New Delhi: Banning of 59 Chinese Mobile Apps has important symbolism but what it can achieve substantially is extremely doubtful. India needs to develop a long term strategic vision to retaliate at China says Sunjoy Joshi, Chairman of ORF (Observer Research Foundation).
In a conversation with Senior Journalist Smita Sharma, Joshi cautioned that it is impossible to disentangle supply chains overnight and any such attempt to cut off Made In China in a knee jerk reaction can stall Made In India program. Joshi added that the government needs to create a competitive atmosphere so the industry can reduce costs of production here and both government and the industry need to trust each other.
He also added that shifting import dependence from China to another country like Taiwan or Vietnam is no guarantee that the Chinese value addition imprint will be gone. The prominent strategic expert also underlined that amid a pandemic which has such high costs for lives and livelihoods, India must adopt a realistic view towards China else India could end up damaging its economy more.
READ:| Pompeo welcomes India's decision to ban Chinese apps
Here are the excerpts from the interview.
Q- Is the banning of 59 Chinese apps by Indian government a mere symbolism or does it hurt China in concrete terms?
Ans. One part of this is signalling but how much it achieves is extremely doubtful. There is a lot of symbolism involved. But in times of belligerence like these, signalling and symbolisms do have a lot of importance. If you start talking about disentangling of supply chains, of the need to cut out completely our dependence on China as of tomorrow it is not possible. And I do not think anyone is going to try that or even seriously think about that. We need to remove the symbols, think of the substance. If you are engaged in a strategic war or even a strategic relationship with a neighbour, this is a long term project which needs planning, thinking. Rome was not built in a day. Neither was any of the supply chains built in a day. Chinese investments have been flowing in for many many years into India be it Baidu or PayTm. China is very deeply enmeshed in your economic system. So disentangling that does not happen overnight. The whole world is struggling with it not just India. We have to think of symbols, substance and signalling as three different things and what actions we take as far as substance is concerned, that is what counts in the long run.
Q- TikTok’s global revenue in 2019 reportedly was 17 billion USD while India accounted for only 0.03 per cent of it despite the high number of downloads. How is this really going to hurt China or will it also hit people employed by these companies amid a pandemic that has cast a dark shadow over livelihoods?
Ans. In a world of Apps, there are possibilities of replacements. India is not lagging greatly. It is Indians who develop the largest number of apps around the world and they are also the largest downloader of apps. My deeper concern is when we start talking about disentangling larger supply chains, we do run into major problems. 70 per cent of your archive pharmaceutical ingredients today come from China. Why they come from China is a question we should have asked ourselves many many years ago. Today you cannot cut that supply dependence all of a sudden. Similarly for mobiles, electronics, automobiles, today if you cut out the Chinese supply chain then cutting off Made In China actually impacts Made In India. Your 'Made in India' program stalls. At the time of a pandemic when you are having problems of employment, of kickstarting the economy, you are doing more damage to yourself than to China. So we must think these through. To counter China we need to do so strategically through long term vision. Symbolism and signalling is one part of it and good for making a noise, for TRPs, for theatrics. But this cannot be done at a substantive level without planning.
Q- Do the security concerns hold ground? In response to a specific question in Lok Sabha in March this year, if there were specific US inputs about intelligence threats from Chinese apps, the Minister of State for Home Affairs G Kishan Reddy, said no and also denied plans of banning the apps. Now in some 100 days, the reason cited to ban these apps are security concerns.
Ans. The security aspect is about both apps as well as hardware be it Chinese or American. Best solution is you develop everything in India. Then you have your systems, you have a far better end to end controls. But until you do that you are always going to be dependent on someone else. There are solutions to it like testing. If you do not have testing capabilities others like Israel, Russia has it and countries that are developing it. There are solutions to the security aspects. If you fear that some back walls have been built in that makes your data insecure, there are ways to it. As long as you are not Atma Nirbhar or completely self-reliant on these things then it does not make a difference. There were questions about Cisco doing the same things, American companies doing the same things. Wikileaks was about America putting back doors and gateways and even spying on its allies in Europe. We need to be realistic about these things even with China. To counter China strategically we need to take certain steps today. You need to make your industry more competitive which will not happen in a week or a month. You need to do hard work at the grassroots to make investing and working in India cheaper. Otherwise, You are only going to raise the costs of production in India and be outcompeted by everyone else in the world.
Q- Chinese net investments in India grew by fivefold in 3 years going up from 1.6 billion USD in 2014 to 8 billion USD in 2017. The sense is that unofficial Chinese investments through third countries or acquisitions and stakes are at least 25 per cent more than official figures. Is there a proper evaluation of how much Chinese investments is there in India?
