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August 3, 2020


INDIA: Further gradual decoupling ahead

BY Aditi Phadnis

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Although disengagement by Indian and Chinese troops has begun on a nondemarcated border of the two countries where the Indian army and the People’s Liberation Army (PLA) clashed a few weeks ago, the Indian government is resorting to a variety of economic and trade measures to put pressure on its neighbor. The support for the government’s response means Prime Minister Narendra Modi is unlikely to deviate from his decoupling strategy anytime soon.

In June, India banned 59 Chinese apps, and it banned another 47 last week, described as clones of the ones outlawed earlier. Some of these apps were wildly popular in India, like TikTok. Still, the ban has brought forth a wave of nationalist resolve and endorsement for the Modi-led National Democratic Alliance (NDA) government, shifting attention from the fact that diplomacy and talks have yielded only limited results in getting back Indian territory.

The Delhi Hotel and Restaurant Owners Association announced in June that Chinese nationals were not welcome in the over 3000 guest houses and hotels across the city. Trader associations have released a list of 450 categories of products from China that were to be boycotted amid the border skirmish. This widespread support made the government announce last week that the import of TV sets would require the importer to seek a license from the government, a tedious and longwinded process. India has an INR 150bn (USD 2bn) TV set industry, and over 36% of that is imported primarily from China and Southeast Asia. Non-tariff barriers have been put in place for Chinese imports such as toys and furniture. E-commerce websites now have to mark goods with a country of origin stamp mandatorily.

More such steps are in the offing as India screens public procurement contracts. A Chinese company that had got a contract for railway signaling systems has been asked to pack its bags. The state-owned telecoms system, the Bharat Sanchar Nigam Limited, has been told not to use Chinese made equipment for its up-gradation. The government has also told private mobile service providers to reduce dependence on Chinese equipment, adding that it will be monitoring this. As India moves to 5G, it is considering keeping Huawei and ZTE out.

All these moves are part of a gradual process of decoupling the India-China economic linkage. Because of the cost advantage that Chinese goods enjoy and their importance as intermediate products in Indian manufacture, the government is moving slowly for fear that any sudden moves could push up costs and alienate Indian consumers. But economic curbs are a part of the war by other means that India has launched against China – and one that is not going to end in a hurry.

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