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    The dangers of going all out against China, according to SA Aiyar

    Synopsis

    Aiyar insists that India and China are inseparable in many areas of trade and economics.

    PTI
    A protest at Galwan Valley against Chinese aggression.
    Despite the ongoing disengagement at the India-China border following a tense weeks-long faceoff, there seems to be no let-up in calls to ban Chinese goods.

    Even as concerted efforts from both sides gradually take the edge off the tension at Ladakh, local industry finds itself in considerable dilemma over what happens if/when India actually severs decades-old business linkages with its trans-Himalayan neighbour.

    In an interview today, senior economy commentator Swaminathan Aiyar put the vexing issue in perspective. Rejecting the popular notion that the China story could be over for India, Aiyar highlighted the dangers of plunging headlong into an import ban. China must be sent a stern message but not in this manner, he insisted.

    There is a need to draw a clear line between goods that can be banned and the ones that can't be, he said.

    There is not much downside to banning Chinese apps, kites, candles, clocks or toys, Aiyar explained, because such a move will not increase consumer prices here owing to the fact that India has other options available at roughly similar price points. But if India goes and bans stuff like Chinese machinery or intermediate goods, it will hurt the Indian economy deeply because no other nation can provide us the same stuff at the cost that China does, he cautioned.

    Getty imageET Online


    The bottomline of the argument is that while banning apps or toys won't turn India into a high-cost economy, a ban on machinery or intermediate goods will, to the great detriment of India's interests.

    If India goes ahead with a ban on such goods, it will then lose out to other countries that continue with Chinese imports, Aiyar reasoned. He cited the example of ASEAN nations to make his point clear: These nations have a long history of bitterness with China but they have never banned Chinese goods. If India goes for a ban, it will simply lose competitiveness, he said.

    Put checks and balances on finished or consumer goods by all means, but don't touch capital goods or intermediate ones — is what he said India should do at this point.

    It is okay for the Swadeshi Jagran Manch to push individual consumers to boycott Chinese goods, but at the state level India must not delink from China, especially in case of cap goods or technology, Aiyar said.

    Talking of Sajjan Jindal's insistence on not importing stuff from China anymore, Aiyar said grandstanding was fine so far as it did not raise the cost of operations.

    So if you want to do that kind of grandstanding and it makes you feel good without becoming high cost, it is just fine, he said.

    Putting in safeguards is better than altogether banning Chinese electrical equipment, an area where China supplies goods very cheap; the same goes for solar panels and battery storage, and so it is not possible for India to go big on solar without Chinese imports, he explained.

    Aiyar underlined the need to be careful in certain areas such as defence production, but he also insisted that India and China are inseparable in many areas of trade and economics. The point is to not overdo it and to always have a calibrated response so that one does not go over the top, he said.

    There are other countries which have just as much grievance against China as we have, but they are not going over the top and neither should we, Aiyar cautioned.
    (Catch all the Business News, Breaking News Events and Latest News Updates on The Economic Times.)

    124 Comments on this Story

    Venkataratnam30 days ago
    We are members of BRICS countries with a Bank. The manufacturers in China was encouraged by the West and some others as it is cheaper. Now they have realized.
    We should develop in a planned manner in the national interest.
    Raj Bhandari30 days ago
    Economies of India and China are neither complimentary nor inseparable. The India-China trade agreement of 1954, during “ Hindi-Chinee bhai-bhai era” was not bilateral but largely unilateral in favor of China. Successive Indian Governments continued and allowed Chinese liberal access to India markets during most part of the last century.
    China, in the meantime embarked on a massive industrialisation under totalitarian regime, ignoring labour rights, IPR and obligations to become “ Factory of the world”
    USA allowed Chinese companies to copy latest technology and inventions, which was further exacerbated by American MNC's shifting their production facilities on competitive considerations. Chinese were desperate to be a member of WTO to secure market access to world markets, which fructify in 1999. This facilitated China to capture Indian market in most industrial and manufactured, pharmaceutical and even consumer goods. Overnight disruption of this supply chain will cause more damage to India’s manufacturing and exports but in the long run this umbilical chord will have to snapped. over dependence on China as supplier will have to reduced and regulated both on national security and economic considerations.
    Shyam Koppikar30 days ago
    Aiyar, How many times do you want to get stabbed in the back by China? People like you will never learn. Yes, we can survive and thrive without China. Look at Taiwan, Hongkong, Japan, Vietnam all China's neighbors thrived. Forget China, Man!
    The Economic Times