As per a June 2020 report published by ETtech, ‘Funding for unicorns, smaller startups may be hit as India reinforces FDI wall’, Chinese investors have pumped in $3.9 billion in 2019, up from $2 billion in 2018. Chinese firms have invested in many Indian startups which are or were unicorns: (Startup: Investors) Zomato: Alibaba. Swiggy: Tencent, Hillhouse, etc. Ola: Tencent, Steadview, etc. Paytm: Alibaba. BigBasket: Alibaba, TR Capital. Flipkart: Steadview, Tencent. Oyo: Didi Chuxing. Byju’s: Tencent. Policybazaar: Steadview. Note: These startups may also have other investors.
China is India’s one of the leading trade partner and has accounted for over 5% of India’s total exports in the year 2019-20 and more than 14% of imports. Indian imports from China are approximately 5 times more than exports to China. That is, Indias runs a huge trade deficit with China. Smartphones, electronic appliances, pharmaceutical raw materials, chemicals and fertilizers, toys, iron and steel products, telecom equipment, plastic goods, apparel, paper, footwear are some of the Chinese exports to India.
Can the Indian government ban Chinese products? The answer is no; because according to the rules made by the World Trade Organisation, it is not possible to impose an outright ban or full ban on imports from any country even though there are no diplomatic, regional, and trade relations with that country. Although the government can ban some Chinese products if it does not meet certain health and security criteria. Also, the import-substitution method cannot happen overnight.
Indian market is a price-sensitive market. A product with the least price will prevail in the market. Consumers demand cheap and attractive products. Indian customers prefer cost over quality which is one of the main reasons that Chinese products are all over the Indian market. So if the Chinese products are boycotted/banned in India, inflation rates will rise because Indian products are costlier than Chinese products. This is because China has cheap labor, land, and electricity as compared to India.
China is the top manufacturer in the world. Almost 20% of global output comes from China. This means 1 out of 5 items manufactured globally comes from China. In India itself, there are innumerable goods made by Indian companies but are heavily dependent on China for inputs that are raw materials. From small pills too big machines, almost three fourth of all the things that we use today may be made in India but contain Chinese raw materials. In short, we are heavily dependent on China for raw materials.
India makes 22% of generic medicines in the world. But almost 70% of chemicals and other raw materials required comes from China. Most of the drugs we use are turned into pills in India, but at least two-thirds of the active pharmaceutical ingredient in it is imported from China. For example, recently, Hydroxychloroquine (HCQ) that has been widely used for treatment and prevention of COVID-19 is manufactured in India, the majority of Indian formulation makers currently are dependent on China for the active pharmaceutical ingredient (API) to form the drug.
As per the paper published by Ananth Krishnan for Brookings India, the Chinese investments in India amounted to $1.6 billion till 2014. In another three years, it grew five-fold to $ 8 billion. Chinese companies Lany, Longi Solar & CETC are expected to invest $3.2 billion in renewable energy in India. Chinese companies have entered into auto, real estate, and several other sectors. In the Indian phone market, the top four out of five mobile brands are Chinese. Xiaomi, the market leader, has seven factories in India and plans to invest more than $ 500 million to expand its retail presence here.