Amidst China-India border clashes last week, tensions have risen all across the country, adding fuel to the #BoycottChina fire. The news of 20 Indian soldiers being martyred has furthered aggressions from the Centre on firms to start boycotting Chinese products. New Delhi told firms to find ways to cut imports from China. But for the auto and the pharmaceutical industries, this task has become a looming problem.
India has relied on China for too long for products like electronics, auto components, and drug ingredients to immediately cut ties with no consequence. The Indian market cannot sustain without help from China, especially in such tumultuous times. Since the aforementioned products are not made in India and cannot be sourced as cheap from elsewhere, stopping import from China is easier said than done and has the potential to hurt local businesses.
“We don’t import because we like to, but because we have no choice,” said R.C. Bhargava, chairman of Maruti Suzuki India Ltd, the country’s biggest carmaker.
“To attract companies to produce locally, we need to be more competitive and lower our costs compared with other countries.” India imported around $70.3 billion of goods from China in the fiscal year to March 2019 and exported just $16.7 billion – its widest trade deficit with any country.
The government is now consulting with companies on tightening curbs on 1,173 non-essential products, a trade body official said on condition of anonymity. They include toys, plastics, steel items, electronics, and specific auto components – which feed vehicle manufacturing. This comes as Prime Minister Narendra Modi launched the ‘aatmnirbhar’ campaign which aims to raise trade barriers and import duties. He appealed to the countrymen to go “vocal for local” and help India become self-reliant.
“If things do escalate, then India stands to lose a lot more than China,” said the chief of corporate strategy at one of India’s top 10 drugmakers. “We cannot afford this.”
According to data from the Auto Component Manufacturers’ Association of India, over a quarter of India’s auto part imports – $4.2 billion – came from China in 2019, including engine and transmission parts.
Some of these components are critical for automobile manufacturing and hard to source elsewhere immediately, said Vinnie Mehta, director general at ACMA. “We cannot have a knee-jerk reaction, especially when we are emerging from the disruption caused by the pandemic,” he said.
It might take a few years for the Indian automotive industry to completely be self-dependent and locally source components for manufacturing. Until then it looks like the manufacturing of cars and bikes will depend on Chinese auto components.