China is a South Asian country, sharing borders with 14 countries including India. Governed by the Communist Party of China (CPC) since 1949, it has rapidly transformed into a global manufacturing hub and technological leader. Its significance lies in its economic rise in the region and hegemonic influence over smaller countries through loans and the Belt and Road Initiative.
As the epicenter of COVID-19, China faced global scrutiny over its pandemic response. Its strict zero-COVID policy and economic slowdowns have affected global markets, while trade disputes and technological restrictions with the US, EU, and India continue to shape its global relations.
China’s foreign policy is marked by its Belt and Road Initiative (BRI), expanding influence through infrastructure projects, and territorial disputes, particularly in the South China Sea, Taiwan Strait, and along the India-China border. It fought a war with India in 1962 over Aksai Chin, and tensions persist along the Line of Actual Control (LAC), most recent being the Galwan Valley clash in 2020.
Neither the authors of this report nor the many jingoistic commenters who rant here have picked up the 2 domestic policy decisions for the increase in imports from China and the collapse of large sectors of Indian industries. These 2 utterly hare-brained decisions taken solely by the know-all Gujarathi Führer and against the advice of professional economists at the RBI were:
– Demonetisation
– GST
Demonetisation was a blow to the solar plexus of India’s vast informal sector where 82% of the labour force toils. Millions of small firms and micro-enterprises operating entirely on cash dot this landscape and they faced an unsurmountable cash crunch. Many operate in the vast unbanked regions of rural India where financial and digital literacy is low and cash is king. Unable to pay their employees and their suppliers and unable to meet customer demand, many simply downed shutters. That pent up consumer demand led to more imports from China and a worsening of the trade balance.
Likewise, in the aftermath of demonetisation, Führer Modi unleashed a second tsunami viz. GST. Small firms, reeling from the shock of the first idiotic scheme of demonetisation were further strangled by the hasty and poorly planned implementation of GST. Many firms in the informal sector simply buckled.
When crafting economic policy, you learn the importance of:
– Timing
– Sequencing
Both were unknown concepts to our Delhi University educated Führer.
TIMING: When oil prices were low and the Chinese manufacturing sector faced problems, India was all set to capitalise on these propitious circumstances. Alas, demonetisation killed those hopes. Those customers are forever gone.
SEQUENCING: Any idiot would have known that an economy limping due to demonetisation was in no condition to absorb another round of savaging. But that is what the implementation of GST in the wake of demonetisation accomplished. India’s many small and medium scale manufacturers who had survived round 1 of the contest viz. demonetisation, were now delivered a knock-out in round 2, the GST round.
But what is truly mind boggling is that even though the Führer had access to world class economists like Dr Raghuram Rajan or Dr Urjit Patel, these experts were not part of the Hindutva inner circle and their advice was ignored. Baba Ramdev and an NGO fellow called Anil Bokil, both certified quacks in economics were advisers to the PM when it came to demonetisation!
Given these self-inflicted injuries that savaged, crippled and cut off the limbs of Indian industry, is it any surprise that Chinese imports have increased? And the Chinese have walked away with export customers India could have had for the asking?
But the sad thing is that Führer Modi has managed to deflect blame, tap into the average North Indian voter’s anti Muslim impulses and jingoism and thus escape responsibility for what I would call an economic pogrom. But then, at the end of the day, Führer Modi is a creation of the people who refuse to hold demagogues responsible for the devastation they leave in their wake.
As the British writer Goerge Orwell (1903-50) wrote:
“A people that elect corrupt politicians, imposters, thieves and traitors are not victims, but accomplices”
Most swadeshi business-houses were mostly merchandisers…sellers of stuff, rather than manufacturers ( unless you count screwdriver manufacturing i.e. assembling imported pieces with a screwdriver) because there’s no risk involved, and definitely no costly and risky R&D required, so importing cheap stuff from China was immensely profitable…as they say, if it ain’t broke, don’t fix it.
Our society in general is not curious about machines. We have never truly entered the machine age which Europe entered in the Industrial Age. A workforce that is skilled in designing and making machines will make natural progress towards industrialisation. Also other fields like electronics emerged in 70’s. We could not catch up with electronics age also – rise of Korea and Taiwan was primarily in this field. We somehow not missed the software and pharma fields in the 90’s, we should continue with those fields and build up more expertise and entrepreneurship in these fields. And we need to move more faster in software, because China has now better and proven entrepreneurs in software products than we do.
