now. For the same to become a success, the carriers need to come up with their own plans and technology like the giant- Reliance Jio which has proposed to develop its own 5G technology keeping the self-reliance initiative in mind. Its self-designed plan, to solidify its design and technology base in India, has been looked up to the most in the recent months. If turned out to be successful, it shall make Jio independent, even of its 4G technology, Samsung. For 5G to become a success, the “productivity-linked incentive” (PLI) scheme of the Department of Telecommunications, where “a firm must invest more than 6 billion Indian rupees ($79 million) in the country over a four-year period and export goods worth between INR 10 billion ($132 million) and INR 30 billion ($396 million) annually”, needs to be implemented without any delay in order to incentivize the carriers. Such more schemes under the Make in India initiative have been announced by the government previously and should remain the prime focus.
Thirdly, the MSMEs which have suffered the most because of Chinese interests in the Indian economy, need to be revamped. The local SME’s and the MSME’s need government attention in the form of policies to ramp up investments. If large private companies are incentivized to work with domestic MSMEs, they can get the opportunity to produce products that are globally competitive while promoting a local ecosystem.
Lastly, with a huge chunk of the population favoring the boycott, the Indian government needs to strategically look for the present alternatives. When we talk about mobile phone operators, the alternatives present with Indian people are Sony, Samsung, Apple, etc. Although, apart from Samsung, no other brand can fully be non-Chinese. Truth be told, an entire China boycott is impossible in the short run. However, with government initiatives and private companies getting ready for the race, India can be in a position to challenge the products of China in the longer run. It would require the betterment of not only the technology but also of knowledge businesses and IPR in the coming future. These initiatives have an opportunity to create more jobs and invite innovation. Generating data has always been seen as a business that is foreign-owned. It would take a drastic shift to focus on these aspects, where the production and supply are more than the demand, which usually comes from outside the country.
However, there is a long run to achieving self-reliance. Thus, protracted steps with a well-structured plan are the need of the hour, instead of overtly nationalist enthusiasm which will take us nowhere.
The First Step?
The government has recently imposed a ban on 59 Chinese apps. While some see it as a welcome step, the government has been under attack citing the reason behind taking such an action to be an infringement of the privacy of citizens done by those apps. While the government has backed the ban with s. 69A of the IT Act, giving it the color of national security, there have been concerns of the same not being legally sound because of no formal order. However, it is too soon to scrutinize such a step. The government needs baby steps in this direction. Any major leap taken against China has the potential to make or break the economy. With the pandemic hitting the country coupled with the poor performance of the economy, every decision will have to be majorly economic rather than simply being nationalist or “Swadeshi”. Although the government has started working towards its Make in India initiative by promulgating elaborative policies and schemes, it would be a great sight to see these put into action with the same zest with which they were announced, unlike the other policies which are often left merely on paper.