Disengagement with China in markets should be no less strategic than at borders
Continuing from yesterday….
The Indian economy suffers from a variety of deficits. The most talked about deficit, i.e., fiscal deficit in fact is the least worrisome amongst all the deficits, in my view. I believe that some of the most worrisome deficits include:
1. Growth capital deficit
2. Advanced technology deficit
3. Skill deficit
4. Trust deficit
5. Compliance deficit
6. Governance deficit
7. Productivity deficit
8. Social infrastructure deficit
9. Employment opportunity deficit
10. Demand deficit
To successfully achieve the objective of self reliance, as being popularly understood, we must first bridge these deficits.
In recent years, China has been helpful in bridging many of these deficits, especially growth capital, technology, productivity, employment opportunities and demand deficits. Chinese investors have invested millions of dollars in Indian start ups by way of risk capital. Chinese have supplied affordable solutions in the areas of energy, transportations, chemicals, healthcare, etc. Affordable Chinese consumer imports have created huge employment opportunities for millions of self entrepreneurs, traders, street vendors, and aided in creation of demand, especially consumption demand. The Chinese economy funded these deficits at the expense of its labor and stability financial system.
We must pause here and assess that since due to legacy issues we always have a wide and deep trust deficit with China, was it advisable in the first place, to let Chinese and Indian economic interest intertwine so much?
Keeping the jingoistic nationalism aside, we must also consider that the non essential, toys, plastic decorative items, small appliances & tools which are more visible and talked about items, constitute a miniscule part of the total imports from China. The imports are dominated by electronics, engineering products & components, agro chemical, specialty chemical, medical equipments, precious metals and Iron & Steel. Our main exports to China include Cotton, gems & jewelry, copper, ores, organic chemicals. China is therefore present in our entire value chain.
Disengagement with China in markets therefore has to be equally strategic as in case of borders. We cannot and should not do it overnight by taking some whimsical, but popular, decisions. We need to have a strategy to fill the deficits by alternative means and render China redundant before disengaging ourselves. Self reliance in this context would mean, building capacities in the fields of advanced technology, raising the level of skill, compliance and governance to attract adequate amount of growth capital, raising productivity to enhance savings potential for domestic funding of growth; and bridging the trust deficit between the people and the administration.
This endeavor inevitably include bringing India into a state of equilibrium by removing social, and regional, economic imbalances, e.g., through-
· Industries and businesses who have thrived historical on government largesse and not necessarily on the enterprising abilities of promoters giving back to society by way higher taxes, higher voluntary CSR spending, technology upgrade for better resource utilization, etc.;
· Regions like Gujarat and Maharashtra, which are economically more developed despite not being endowed richly with natural resources, acknowledging that a part of their development is due to imperial designs of British regime and share their wealth with exploited regions like Jharkhand and Odisha.
· Caste and communities which command ownership of the major part of economic resources and occupy most of the social space, voluntarily vacating some space for the historically oppressed and downtrodden.
· Populace which has grown to be non-compliant by habit, not necessarily by intention, changing habits like spitting on roads, violating traffic rules, encroaching on pavements in front of their house/shops, exploiting domestic helps and child labor etc.