Mr. Shekhar Gupta- with all due respect, please share your stand…
It feels like cheap sensationalism. Using words like Chinese colony. There are ways to indicate that these sectors we are not doing well and need to move towards self reliance in the competitive market.
By taking processed goods in some sectors, we don’t become the colony but customers. We make good money as a country, which our fiscal reserves indicate. We are stuck in low income group trap but the country as a whole doesn’t need to be disrespected.
RESPONSIBLE JOURNALISM!!! PLEASE!!!
Charting is confusing – years should read left to right in increasing order not the way they are right now.
Mr Sekhar Gupta, I religiously follow ” cut the clutter “. I think you present more or less a balanced view with, of course, a hint of bias. But I didn’t read this article. The headline was disgusting and enough to come to comments section.
One word ” Disgusting “. Stop being the “Wire”. Incidentally, when you were born sir, after May 2014? In which book you found that India was a economic, technological, industrial giant till May 2014 and became primitive thereafter ?
Mr P.C. Tripathy: What is wrong with The Wire? It is an excellent news platform for critical journalism and is widely respected for its independent, brave stance in the face of all the threats that the BJP government showers on it. Do you want the few independent publications like The Print, The Wire, Scroll etc. to become like the rest of India’s paid news platforms? If you do not like critical, probing journalism that speaks truth to power, you are always free to soak up Arnab Goswami’s hot air, Mr Tripathy. Clearly, you only want to read publications that praise Modi and project India as a Vishwaguru. Reality is that in the Vishwaguru today, you can easily get lynched if you are Muslim. And a Muslim child would be brutally beaten up if he decides to quench his thirst in a Hindu temple.
The article does not claim that India was an industrial giant before May 2014 and became a pygmy after the election of the Gujarathi Führer. But as I explain in my longer post above, foolish policies of Modi such as demonetisation and GST took a wrecking ball to an otherwise relatively smoothly humming economy and devastated it. The informal sector of the economy where the bulk of Indians work was simply savaged and has not recovered. Indeed, demonetisation and GST were foolish Indian policy moves that immensely helped the faltering Chinese economy recover and hurt India. In fact, since Indian firms had to shut down due to demonetisation, Indian consumer demand was met by Chinese products, thereby increasing Chinese imports.
The problem with people like you Mr Tripathy is that you do not wish to accept that Modi has neither delivered you “achche din” nor is he capable of doing so. He simply does not grasp basic economics. But then, as long as he has naïve voters like you who will vote for him no matter how badly he damages the economy and the unity of India, the Führer is a happy man. And who doesn’t like power? Certainly not Narendra Modi.
But then, as Lord Acton (1834-1902) said:
“Power tends to corrupt, and absolute power corrupts absolutely.”
PS:Incidentally, the article was written by Ms Remya Nair and Ms Kairvy Grewal. Why do you address your comments to Mr Sekhar Gupta and not to the journalists themselves?
Author should go back to school and learn econometrics and statistical concepts from the scratch. What kind of analysis is this? Blatant example of ignorance and understanding about “causation and correlation”.Any indication of a correlation between two variables, does not imply causation! idiotic viewpoint!! That’s why I never read this propaganda flyer…. because A. its written by such people with a hidden agenda and B. because their analysis is so poor and prejudiced that it makes for laughable reading.
Do you mean to say the economy going down was not linked to Modi and demonetisation ?
The economy just went down from 10% to 5% and now -9% due to no reason – you can say it is the world situation.
Losing land in Galwan also was not due to Amit Shah. It had no fathomable reason, the Chinese were just random.
India going down in democratic rankings, ranking for women’s safety etc. also has no “causation and correlation” such as lynchings, rapes and vigilante activities.
We have random Brownian motion under Modi !
Basically we are very lazy and incompetent. See the result at sports, like Olympic. Inspite of 1.3 billion people we could not manage a gold medal. From the very beginning of independence, poor planing , rampant corruption, reservation in jobs , casteism are playing a havoc roles in our daily life.
What can you expect from this country?
Reservation, corruption is not entirely to blamed for lack of economic progress.
