MISSING PIECES
I
Lessons to learn
t is true that trade between two nations builds strong foundations of friendship. Everyone who follows India and China keep saying that China has a favourable balance of trade vis-a-vis India. China exports more to India as compared to what India exports to China. Look the other way – I believe, it is India which imports more from China (rather than what China wants to export to India) for its needs, economists call it the law of demand and supply! Also what India exports to China, is actually what China wants to buy from India, for its needs. It’s not what India should export (value added goods). How did this come to happen? How can then India export to China what India should want to export in terms of total value and products? Actually, everything! Because even today China imports almost everything from ‘pin to plane’ as their domestic production cannot fulfill the domestic demand because the focus of Chinese production is exports. Then why is India not able to export more to China? Industry says that they face competition from Chinese businesses and products in international markets, so how can they export to China? Is this not what many countries say for India too? But India too imports everything from ‘pin to plane’. I want to use a live example to explain my stand. It was in 2005 that I was given an assignment by an international development agency to work for the competitiveness of machine tool (several sub categories) cluster in Bangalore. For me, competitiveness meant and means till date – exportability! So I started playing with data. I found that at that time India’s machine tool market was around Rs 5,000 crore (US$ 1 billion in today’s terms). India’s export of machine tools was about Rs 75 crores (US$ 15 million). I was astonished when I looked at Chinese data. China’s machine tool market was Rs 28,000 crores (US$ 5.6 billion). But what was interesting, was that China’s imports of machine tools in that year was Rs 4500 crores (US$ 900 million). When I conducted the first outreach event for the machine tool industry, I shared these figures and I challenged the industry that if we cannot get 1% share of China’s imports in machine tools – Rs 45 crores (US$ 9 million), then we have a long way to walk on words like competitiveness. Yes, I know about the argument of Chinese state subsidies and all that. But to me, it makes no sense when we talk of China’s imports! This exercise led to several exchange of trade delegations
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between India and China of which I was part of and I have a long story to tell, but will not do that at this point of writing. However, I would certainly like to share with you the fact that since that year, India’s exports of machine tools (several sub categories) to China has grown 100% year upon year – check the data of Indian exports! There are many such stories on India China trade. In this column, I will be writing one such story in every issue. Look out. What are the lessons? Exporting value added goods to China is possible. What are the missing pieces? • Product focused China knowledge seminars by stakeholder institutions. • Practical and 10 pages of market reports on product specific for example the lathes markets of China (Not the bulky 200 page glossy reports, which God knows who reads, certainly not the industry) • Product focused trade delegations to China, with targets for delegations. • Factory visits to China (yes, they allow) • Aggressive promotion of MDA & MAI schemes for China • Belief that we can export value added goods to China Remember, India is a model where entrepreneur is at the centre of economy and China is a model where state is at the centre of economy. Therefore, it is entrepreneurs of India who can do it, with a support role from government (not lead role as in case of China). Only strength respects strength. We need the spirit like that of,– Sarfaroshi ki tamanna ab hamare dil mein hai, Dekhna hai jor kitna baazu-e-qatil mein hai?”(The desire for sacrifice is now in our hearts We shall now see what strength there is in the boughs of the enemy).
Jagat Shah
Founder & Mentor, Global Network, an international trade consulting firm and Chairman, India China Economic & Cultural Council, Gujarat