Selling out to China?
Nothing has shocked me more in the last few weeks than the information revealed by S Gurumurthy in a study of “A Decade of Economic Destruction.” It is about India’s trade with China. It would seem that we have almost totally sold ourselves to our powerful and relentless neighbour. We have been importing goods that we could have any day manufactured ourselves and saved on foreign exchange.
Consider this: China’s share of goods exported to India is now more than a quarter of the capital goods, half of textile yarn and made-ups, three-fourths of cotton yarn/fabric, nine-tenths of silk yarn/fabric, one-third of ready garments, two-thirds of synthetic fibres, one third of chemicals, medical and pharmaceuticals, one-sixth of machine tools, one-third of computer software, etc. Can’t we manufacture each of these products?
China has been dumping goods into India in an outrageous fashion, forcing The Statesman (April 18, 2009) to warn that “if the current situation continued the Indian industry will cease to exist.”
India’s trade deficit with China has shot up and it is now $ 325 billion in the last seven years. The capital goods imported from China alone amounts to $ 150 billion. What seems ridiculous it is that India is importing ready made garments from China. If India is to be saved from further disaster, a massive movement must be undertaken to boycott all Chinese goods. Like a colonial country, we sell China raw material and import finished goods. We have been selling, of all things, iron ore, the most precious of possessions, which is a traitorous thing to do.
Remember, in the late twenties and thirties, the Indian National Congress, under the leadership of Mahatma Gandhi had inaugurated a ‘Boycott British Goods’ campaign to the point of success that Manchester’s sale of textiles fell by almost 40 per cent. We have come to such a stage that China is selling Lord Ganesha dolls to a sick Indian public because they happen to be underpriced.
More dangerously, China has managed to obtain a stranglehold on the power, communications and electronic sectors in India, thereby getting, as one China expert has recently pointed out “the potential to disrupt power and communications in the country”.
One understands that the picture is unfortunately bleak in the electronic and communication sectors in India, where our imports from China could well exceed our petroleum imports by 2020. China is no friend of India, but Delhi is behaving as if it has no alternative but to fall at China’s feet for the most elementary things needed in the field of technology, when we have been training engineers in plenty who can easily help, put India on the industrial map in a short time. But what we are hearing is an increasing number of suicides among young men just graduated who find no job opportunities. There have been recent reports that many Japanese firms who had invested in China now want to shift their operations to India.
It is no accident that the Government has come into strong criticism from the retiring Governor of the Reserve Bank of India.
Isn’t Prime Minister Manmohan Singh aware of what is going on right under his nose? The other day he said – rather, he admitted – to the historic fall in rupee, saying that some domestic factors have been responsible for India’s troubles. Why can’t he name them?
What is understandable is India’s fascination for China. Based on the US Department of Defence estimates of 63 billion dollars as China’s annual defence budget, as Gurumurthy has noted, “the 175 billion dollars Indian trade account bounty, funds the defence budget of China for some three years! It seems clear that the trade deficit with China weakens the Indian rupee and also the Indian economy as a whole, and what is to be fully noted, it strengthens the Chinese economy. Is that of any help to us?,” says Gurumurthy. He further says, “How and why did the UPA government commit this geo-political and economic blunder?” No answer.
Apart from failing to resist the Chinese dumping, by cutting India’s import and excise taxes, the UPA has positively helped China, already a cheap producer, to penetrate and dominate the Indian market.” The Chinese are smart. China’s huge liquidity has enabled it to lure the Indian importers of China’s capital goods with billions of dollars of supplier’s credit, virtually at throwaway interest rates.”
It is the smartest way to capture a market and our importers are obviously are not aware—or do not care, because of short term gains – of future consequences. What all this suggests is that we do not have a well-thought out plan that takes care as much of the present as of the future. We are beguiled with low interest rates, cheap prices and sweet talk. The day does not seem to be too far when we have to face its tragic consequences.