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Thursday, July 02, 2020

New red line

India’s decision to ban Chinese apps sends a clear message on the road ahead. There is need to tread firmly and carefully.

By: Editorial | Published: July 1, 2020 12:07:56 am
coronavirus, covid 19, coronavirus lockdown, india lockdown, indian express While India accounts for only 3 per cent of China’s exports, China (excluding Hong Kong) accounts for 14 per cent of India’s imports, and 5 per cent of exports.

On Monday, the government banned 59 mobile applications with Chinese links such as TikTok, UC Browser, Shareit, and Cam Scanner. The decision, which comes amid continuing tensions between India and China, after the killing of 20 Indian soldiers on the Line of Actual Control, is the first clear message from New Delhi that it will review the rules of engagement. This is an interim order and firms have been given 48 hours to respond to questions on their compliance with data security and privacy but this marks a decisive break from the past. It serves as a statement of intent while sending a clear signal to China that there will be costs for acts of aggression.

How to manage and respond to China’s growing assertiveness in the face of a growing power imbalance is a challenge for India. There is an asymmetry in power, a visible economic disparity. The Chinese economy is roughly five times larger than India’s. While India accounts for only 3 per cent of China’s exports, China (excluding Hong Kong) accounts for 14 per cent of India’s imports, and 5 per cent of exports. But the situation at the LAC demands a response. In this context, the ban on Chinese mobile apps may be construed as low hanging fruit and a relatively soft target, but it is, at the same time, a decision that makes the point without leading to a revenue loss for India or hurting it economically — for that same reason, calls for boycotting all imports from China in this moment are ill-judged. Those using these apps have other readily available alternatives but Chinese firms stand to lose a fast-growing market. Given that India’s digital economy is tracked globally — it is one of the largest markets in the world for these apps — blocking access here does impact the valuations of the companies.

Other retaliatory steps are being considered. E-commerce firms have been asked to explore the idea of listing the product’s country of origin amidst a growing clamour in some sections for boycott of Chinese products; there is talk of raising tariffs, curbs on contracts in some infrastructure projects. In fact, earlier, in a move that was apparently aimed at Chinese firms, the government had made it mandatory for foreign direct investment from neighbouring countries to take prior approval to curb opportunistic takeovers during this period. However, given how pervasive Made in China is, how sweeping its presence in the technology space in India — its investments in a long list of Indian unicorns — each step will come with its own set of consequences. New Delhi should prepare for these and calibrate its response, step by careful step.

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