Country suffered impact of nationalist measures within just nine days
India needs to give up its idea of starting a trade war with China, as shown by the drama centering on Active Pharmaceutical Ingredients (APIs), a middle product in drug making, Chinese experts said on Wednesday.
The comments came after CNBC reported on Tuesday that the Indian customs authority is retracting its decision to delay the clearance of goods from China at its ports and beginning to process APIs. The move is seen as “relief” for Indian pharma companies.
That means the initial move by Indian customs, rolled out amid a wave of hyper-nationalism in the country and calls for a boycott of Chinese products following the recent border clash, is seeing cracks on just its ninth day.
Zhao Gancheng, director of the Centre for Asia-Pacific Studies at the Shanghai Institute for International Studies, said the partial lift clearly shows India’s reliance on middle products from China in this field.
“It took nine days for the Indian government to realize it is shooting itself in the foot by stirring up troubles in the global supply chain,” Zhao told the Global Times on Wednesday. “Such an action has failed and the Indian side has had to stop it before fatal damage is done to its own drug making industry.”
Within just two weeks, Indian policymakers at national and regional levels have paused key project proposals for automotive projects, vowed to replace contractors for a railway signaling upgrade project – the single largest Chinese deal in the country – delayed customs clearance for goods from China, threatened to slap tariffs on Chinese solar panel imports, and on Monday night moved to ban a total of 59 apps of Chinese origin, including the hugely popular TikTok and UC Browser, on “national security” grounds.
“The action from the Indian customs authority, which must be under the direction of those higher up in the Indian government, is reckless, unwise, and unsustainable,” Zhao said.
“Many Indian pharmaceutical firms typically have stockpiles for such middle products that can last for about three months,” an industry insider told the Global Times on condition of anonymity, adding that the Indian customs authority could theoretically withhold Chinese-made APIs for a slightly longer period of time before a supply chain meltdown occurs.
However, for Indian companies, getting rid of a reliance on China-made APIs will take a decade, said the person, whose company mainly exports intermediates such as vitamins to India.
CNBC said Indian customs officials started to issue orders to clear API shipments after Indian pharma companies raised concerns and the delays began to cause extra losses for Indian importers.
India has been importing about 68 percent of its total bulk drugs and intermediates from China every year, according to reports from the Times of India.
Data from the China Chamber of Commerce for Import and Export of Medicines and Health Products showed that China exported a total of $5.65 billion worth of APIs to India in 2019, accounting for some 17 percent of its total API exports.
Concerns are not limited to the pharmaceutical industry. More Indian industries are expressing their concerns and are implicitly asking for the same treatment. Indian electronics body ICMEA and the Engineering Export Promotion Council of India have also expressed their concerns over the delay of Chinese goods at ports.
Chinese experts pointed out that the move by the Indian customs authority is political posturing at most, although the action itself has reflected that those in power in India have grossly miscalculated the country’s economic standing in the global industrial chain. The Chinese experts urged the Indian government to stop its petty mind games and resume clearance for all Chinese goods.
“If the issue of goods delayed at Indian customs is not solved by end of this week, the smartphone manufacturing supply chain in India will melt down,” a Chinese executive in the Indian smartphone industry told the Global Times on Wednesday.
“Without replenishment, existing stocks in the supply chain will see a round of price hikes. The Indian consumers will pay for it,” the executive said, declining to be named as he is not authorized to speak to the media.
“Populism is hijacking and fooling the Indian public,” said the executive.
“While it is not utterly unthinkable that the Chinese and Indian economies could completely decouple, the two do rely on each other for the production of large categories of goods,” Zhao said, noting that the likelihood of the world’s second-largest and fifth-largest economies locking horns in a trade war is still quite slim.
“But if there is a trade war, India could not afford it in the way China does,” Zhao said.
A factory in India. File photo:VCG
