From Indo-China Face-off To Weaponizing Trade

From Indo-China Face-off To Weaponizing Trade

After the recent face-off between Indian and Chinese troops at LAC, both the countries now have engaged themselves in a trade war by blocking each other’s imports done via ports. India has tightened the scrutiny of the import from Chinese companies, but experts say the move might create a shortage of necessary raw materials.

Crux of the Matter

India’s Aggresive Stand
Bilateral border tensions have spilled over to trade. Now, Indian customs have begun physical inspection of all consignments coming from China based on intelligence inputs. Import consignments from China were halted on the Chennai and Mumbai ports. Moreover, Chinese cargo is being held up by customs at airports in Delhi and Kolkata.

Despite India’s dependence on China for raw material for the pharma, electronics, and automobile sector, there is speculation that India will continue these strict measures and tighten scrutiny of imports from Chinese companies located in Southeast Asian Nations. The Indian government may ask authorities and importers to be aware of shell companies linked to China that might be trying to benefit under the Free Trade Agreement with ASEAN.

There is no official word from the government on this matter. If India wants to be self-reliant then India will have to follow two strategies for self-reliance, i.e. boosting local manufacturing capacity and containing imports.

The automobile sector in India is likely to bear a heavy brunt as Indian companies like Bajaj Auto, Mahindra & Mahindra, TVS Motor Company, Hero Electric, and other Indian companies building electric 2 or 3 wheelers import major components and batteries directly or indirectly from China.

We don’t import because we like to, but because we have no choice.

RC Bhargava, Chairman of Maruti Suzuki

American firms with manufacturing operations in India are facing difficulties in importing from China. Currently, there are 50 US firms across sectors such as telecom, FMCG, automobile, and medical equipment, having manufacturing operations in India. Looking at the situation, the US-Indian Strategic Partnership Forum (USISPF) sought the restoration of port operations. Moreover, many companies canceled orders from China.

China’s Retaliation
China has increased the price of paracetamol and ciprofloxacin antibiotic by 25%-27%. India imports these and other such drugs in large quantities due to the insufficient domestic production of raw material. It must be noted that in times of Covid-19, Indian generic drug has been in demand and nearly 70% of Active Pharmaceutical Ingredients (APIs) used to make these drugs come from China. China also reacted by halting Indian origin shipments at Hong Kong Port. In this trade war, 200 industries have been impacted.

Top Five Ports of India

  • Kandla Port is the biggest container port in India in terms of value and amount of cargo.
  • Mumbai Port is India’s largest port by size and shipping traffic.
  • Chennai Port handles over 100 million metric tons of cargo per year.
  • Port Blair Port serves as a connection point between the Bay of Bengal and the Andaman Sea.
  • Kolkata Port is equipped with two dock systems, Haldia docks, and Kolkata docks.
  • The Gwadar Port is the deepest seaport of the world and is situated on the Arabian Sea at Gwadar in Balochistan province of Pakistan. The port is under the operational control of China.
  • In the Qin Dynasty, the First Emperor of Qin inked the northern walls to prevent invasion from northern nations. In the Han Dynasty, the emperors extended the Great Wall of China far into today’s western China to protect the Silk Road trade. It allowed the imposition of duties on goods transported along the Silk Road.
  • The Government of India’s Economic Survey 2017–18 noted that five states — Maharashtra, Gujarat, Karnataka, Tamil Nadu, and Telangana — accounted for 70% of India’s total exports.