India should resist calls for protectionist measures against Chinese smartphones

By Hu Weijia Source:Global Times Published: 2017/4/18 0:23:39

India should resist the temptation of resorting to protectionism, an issue that has raised its ugly head among its smartphone makers recently. These firms are seeking government action to ease the pain of their defeat to Chinese rivals.

"The government should be more supportive of its people," Narendra Bansal, founder of Indian smartphone brand Intex Technologies, was quoted as saying by the Financial Times, adding that the Indian government should raise supplementary levies against handsets from Chinese companies.

With the Make in India campaign having been initiated by the Modi administration, India is in a period of rapidly developing industrialization, and the question of how to effectively protect nascent homegrown industries is a tough task faced by local governments.

Although protecting local brands from intense international competition can buy some time for the expansion of homegrown industries, such moves will reduce local companies' competitiveness in the long run and build an inefficient industrial system.

The more protectionist measures that are taken by the Indian government, the more backward the production capacity of Indian homegrown industries will be. Historically speaking, almost no country in the world has relied on policy protection to transform itself into a manufacturing powerhouse. If India wants to replicate China's success as a world factory, the most valuable experience that China has gained in the last 40 years is its opening-up policy, which opened the domestic market to foreign investors.

The Modi administration has ramped up efforts in recent years to make India a more attractive investment destination, for instance by reforming its tax structure. However, potential protectionist measures could overshadow the effects of the government's plan to improve the investment climate. China is currently a major source of investment in India, and the country may not be able to complete its industrialization and modernization without help from foreign investors.

Additionally, Chinese telecom equipment maker Huawei Technologies Co and some other Chinese smartphone vendors have announced that they will establish production facilities in India to increase their local assembly of handsets in the country, meaning that supplementary levies against products from Chinese companies would hurt the interests of Indian employees working for the Chinese firms.

Indian entrepreneurs like Narendra Bansal, rather than average Indian laborers, will perhaps be the biggest beneficiaries of any protectionist measures against Chinese smartphone products.

As for China, the Chinese government is unlikely to sit idly by while India harms the interests of Chinese companies. We cannot rule out the possibility that China will take countermeasures if India takes unfair measures to protect its homegrown companies from international competition. Beijing and New Delhi should avoid a potential trade war and enhance economic cooperation in order to strengthen bilateral ties between the two countries.

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn



Posted in: EYE ON THE ECONOMY

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