A Wide Angle View on India-China Trade
A comprehensive overview on India-China trade and the influence on MSMEs, writes Faiz Askari of SMEStreet.
Life can never be judged as black & white. Yes, its important to understand this phrase at every level. Being judgemental often hampers the judge. Well, these quotes I am making in context to the argument of boycotting Chinese goods. Well, in a straight sentence, I must say that boycotting Chinese goods or components is not at all a good idea for everyone including MSMEs.
Before getting into further discussion, I must explain the basic and fundamental tenet of international business and global trade. Well, we must acknowledge and understand the fact that one of the prime and fundamental principles of international trade is to create a bridge between two different societies and nothing is more powerful bonding than business. Well, a political rift may happen as a result of different political ideologies, contemporary influences and so on but the trade shall remain focused bringing to two different sides closer to each other on the basis of giving value-added profits to each and every stakeholder.
India & China & MSMEs
Now, coming back to the subject of ensuring national interest and MSME development. Well, this is an important point and must be kept at priority always. The manufacturing sector which is contributing significantly to the GDP somewhere over 40% requires a wide-angle vision for development.
This sector consists of MSMEs and there has been a lot of initiatives to uplift them. MSMEs’ contribution to the economy must also be considered as a nation-building exercise but we must accept it is a process. The process which includes capacity building at the first.
Ow, MSMEs which are in the manufacturing domain procures raw material, components for their production output and in order to remain profitable, they seek the best possible cost for their raw material. This is where the Chinese components and raw material comes into the picture. In order to make their end product with a profit and not loss-making, they procure from China.
There are estimated costings which says that if Chinese products are replaced with domestically produced components, the costing of production will increase by over 40 to 45%.
Now, the question arises is, are we ready to pay around 45% extra for a product which is made in India without Chinese component imports? We may like to avoid this question but we can not ignore the fact that these are Indian MSMEs that procure sensibly to make their profits and generate employment locally and pay taxes locally. That’s why to look at the scenario, we must have to consider the complete picture.
The Goal of Self Sustainable Economy
The economy should evolve as self-sustainable business entities, we should understand that public sentiments are one thing and economic facts are different. But, having said this, we should be open and agile towards becoming self-sustainable, instead of the idea of boycotting, I believe that we must uplift our manufacturing capabilities, upscale our capacities to produce something which is a truly holistic sense can disrupt the raw material market in India. Doing this is not an easy task and it requires time and efforts.
Also, a well-defined strategy is needed from the government agencies which may act as a facilitator for quality and appropriate products from the manufacturing segment.