Source raw materials from a country, use them to manufacture finished products on an industrial scale in your own country, and then send these products back into the raw-material exporting country for sale.
That’s what school textbooks taught us British colonialism did to India over two centuries. Going by what we export to and import from China, 21st century colonialism seems to be the name of the game. That, at least, is what the data indicates.
For, figures between 2014-15 and 2019-20 show that the export of low-value raw materials and import of high-value manufactured goods have marked Sino-Indian trade ties. The power of trade and its consequent economic heft is, by far, the weightiest factor in the asymmetrical relationship between the Asian giants and that is not changing anytime soon.
India’s exports to China over the last six years have been only a fifth in value of India’s imports from China. While average exports to China have been $13 billion in the six years ending 2019-20, the average value of imports from China has been $66 billion in the same period.
India’s exports have ranged from food items like fish and pepper to essential inputs like iron ores, granite stones, petroleum products and cotton yarn. Its imports from China include automatic data processing machines, telephone equipment, video phones, electronic circuits, transistors, semiconductor devices, antibiotics, fertilisers, sound recording devices, TV cameras, automobile components, and project goods.
The unvarnished truth is that the current trade patterns accurately reflect India’s manufacturing capabilities – or lack thereof, to be precise. The Indian government, thankfully, gets it.
The PLI (production linked incentive) schemes for various sectors, the Atmanirbhar initiative, the Make in India policy, pushing the China plus one global supply chain thesis et.al. are reflective of the Indian economic-strategic policy establishment recognising that power flows through trade in the contemporary world. But India has a long, long way to go.
The finished products imported from China, it must not be forgotten, are to meet India’s domestic demand for these goods and are not being forced on the country. In that sense, it is not coercive colonialism of the British kind which is playing out; it is more a result of China’s unparalleled competitiveness in manufacturing relevant product lines.
For example, the telecom revolution in India resulted in the import of telecom equipment and mobile phones in large quantities from China which dominates the electronic hardware market. India’s telecom and mobile phone manufacturing industry is still at a nascent stage despite the fillip provided to the sector by a well-designed PLI scheme.
The key is to be realistic. India is not overnight going to start competing with China in manufacturing terms. But from being just an exporter of raw materials to focussing on value added exports such as cancer drugs, auto components, and processed foods is a good first step.