Detente with China will benefit Indian consumers
Detente is back in the air with China. The French word, loosely meaning ‘release from tension’, was used to describe the diplomatic initiative to reduce Cold War hostility between the Soviet Union and the US in the 1970s, and it yielded good results. Going by recent developments, we will be seeing some detente between India and China too.
Provisional commerce ministry data for 2020 shows China is back as India’s largest trading partner with two-way trade touching $77.7 billion last year. This was below the previous year 2019’s $85.5 billion; but it was enough to displace the US to No.2 spot, with which India’s trade accounted for $75.9 billion.
Following the pull-back of troops by China on the Pangong Lake frontier, India is now looking at easing investment restrictions too. Foreign direct investment (FDI) by Chinese companies may now be allowed up to 25% through the automatic route. Initially, this may be in areas that are ‘non-sensitive’ and don’t have security implications like heavy machinery, automobile parts and some technology transfer.
Chinese money however will continue to be heavily vetted when passing through the ‘approval’ route in areas such as telecom and defence. Opening up trade and investment with China is a welcome development. While the realpolitik of border clashes pushed relations between the two countries to a new low, business and the economy suffered. India is heavily dependent on Chinese imports for heavy machinery, telecom gear and white goods.
These can be sourced from Western markets too, but at a higher price. A thaw in relations with Beijing will therefore benefit consumers in our country considerably. The fact that India last year had a trade deficit of nearly $40 billion with China shows how dependent we are on imports from there.
While atmanirbharta is the obvious best option, experts say in many branches we are still years away from self-reliance. As the process of détente gathers pace, India should also look at rolling back, without compromising our security, the ban on hundreds of Chinese-origin apps such as Tik Tok that help small businesses and people-to-people interaction.