All of South Asia is like this. Be it Pakistan, Bangladesh, Sri Lanka or Nepal. There is something else blocking us which we do not clearly understand…the nation is capable of making missiles, nuclear bombs and send satellites to space, building huge dams, extensive railways and metro network etc. The real reason is in South Asia we are not able to make sophisticated things that the world is interested in buying. Maybe because we are largely only comfortable to do things with our hands (craftsmen, weavers etc) but not those made by machines and Industrial processes.
Basically good analysis. How free speech helps economical growth? We know how liberal is China towards free speech. Recall your memory what happened in Tianmen square.
What is the agreement of a party with China. What were the terms and who benefitted from it. Print should try to analyse from 2004 to 2014 how the trade difference galloped. In favour of whom.
Finally it is an article showing the country in poor light where aim appears to discredit current govt.
This is very obvious to all readers.
That’s why so many reactions
Vande mataram
For one, the edge India had in export of copper cathodes has also been lost.
This was directly the result of opposition led protest to in Thootukudi that led to the closure of Vedanta copper smelter unit. The protest was so violent it led to firing and death of some protestors. You have topay lose somwhere in one way or other. We lost our export edge thanks to DMK and opposition.
Why r u only seeing lasyt 5 yers figure , why not last 10 years. That will include the UPA tenure also . Trend is same but good thing we are more realizing the danger n getting ready to reduce dependency
Author is merely pointing out the facts of trade imbalance between India and China. Most Indians just can’t accept it. If India is super powerful, they wouldn’t trade with China at all but the reality is the differ. India is too weak and can’t produce like a top 5 powers (US, China, German, Japan and UK), but Indians keep on thinking they’re number super power.
I can totally understand that the authors who has written this article knows nothing about diplomacy or politics. That’s why they have written such an irresponsible article. I mean okay…we have some trade deficits with China but our current govt is trying to take India back on track. Trade with China goes well beyond BJP since the Congress or the UPA govt also used to do trade and business with China and it was in 2004 that the Free Trade Agreement between India and China was signed but China didn’t live up to the terms. It only opened half of it’s market to India whereas India opened full market to China. So the real culprit here is the Congress and not the BJP. I urge the authors to refrain from writing such illogical articles from next time onwards and read or see international news to have clear idea about the subject on which they are writing the article.
the trade deficit is on decline since last three year..
All I can say is “Awesome April Prank ”
keep it up
All the parties thrive on greed for power and implement schemes which make the people of India lazy.. Had the resources and money invested in skill development and building of conducive environment for manufacturing India would have been on par with China in terms of export.
What was all that talk about Skill India, Make in India about ?
India is a difficult place to do business.
Political class looks at businessmen as a source of income for party funds, and corruption in public services as source of income from the aam public. India is not run by democratic nation building parties, we are actually run by a mafia who have their own informal tax system! India will not be near China even in next 70 years if this state of affairs continues.
Very negatively biased report. I ashamed people in our country write this for a few dollars. People are too smart to believe this crap.
Mr Nkootar: Do you have alternative data sources to prove your point ? I guess not …
Absolutely correct. As if India is a colony of China. I can’t believe Indian journalists have descended to this level.
So why aren’t we exporting processed items more?
Which era of government:
Insured that farmers should only sell to APMC?
Insured that every big sector, such as coal/iron/space/defence remain monopoly of government?
Insured that atleast 144 permits are required to start any manufacturing unit, and NEVER EVEN DISCUSSED ANY LABOUR REFORM?
Insured that education in India remain largely on ‘ learn and write ‘ and no understanding, added with century old syallabus and topics?
Have some shame THE PRINT, you are also a part of India.
Mr Prabhakar Shukla: When criticism is levelled against some aspect of India, in this the trade balance with China, your ilk bristles and bends backward to deflect the blame away from the Gujarathi chowkidar. You don’t say that directly in your mail but I guess you want to say that it is all Nehru’s fault right ?
The Print has once again a totally biased report…. disgraceful. Very conveniently you are only giving statistics for the Modi Govt. Come on Mr SG and your gang – be what you claim to be i.e. good journalists. It is very obvious you are NOT.
Mr Dilip Basrur: You snort:
“.. Very conveniently you are only giving statistics for the Modi Govt. ..”
