Run, The Dragon is Here!

Chinese DragonWe all love Chinese food, Chinese crackers and Chinese action flicks, however, our Government should not love China, else we will be on the road and China in our home!

Don’t term me as anti-China, just understand, that we all love our economy and want to see it flourish, but since 2001, China seems to be after our Forex reserves.

The Indian Government has really put in some great effort to chalk out foreign policy and combat deficits but unfortunately failed, and now seems to be dealing with the rising deficit with China as its ticket to Follywood! When we woke up in 2001, (exactly a decade after the L.P.G), we found that we really loved China, in spite of the umpteen number of anti-dumping cases filed against it and Pakistan being its all-weather ally (and our all-weather enemy). And thus began afresh, the ‘Sino-Indian’ trade relations. Till 2003, it proved good for us, as our balance of trade was positive with China, but, by the time it was 2008, we had $38.7 billion as trade deficit to its ‘credit’, or shall I say, ‘discredit’. Currently, the deficit is as large as 55% of the trade and this deficit is only bound to increase after the Beijing Olympics get over. Iron ore, an important resource for our future development account to 45% of the export transactions with China. However, who knows whether the current situation will remain the same post-Beijing? Same goes for the next major export item, the non-ferrous metals. We will have to diversify our export basket else our Forex reserves will drown in the Hwang-ho. Our Government takes decisions without taking into account an all-round perspective. China is really sympathetic as far as the deficit issue is concerned, and one can see assurances coming in from their ministers every now and then, but what about the real action like their heroes showcase in marshal arts flicks? They won’t show that because they can sense that our own paradise is troubled. For us, China is the largest trade partner (it overtook the US in October 2007) but for China, we are only the tenth largest, and their bilateral trade with us is just one percent of their foreign trade. Otherwise, if China likes us so much and is really so concerned, then why does it have non-tariff barriers, like heavy licensing and expensive and cumbersome procedures that make the penetration of Indian pharmacy into China difficult? The idea is simple, for a sector like telecom & banking, which is our forte, China has tough regulations. However, we do not cease to love Chinese air-conditioners, transmission apparatus and knitting machines as they saw a high growth of 120%, 174% and 143% respectively over a period of time. China didn’t ease its pharmacy and drug regulations, but the Indian drug manufacturers relied on it for raw material, at the cost of our own domestic, small and medium industries. And, when they hiked the price, only then did they come back to our domestic sources. Surprisingly enough, even after all these strategic plans that the Chinese follow, our Honourable Prime Minister visited China, and in his diplomatic speech he mentioned all those goods and products that we could supply to the Chinese at low costs in our bilateral trade.

10 MoUs were signed with China this year in January, in fact, a joint agreement was undertaken with China to study how the bilateral trade can be beneficial for both.

Astonishingly, without any formal agreement trade, China is rising high, and if we really get into the RTA with China, as it clearly wants, then the day of doom is not away. The people who can make a difference to our economy with their policies have identified the key products, which can be exported to combat the deficit with China. It was later found that these products have a firm demand in China quite contrary to what it should have been.

Monica Verma