Ans. Today these questions are being asked the world over especially post COVID. India and the rest of the world is realising that over-dependence on any one geography and in particular, China is unpredictable. The whole world is engaged in this game trying to disentangle the supply chain. Sensible people know this is a project that will take minimum 3 to even 7 to 10 years. There are companies and people invested in them, large financial companies that are enmeshed. There are definite opportunities for India which is what we should be planning for today.
Q- There are some 26 billion USD planned Chinese investments reportedly. So what are the options or alternates when you begin decoupling trade with China?
Ans. We must make India a competitive destination for capital and investments, make it easy and simple. For example, reduce costs for production in India which are extremely high today. They are not high because of something China or Pakistan has done but because of some policy decisions, we have been taking in the past. Reduce our energy prices. Today there is a simple solution to everything. The moment there is a financial crisis, raise taxes. It is happening even in the energy sector. India is struggling today with petrol and diesel prices. In times of trouble that could actually be a stimulus to lower costs for the economy. When you start talking about manufacturing, building, logistics, entire supply chain within India we have to take a while hard look at what it is that is making our industry not competitive. Only then we can take on the China challenge. We will not be able to take on the China challenge simply by banning a few apps once in a while.
Q- What is holding back the government policy? What is the industry feedback about how can they step up?
Ans. Industry fundamentally wants an environment where they can produce cheaply. Industry is not saying do away with labour laws instead of asking to rationalise them. No good industry really asks that they be allowed to exploit labour. They want good comprehensive labour laws that actually end up protecting industry. In India, you may have as many as 51 central legislations which are fundamentally looking after labour, and yet when the crunch comes, when you have a migrant crisis, you have lakhs and lakhs of labourers with no protection available to them at all. That is a governance failure which has gone on for a long time and needs to be corrected. We are not paying sufficient attention to see where there is an actual interface between industry and the government which is not in the corridors of power in New Delhi. Which is in many other sectors like labour inspector or GST/ Excise Inspectors. On land acquisition, there are a whole lot of problems which industry faces. To address them is hard work that needs to be done by bootstraps. Legislation alone cannot control it.
Q- Government has said notify about all import details, parts are being held up in ports and customs. Telecom, electronics, IT have a heavy dependence on Chinese imports. There are apprehensions that medicines during this COVID crisis may get adversely impacted because of pharma sector imports. Does it look a well thought out step?
Ans. There are definite contradictions in this. In the guise of putting in these controls and raising many of these barriers, you are actually reducing the ease of doing business. As far as the substitution of Chinese manufacturing by Indian manufacturing is concerned, you may actually be taken a few steps backwards rather than forward. This needs a closer detailed analysis and to begin trusting your own industry. Today I do not think we trust our industry. Today we think everyone in our industry is corrupt and they are all lout to make money. Yes, they are out to make money. But there are interests intertwined, profit is not a bad word, profits are good for the economy and for people to do business. Let us respect entrepreneurs and the fact that they are creating jobs and competitive products. That mindset and interface need to change. Every farmer is an entrepreneur. Treat them with respect. We depend on them. That holds for the entire gamut of the economy from farming, manufacturing to services. The entire economy can stand on its two legs if we trust our people. It is on both sides. People do not trust the government. They do not believe that government policies are here to stay. That trust has to be built on both sides.
Q- Should India recalibrate strategy with Taiwan or other options to reduce dependence on Chinese imports until such time as Make In India takes off?
Ans. That is already happening. But the origin of the source is never known. So you may be importing stuff from Taiwan or Vietnam or somewhere else but how big is the China imprint on that, how much value addition is actually going to China is extremely difficult to calculate. Diversification is a strategy but it carries its own risks. So try and do what you can within the country and build up alternative supply chains knowing that these risks are there. When A lot of manufacturing started shifting from China, the production shifted from one country to another, Made In China became Made In Taiwan or Made In Vietnam. But you see probably largest value addition was still happening in China.
Q- How hopeful are you of a possible military/diplomatic solution to the LAC standoff? What next for PuB G or PayTm with heavy Chinese stakes or are Chinese owned and have donated to PM Cares fund?
Ans. A lot of investment from China is actually your best investment that China does not become over belligerent. If they do not have stakes here, the risk that they become more belligerent is always there. Why is China behaving in a certain way today? It is sensing opportunities. It is sensing that some countries can create trouble for itself, become strategic and economic rivals, so how at the time of crisis so you raise their cost of engagement? China’s actions at the LAC or the South China Sea or cyber-attacks in Australia, seem to be well calculated, to raise costs of engagements for all its rivals including India. If push comes to shove, do they really go all out and take on everybody else? This is a calibrated response from China, there has to be a calibrated response from India. We should not close any options but be prepared for everything. We are here for the long haul. Asia belongs to both of us.
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