So who do you hold responsible for the mess? Nehru ? Lal Bahdur Shastri ?
The problem with blinkered, blind Modi bhakths like you is that in your worldview, Prophet Modi can do no wrong and others can do nothing right ! Despite the overwhelming evidence attesting to the fact that the Delhi University graduate’s grasp of economics, even basic economics is close to zero, people like you continue to believe in the mirage of economic growth and development that he spins. Heard of demonetisation ?
Meanwhile, whilst people like you sing praises to Prophet Modi, smart Gujarathis are quietly moving funds out of India.
India is too large a country (with surplus agricultural products,milk etc) to become a colony of China economically. However, Modi govt must look into it on priority basis and encourage entrepreneurs to ” make in India” in letter and spirit.
Again the same argument “Government should do it”. Only thing Government should do is to sleep, waking up only to remove obstacles to free markets. Remember , any Government is a tax eaters club. Sensing support from population in 1947, tax eaters pounced on tax payers to impose highest slab of taxation of 97.5%
Infact a famous economist opined “India grows when Governments sleep”
‘Modi govt must look into it on priority basis and encourage entrepreneurs to ” make in India”.
He is doing that. Have you heard his slogan ‘Hum do, hamare do’ ?
There is no colonialism as trade is voluntary ..There was forced trade in colonialism.
It’s well known protectionism is deeply destructive of health of own economy. Government imposed import tariffs on various goods. It competed with the irrationality of Chinese government. What if Chiba sent shiploads of free gold – should one return it? What applies to gold applies to all products and services.
At one time steel was sold in India at double international rates. How can new businesses grow under destructive ideology of protectionism. Accept all the free or subsidized stuff the world has to offer.
Use the opportunity by allowing businesses to blossom so that they can invent and export newer products and services. They typically will have higher profit margins compared to products of established crony Industries which have usually razor thin margins due to intense competition.
Data is all from 2014-15 onwards …..Were we NOT TRADING WITH CHINA BEFORE 2014-15???
Headline of the article makes it look like all our woes of TRADE WITH CHINA STARTED FROM 2014-15!!!
It’s not difficult to guess the AGENDA DRIVING S7CH HEADLINES AND ARTICLES!!!
Modi had a single minded interest in attracting Chinese investment to Gujarat even before 2014. He was an untouchable in the west after engineering the Gujarat 2002 riots. During that period, Xi picked him up, and opened the door to a person who was boxed in by disgrace. The Chinese do not care about human rights, they were willing to see it is an internal matter. Modi was grateful to Xi and touched his feet. I have noticed Gujaratis hang around in trade shows at Chinese pavilions. All they want is a distributorship. Any co-manufacturing with the Chinese was just import and assembly. The Gujaratis are a corrupt and scheming lot – besides being communal to the core.
After Modi became PM, the west lifted the ban. Although he went to the west, he was a darling only to the NRIs. Modi’s business interests were still Chinacentric.
After Galwan, he denied any land was taken, but at the same time he announced ban of TikTok and restrictions on Chinese investment. Only two weeks The Print reported that the China had displaced the US as the top trading partner. After the US group downgraded India’s democracy, Jyoti Malhotra wrote that Modi wants to have good relations with all neighbours due to his genius, and she gushed that Modi now is pragmatic, he does not mind investment from China as it will strengthen India; the aim was to be like China and say ‘go to hell’ to the US if it raised democracy.
It seems the authors are more prone to give a distorted view of indian economy and took special care to show the present government as incompetent. That is very bad.
India has not learnt lessons from History. No point in blaming China for this blunder. No doubt, we can export only what we have. But, who stopped India from processing the raw materials and export value added goods? It is the duty of Ministry of commerce and DGFT to promote healthy pattern of import and exports. Both are corrupt to the core, and are perhaps on the payroll of China!
A good stand alone analysis of data by somebody, I am sure, very competent to do it.
But, the sum total of media reports and commentaries leave an ignorant layman like me confused.
Some doubts:
1. What was the trade balance with China and other countries prior to 2014?
2. Is becoming more self-reliant good for India in increasing exports and reducing imports?
3. Is democracy, where everybody can speak (or not speak) and do (or not do) in the name of freedom and free speech helping matters of economy?
