COLUMN/ THE HOT POTATO
January 24, 2023: There’s an old saying: penny wise, pound foolish. It applies to how things work in the cut-throat world of geopolitics.
Let’s understand this with a hypothetical example. Say, you got a neighbouring empire that you suspect is plotting to invade your kingdom. You panic and throw in all that you’ve got to bolt your border. Your first reaction is to line up a gargantuan fleet of troops to man your borders. You arm them to the teeth and task them to keep a hawk’s eye out — nobody should bat an eyelid.
But there’s a catch here. Your obsession with securing your border is of little help. That’s because you’ve unmindfully left your back door ajar. While you’re busy at the border with binoculars, scanning the horizon for the sight of onrushing tanks, dapper-suit businessmen from that rival empire tiptoe into your fragile economy from behind you, and silently siphon your money out.
End result? You pay a hefty price for not paying attention to the bigger blow your kingdom takes. The all-important economic blow. It’s a classic case of ‘penny wise, pound foolish’.
Now, here’s the thing, disconcerting as it may read. This example is not a hypothetical one but a real one when it comes to India’s economic relationship (or standoff, rather) with China. China is definitely not the coolest neighbour to have. That’s the worst-kept secret in world politics, and we’ve learnt it the hard way many a time.
So, while India knows only too well that China is perpetually breathing down its neck along the long border, it’s only natural to focus on bolstering our defences militarily. There can be no two ways about it, given China’s militarily intrusive track record.
But while we’ve successfully stood up to them militarily, we’ve let our guard down when it comes to dealing with them on the economic warfare front — which many people tend to wrongfully write off as something of secondary importance to our safety and security.
Heck, no! The economy is as important as our border with China. And winning the economic war is as important as winning a border war. This economic war is the war you don’t see. To be precise, the war of international trade. That’s where China is racing ahead of us with a gigantic lead that we need to reverse desperately.
Rs 8,226,220,232,000! — Well, that’s Rs 8.23 trillion. In US dollars, it’s 101.02 billion. This figure is the trade deficit bill that India ran up against China for the year 2022. It’s the first time ever that India’s trade deficit with its export-obsessed neighbour shot past the mind-boggling $100 billion mark. It’s a new low for the Indian economy that needs to be corrected at once.
Let’s compare this astonishing figure with the 2021 numbers. Back then, India’s trade deficit with the Chinese stood at $69.38 billion, which in today’s numbers comes to Rs 5,649,793,788,000 or Rs 5.65 trillion.
The table is tilted, folks. They’re getting away with the game. And we’ll keep trailing and flailing if we continue to import tonnes and tonnes and tonnes of Chinese goods — often nonessential ones that we could jolly well manufacture ourselves.
Let’s just take a pause and try to make sense of the quantum of products we allow Chinese exporters to dump on unsuspecting Indians. The math should leave you panicking, if you indeed care for your country and its precious wealth. In 2022, India imported from China goods worth $118.5 billion. In our currency, that’s Rs 9.67 trillion. And what’s the worth of the goods we exported to China that same year? Just $17.48 billion or Rs 1.43 trillion. That’s a sound figure if seen in isolation, but it’s a no-contest compared to our import bill.
The gulf is there for all of us to see. It’s too big to ignore, too blinding to miss, and too unacceptable to sit back and let go.
So, why is winning back the economic war so important? Does it really matter? Isn’t securing ourselves militarily against China good enough?
Well, the math should answer these questions. Our imports from China are increasingly dwarfing our exports to that country. It simply means India’s financial resources are leaving the country and travelling straight into China in phenomenal quantities and at a phenomenal speed. While the Chinese economy is happily soaking in this new financial wealth flowing in from India, China is correspondingly offloading its poverty straight onto the Indian economy by trying to squeeze it dry.
Frankly, we don’t need an understanding of high-end, jargon-laced economics to thrash out a workable solution to this crisis. The biggest problems on the planet have the simplest solutions.
If we can figure a way to stop relying on tonnes and tonnes of Chinese imports, especially the nonessential ones, and if we can correspondingly set up systems to produce that stuff ourselves right here, we can turn the tables on this haunting trade deficit.
The bottom line is, the economy is just as vital as defence. A trade policy focusing on trade surplus and not trade deficit is just as vital as deploying soldiers along a sensitive border. And constructively and peacefully fixing a cancerous trade deficit with an opportunistic neighbour is just as vital as winning a military war.
The need of the hour to stop India from leaking money to China like a sieve? — A defence ministry for the economy to win the war we don’t see.
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