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Saturday, October 31, 2020

What Future Holds For Businesses Amidst Indo-China Dispute?

The recent incident which led to casualties for armies of both the nations in Galwan valley raised a series of questions on the intent of India’s neighboring country China

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Smita Malwe
Smita Malwe
Smita is a communication enthusiast and a seasoned PR professional. She is a keen follower of Business, Technology, Politics, Healthcare; always ready to pen down engaging stories.

In the last 4 decades, there were hardly any incidents where soldiers are martyred in the clashes at the Indo-China border in the Laddakh region. Apart from a recent confrontation around the disputed border at Doklam and such similar incidents. Post-1963, there were various agreements made and peace treaties were signed to maintain peace and calm at the borders. However, the recent incident which led to casualties for armies of both the nations in Galwan valley raised a series of questions on the intent of India’s neighboring country China. The relationship seems to get more sour amidst the Coronavirus crisis. Given the volatile bilateral relations between India and China, the future of businesses doesn’t seem promising.

Source: india.gov.in

With the growing tiff between the two countries, it becomes imperative that the growing commercial relations of India and China are getting complicated and businesses across industries are expected to have a tough time ahead. According to recent government reports, India’s imports from China grew to around US$70 billion in the year 2019 and China’s hold on low-cost products in the Indian market is emerging as a big threat to the Indian economy. Modi government is keeping its front foot to project themselves as a promoter of a self-reliant nation and has been urging their people to look for an alternate and choose local goods over Chinese products. The new mantra ‘Vocal for Local’, considered as a repackaged version of ‘Make in India’ which was consciously advocated by the Indian Prime Minister brings the new challenges for the businesses. Preference to ‘Make in India‘ is not followed by several state-owned firms, and other state-funded initiatives hence Centre has now asked the states to expeditiously adopt the 2017 Department for Industrial Policy and Internal Trade’s Public Procurement order which mentions about giving preference to Make in India and suggested to follow the latest central government measures on procurement contracts. The Indian Government is also said to be looking at introducing quality standards related to clauses in procurement contracts to create barriers for the entry of Chinese manufactured goods into India.

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The changing sentiment of Indian consumers due to the recent tussle has raised an alarm for top Chinese players across industries in India. Top Chinese smartphone players like Xiaomi, One Plus, Pocco are now cautiously reiterating their commitment to India. Some of these brands have also shared their plan to stamp ‘Make in India’ on the boxes to promote the Modi government-led campaign. To boost electronic manufacturing, the government is now offering a PLI (production-linked incentive) involving cash worth 4 % to 6 % of additional sales of goods made locally over a period of five years, with 2019-2020 as the base year. It is now expected that apart from Chinese players, other global firms like Samsung and Apple will also ramp up the local manufacturing considering India is a huge market of 1.3 billion people.

Over 80 % per cent of the country’s medical devices are imported mainly from countries like USA, Germany, Singapore and around 11% has been imported from China. Reducing the import dependence for medical devices is going to be a key challenge for India. Government must prepare a roadmap to be self-reliant while ensuring patient safety, maintaining quality standards, safety regulations and price control. According to industry experts, India is in a dire need to draw a robust long-term plan and align the local manufacturing of medical devices with the national mission of making healthcare accessible and affordable.

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The auto industry’s sentiments are no different as manufacturers depend on imports for various components. A National Electric Mobility Mission Plan was launched in 2015 to chase the target of having only E-cars in India by 2030. India’s EV mission was one of the most ambitious projects of Modi led government while the country’s electric vehicles industry is largely dependent on Chinese imports for chemicals used to make cathodes and battery cells.

The government must acknowledge and address the key challenges in order to become a self-reliant nation. Manufacturing of some of the key products which India imports from China are mostly capital intensive and requires a large sum of investment which might not be possible soon. Indian firms can however focus on adapting ways to reduce the dependence on other nations by increasing the existing production capacities and slowly shifting the focus on improving quality and price control. Whereas the government can work on ensuring certainty in existing policies and enforcing them to attract the required high upfront investment. The government must adopt the innovation policy and industrial policy as well as observe closely the need of industries to provide an efficient infrastructure for businesses to grow.

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