4. Should we change the system of governance to that of China where doing is more important than talking?
5. How productive (including the media) is discussing politics and religion and religion and politics for most part of a life time of an Indian helping in the balance of trade?
Tail piece: I know, I should be already knowing the answers to all such questions, but then….
I shall try to offer arguments pointwise
2) Balance of payment is not a problem at all if private sector borrows. Governments have nothing to do if one Individual , say , borrows from another one overseas. Such Investment should be welcome.
Problem arises if Government borrrow. Thus balance of payment is a non-issue.
3)Free speech should not be a problem. Restrictions on it is government asserting it owns the tongue of speaker, which is deeply unethical. Countries with freedom won the 2nd world war and cold war. The problem lies in Socialism introduced into constituition by KGB. Socialism asserts it owns the critical part of the body, which generates thought. Wrong arguments die in atmosphere of free speech.
4) System of governance is corollary to ideas inherent in law. India has MMMM Mad Murder of Meritted by Majority by Reservation policy and Socialism. It’s very unfortunate as Merrited and Investors produce much much more than they consume. Reservation policy and Socialism in constituition kills the golden Goose. Insurance companies can rule much better. Highly intelligent people rise to top.. Business of Insurance companies is earning trust. They have to face people on daily basis. They don’t have to depend on media as Politicicans do. At least they will not set fire to country as Reservation policy Politicians do as they will have to pay. Insurance companies become prosperous if people become prosperous.
Wrong analysis. Reservation is there and is needed because of the caste system. The caste system is anti-merit. Indians are unique in this, and they cling to it. So what are you talking about ?
Why has no Indian government eradicated caste ? That is the question you have to ask. Reservation will not eradicate caste but you have to do something else actively to remove it.
The actual situation is the RSS which runs the govt. wants the caste system of Manusmriti. Yogi exempifies the double speak : when Prannoy Roy asked what Yogi thought of the caste system, he said he was for caste system, but he was against casteism ! He said caste was a very good system to order society, but what he meant by being against casteism was he was against reservation.
Complaint against reservation is a typical upper caste grouse. You forget Brahmins reserved education to themselves for 5000 years. So why should others not demand reservation ?
Let me share some answers for your doubts.
What was the trade balance with China and other countries prior to 2014? It was in China’s favour even before, but it has widened under Modi. Modi himself is responsible for encouraging the Chinese making inroads into the Indian economy. You will recall that Modi engineered a massacre in 2002 as CM of Gujarat, and the west banned him. At that time, Xi opened the door for him and saw an opportunity to manipulate him and India. Modi was touching Xi’ feet, as Xi was receiving Modi and not asking about his past misdeeds. As CM, Modi tried to bring Chinese investment. Much of it was Gujarati businessmen setting up distributorships for Chinese goods; at best, goods were imported as kits and assembled in Gujarat. Modi has facilitated entry of Chinese imports with a small section making profits by selling them.
Finally, if push comes to shove as in Galwan, India has found it cannot kick out the Chinese business – because much of Indian manufacturing is dependent on Chinese machinery. And because domestic manufacturing is weak, it cannot provide Indians with the goods like smart phones. After Modi became PM, this lopsidedness continued on a bigger scale. In Modi’s first term, he built a useless statue for Patel for 6000 crore. It was built in China !
India’s economy was unusual : it was farming and some service sector, and manufacturing was small and weak. That is not just due to Modi. But he has not done anything great to correct it. India has problem with low education and skills. The caste system and its mentality has prevented universal literacy and education, so you have a workforce that is uncompetitive and not up to international standards (except for a small fraction).
‘Is becoming more self-reliant good for India in increasing exports and reducing imports?’
Self reliance was a Nehruvian concept which was appropriate at that time. India had become independent, there was a technology ban, even if you had the money, the west would not set up a steel factory in India. India had to go the Soviet Union to get its first steel factory. Today many technologies can be purchased if you have the money. The question today (when technology can be bought), is if a plant is set up in India by an Indian or foreign company, would it be internationally competitive ? The answer is ‘no’ – because land is expensive in India, corruption is high (so the cost of business is high); electricity price is high; Indian labour is not as educated; Indians do not mind rioting and burning cities for 2 weeks and losing business.
‘Is democracy, where everybody can speak (or not speak) and do (or not do) in the name of freedom and free speech helping matters of economy?’
