Backlash against Chinese products ramps up in India

In Mohit Gogia’s stationery and gift store in Noida, the only decorative lights for sale ahead of last month’s festival of lights were Chinese made.

“India-made lights cost twice as much,” said Gogia, as shoppers snapped up supplies for the Diwali celebration. “Customers aren’t willing to pay that.”

Two-way trade statistics tell the tale. India’s deficit with China has ballooned ninefold over a decade to $49 billion in 2016 as China’s manufacturing edge stacks the odds against Prime Minister Narendra Modi’s three-year-old ‘Make-in-India’ programme. The result: India’s current account deficit is worsening again, threatening the outlook for an economy already straining under the fallout of a snap ban on high-value notes a year ago and a new sales tax.  

Now — a century after freedom fighters in colonial India launched a movement against British goods — the backlash against Chinese products is ramping up. Swadeshi Jagran Manch, an economic policy group linked to the ruling Bharatiya Janata Party, drew more than 100,000 onto the streets in the capital New Delhi on October 29 in a rally against the dominance of Chinese products. A picture in the local press showed protesters holding Indian flags and a poster of Chinese President Xi Jinping with a cross mark on it.

“This is the biggest-ever gathering to fight the dominance of Chinese goods,” Arun Ojha, national convener of Swadeshi Jagran Manch, said in an interview in the hot, dusty protest site days ahead of the rally. “Our youth are losing jobs and we are becoming traders of Chinese products.”

Swadeshi Jagran Manch says its boycott movement is a “second war of economic independence” and claims support from farmers, trade and labour associations — the same groupings that Modi will rely on for re-election in 2019. Protest leaders met with Defence Minister Nirmala Sitharaman following the demonstration. Calls to her mobile and to the office of the prime minister seeking comment went unanswered.

“This flood of Chinese imports fits in very uncomfortable with the priority of the Modi government to expand India’s manufacturing base,” said Harsh Pant, professor of international relations at King’s College in London. “This trade deficit is now becoming a major headache. Though this haves not unique to India-China economic ties, this is a major concern for Indian policymakers now that economic restructuring is a priority for New Delhi.”

In the last 10 years, there’s been a few episodes of rapid growth in India that led to rising external deficits and inflation and came to a halt because the government had to rein in demand in order to restore macroeconomic stability, said Louis Kuijs, head of Asia economics at Oxford Economics in Hong Kong.

“The imbalanced trade relationship reflects the fact that India’s manufacturing sector remains strongly underdeveloped,” Kuijs said. “Unless it is able to develop its manufacturing sector so that it can produce a large share of the growing demand for goods in its economy, India’s economic growth will be constrained by rising current account deficits and/or inflation and their consequences.” 

Bloomberg