Chinese stake in Indian economy is growing through investments particularly in technology sector. Indian export to China has outpaced imports but trade imbalance is still huge. An analysis of how deep Chinese money has penetrated in India
New Delhi, June 18:
Following the bloodiest clash with China in 45 years, reports suggest that the government would retaliate not only along the Line of Control (LAC) but also in the field of economy. The border question is complex, but the economic one is even more complicated.
Since the 2008 global meltdown, China has seen a sharp rise in its economic prowess helped by a corresponding decline in the US’s money power largely on account of its engagement in counter-terror-cum-geostrategic wars in the Middle East and AfPak regions.
Almost every country of the world has deepened its engagement with China in recent years. Being a major emerging global power, India too has done the same.
Chinese investments in a country come through direct, routed and through corporate penetration in technology and infrastructure sectors. Officially, China’s FDI in India stands at over $2.34 billion. Some observers and think tanks report a higher investment including rerouted ones. They put the Chinese investments in India at over $6 billion. Some others cite a figure of $8 billion.
An additional $550 million comes to India from China through the annual tourist inflow.
A Google search for Chinese investments in India’s startup sector shows significant results. Going by news reports, Alibaba, Xiaomi, Tencent, China-Eurasia Economic Cooperation Fund, Didi Chuxing, Shunwei Capital and Fosun Capital are some prominent Chinese arms that have invested in Indian startup firms.
Some of well-known Indian startup brands to have received Chinese investments include Paytm, Ola, Snapdeal, and Swiggy. Alibaba has invested in Paytm. China-Eurasia Economic Cooperation Fund and Didi Chuxing have invested in Ola.
An Indian Express report on Wednesday said Chinese investments in Indian startups have been to the scale of $5.5 billion in the last five years ending 2019.
So, Chinese money is deep into the Indian economic system. In the much-talked about smartphone market of India, Chinese firms have a share of over 75 per cent with Xiaomi (over 31 per cent) and Vivo (over 21 per cent) capturing the half.
Bilateral trade has been in China’s favour for far too long. India has just begun to catch up from a very far-off distance. India and China traded merchandise of $3 billion in 2000 which increased to $95.54 billion in 2018.
Trade deficit for India in 2018 was $57.86 billion. Reports suggest that in 2019, Chinese export to India were at $68 billion while imports stood at $16.32 billion. This means India has a trade deficit of nearly $52 billion. In other words, India’s dependence on the Chinese economy can be valued at $52 billion.
India has been catching up with its exports to China and these are reported to have grown by 23 per cent during 2016-19 against a growth of around 4.5 per cent in imports from that country.
But with the next technological breakthrough of 5G, China may get a bigger presence in the Indian economy. The government has allowed Chinese tech giant Huawei for 5G trials much against the advice of the Donald Trump administration of the US, and some European countries.
5G technology is predicted to emerge as the foundation of future governance and business; Chinese entry in the field may force the government to revisit its decision in the wake of rising border tensions with China.