This is a loaded question. You want to say India is disadvantaged because of democracy. But earlier you said the beauty of democracy is you and I can differ. There are many countries with democracy who have successful economies.
‘ Should we change the system of governance to that of China where doing is more important than talking?’
You can but it will not work. India is rooted in a caste culture – as you well know. That is India’s limiting factor. Development will always be for a few – because that is the fundamental aim of governance.
‘How productive (including the media) is discussing politics and religion and religion and politics for most part of a life time of an Indian helping in the balance of trade?’
It is the politicians, especially of the BJP, who discuss politics and religion and religion and politics. The media is following them. Last week a BJP candidate in Kerala went to a Christian Father and told him that Muslim imams were getting state salaries, and all this is at the expense of the Christians and Hindus, so please support the BJP which will correct this. The Quint and The Hindu investigated explained the lies – the imams like other groups could invest in state pension funds, and they get pensions according to that. The BJP is ‘politics and religion and religion and politics’ but that is no issue for many Indians.
In summary, China has the upper hand, it is correct that China sells more to India than the reverse, and what India sells is lower value items. Further, the Modi govt.’s primary driver is Hindutva which is ‘Hindu one upmanship’ against minorities, and his concept of progress is through retrogression to Vedic times, and wishful delusions of grandeur. Hence, India has reached a plateau and cannot go higher; under Modi, it has starting coming down from the plateau.
At least use some mind before using such provocative headlines . Ofcourse free and fair media is good but have some responsibility of portraying nation’s image to outside world.
You can export only what you have and what others want and need. Half the time, it appears the govt. is busy exporting cheap labor that it has in plenty. At other times, God given raw material is exported. So what is new in Indian export??
‘Half the time, it appears the govt. is busy exporting cheap labor that it has in plenty. ‘
Correct. Only sometime ago The Print had an article boasting that India has great opportunities to export nurses ! Modi himself said on World Teacher’s Day that India is the vishwa guru, it will export teachers – when we do not have enough teachers for our schools.
Till 2004, the trade balance between India and China was evenly poised. But under the incompetent leadership of Manmohan Singh, the trade imbalance widened extensively.
Incorrect.
Modi was the one who ran to touch Xi’s feet when the west did not want him. He encouraged the Chinese to come and boasted about FDI in Gujurat.
One some days back the Print reported that China is now India’s biggest trade partner ahead of the US. This is after the boycott that Modi implemented !
So we lost land, we have a dependence on the Chinese for our manufacturing (hence you cannot organise a boycott when they create problems at the LAC), and as the article says, we are just a raw material exporting country to them. We had some advantage in IT and service sector, but even there, the Chinese have advanced and overtook. They have their own platforms like TikTok. India has none.
China was lagging India in software twenty years ago. They have pulled ahead of us and have established several world class companies like Tencent, Alibaba etc. Now they have productised AI ahead of USA also. Now due to US sanctions, they are preparing to make their own semiconductors including processors. They produce more electric cars than USA and are getting really strong in battery technology.
They are serious and competitive businessmen and extremely hard-working.
And here in India the tamasha continues…our politicians are serious and competitive only for elections. Their interest in promoting business only as long as businessmen contribute to party funds.
Come on,MMS did not stop anyone from producing ,defence items,mobiles,drones,rakhi.,home improvement material.get a life.the Indian manufacturing sector is still in the industrial age has not moved up to the ice age .our ice industry is only software that too in servicesvery less in hardware.about last 7 yrs less said is better.
When did India truly enter the industrial age?
The machines we use in our factories are mostly imported from abroad. We can’t be serious about manufacturing unless our workforce is skilled in designing machines to improve production processes.
Regarding the ICE age, our foundations in hardware and communications devices are close to nil. Forget about making them.
Provacative headline, but interesting data.
Absolutely no reason to import fertilizers, auto parts, chemicals, metal articles. All can be made in India.
China does have an overwhelming advantage in manufacturing of electronics, PLI schemes are a step in the right direction.
World is a global village, do not reinvent the wheel get whatever is cheap from where ever so we all will live in a cheap world was the idea behind the globalization. Little did the world realize that when it came to costing the Chinese divided everything by the population numbers and over years not just us but the world fell into the trap starting with 1991.
The figures projected above give an impression all this has started in 2014.