Military action or not, China is not going anywhere soon from our territory. Hence, India should continue to hit China where it hurts the most – economy

Chief of Defence Staff General Bipin Rawat said this week that there are military options available if the talks between India and China over the Ladakh crisis fail. His statement came as an unexpected verbal bazooka fire amid the stand-off with China that has now been on for over 100 days.

While the military options before India have always been on the table ever since the Chinese PLA made intrusions, it is for the first time that someone from the top in the current security establishment has openly hinted at this. Till now, India has stuck to the line, saying ‘the focus is on talks’ without any major breakthrough since July and the Chinese continuing to occupy various positions along the LAC. However, External Affairs Minister S. Jaishankar in an interview to Rediff said that all border situations were resolved through diplomacy—a statement that is now being seen contradicting CDS Rawat’s views.

Military action or not, China is not going anywhere soon from our territory. Hence, India should continue to hit China where it hurts the most – economy. The economy is the biggest advantage and disadvantage that the Chinese have.

Make China ‘Pay’

While India has already taken some measures to penalise China—imposing higher tariff on certain Chinese products, restricting participation of Chinese firms in government contracts and banning 59 Chinese apps—it is time for the country to escalate the costs for the neighbour. However, this should be done only after due diligence by the government and industry as the trade deficit between the two countries is heavily tilted in favour of the Chinese. Also, the Indian industry, especially pharmaceuticals and auto, is heavily dependent on imports from China. So, snapping trade links with China without arranging for alternatives won’t be a good idea. The government should make sure that the steps taken have no ripple effect on our economy in the long term.

India needs to set specific timelines before itself to inflict economic costs on the Chinese and send them a clear message—move back or lose money.

I had argued in April this year, before the LAC tensions began, that India should use domestic markets to its advantage. This is so because Indian markets have the capacity to counter China’s advantage on the border.

According to the Confederation of All India Traders (CAIT), in 2018-19, while India’s imports from China stood at $70 billion, exports were a meagre $17 billion. The trade deficit shows how India is a huge market for China. India needs to diversify its imports basket and ensure that there is a focussed Make in India approach to tide over this problem. Heavy Chinese import sectors such as pharmaceuticals, automobiles and telecom should come under immediate focus. The Narendra Modi government should attract foreign companies to set up manufacturing facilities in India.

China’s Real Power Lies In Its Economy

The Chinese belligerence on the LAC emanates from its economic might—being the world’s second-largest economy after the US. Apart from mending the military differential, India must also try to close the economic gap with China.

China managed to become the workshop of the world. As per data from London School of Economics, in 1978, Chinese exports were at $10 billion, less than 1 per cent of world trade. But, by 1985, the exports hit $25 billion, and a little under two decades later they were valued at $4.3 trillion, making China the world’s largest trading nation in goods, according to a BBC report.

According to a 2019 World Bank report, more than 850 million people have been lifted out of poverty in China since reforms were first introduced, and the country is on track to eliminate absolute poverty by 2020.

COVID Opportunity

China’s global standing has taken a hit by the coronavirus pandemic and this gives India an opportunity to stand up and replace it as the ‘workshop of the world’. According to a Bloomberg report, India’s latest set of incentives to entice businesses moving away from China seem to be working, with companies from Samsung Electronics Co. to Apple Inc.’s assembly partners showing interest in investing here. India has also extended similar incentives to pharmaceutical businesses, and plans to cover more sectors, which may include automobiles, textiles, and food processing under the program. However, according to the report, while companies have been actively looking to diversify supply chains amid the US-China trade tensions and the coronavirus outbreak, it hasn’t yet translated into big gains for India despite the nation making it cheaper for businesses to open shop.

According to a recent survey by Standard Chartered Plc, Vietnam remains the most favoured destination, followed by Cambodia, Myanmar, Bangladesh and Thailand. India needs to quickly get on to this list to really hurt China.

China was never an ally of India. It has always supported insurgency in the Northeast, shielded Pakistan, which is the main exporter of terrorism in the region, and remained a bully. Now that China has publicly shown that it cannot be a trusted ally of India, it should be a wake-up call for the country to begin focusing on our abilities and threats.