Biz Wants Stable Policies As India Looks To Improve China Ties

The rapprochement between the two countries is in the aftermath of the announcement of a 50 per cent tariff on Indian goods by US President Donald Trump. 

China is a major exporter of raw materials and machinery used by Indian manufacturers, most of whom are small businesses. As part of the Atmanirbhar Bharat programme of the Narendra Modi-led Indian government, restrictions have been placed on imports from China. Curbs have also been put on the entry of Chinese professionals in India.

'Remove Curbs On China'

These are needed for the maintenance of Chinese machines imported by Indian manufacturers. Indian companies have been pressing for easing these curbs. Under these circumstances, the sudden bonhomie between India and China isn't surprising.

“We had demanded the removal of restrictions on Chinese imports and the entry of Chinese professionals to India. While the improvement in bilateral relations is a welcome step, it should not be seen as a counter to deteriorating relations between India and the USA. There should be consistency, longevity, and stability in relations. It should not happen that in the future, if the USA improves its relations with India, we will again put restrictions on Chinese imports and professionals,” said Jitendra Shah, president of the Federation of Associations of Maharashtra, an apex body of over 700 trade and business associations of Maharashtra. 

Manufacturers of aluminium extrusion products rely heavily on machinery imported from China to produce goods. The All India Aluminium Extrusion Manufacturers of India (ALEMAI) had requested the Indian government to allow Chinese experts to enter India for the maintenance of machinery, but no action has been taken on this yet.

"A few weeks ago, there were talks of relaxing tourist visas (for Chinese professionals). No action has taken place since then. What the government says should also be followed up with action,” ALEMAI president Jitendra Chopra told The Secretariat. 

Ajay Patel, vice-president of Naroda Industries Association (NIA), welcomes the efforts to improve relations between India and China, saying that both countries are major producers of goods, and huge markets. “If India and China join hands, we can supply goods in local as well as export markets,” said Patel.

Chemicals & Pharmaceuticals

Naroda is a major cluster for producing chemicals and pharmaceuticals, both of which rely heavily on the import of raw materials from China. Dyes, thus produced, are used in local markets as well as exported.

The Indian pharmaceutical industry also relies on imported active pharmaceutical ingredients (APIs) and key starting materials to manufacture medicines. India is one of the major exporters of pharmaceuticals. 

Since China produces raw materials on a large scale, it can sell them at competitive rates. The Chinese government also incentivises companies that export. These goods are cheaper in India than the locally produced raw materials. Curbs on Chinese raw materials force exporters to use locally produced, but costly, raw materials, which make them uncompetitive in the export market. 

Compulsion, Not Choice

Analysts haven't missed the fact that India is not getting closer to China by choice, but out of compulsion. They believe that India needs to adopt a calibrated approach, keeping its interests in mind. Mumbai-based investment analyst Deepak Gala told The Secretariat that proximity to China can cushion against the likely reduction in investment from the USA.

“China has surplus funds. It wants to invest abroad, including in India. This can create competition for Indian and foreign companies, and benefit the consumer. India can allow Chinese investment in selective areas that do not compromise the country’s security or India’s strategic autonomy. A country with a population of over 140 crore will never want to be subordinate to any country,” said Gala. 

Jayendra Tanna, president of Federation of All India Vyapar Mandal (FAIVM) said that cosying up with China is a major U-turn by the Modi government, and that China will milk this opportunity to force its products into the Indian market, which will hurt small businesses.

“Narendra Modi is suffering setbacks on every front. This measure is out of desperation and not out of choice. China will seek its pound of flesh. Cheaper, ready-made Chinese goods will hurt small manufacturers. The boycott of Chinese products will be a thing of the past. No one will talk about it,” said Tanna.