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Boycotting Chinese goods: Impractical and harms the national interest

The plan to boycott Chinese imports is neither practical nor is it in the Indian national interest.

By Anupam Manur (@anupammanur)

boycott

There has been many nationalist calls for boycotting Chinese goods as a retaliation against China for blocking India’s bid at the UN to designate Jaish-e-Mohammed chief Masood Azhar as a terrorist, following the Uri attacks and the subsequent surgical strikes carried out by the Indian army. Presumably, India is tired and frustrated of China tacitly supporting Pakistan and thus, the clarion call is for consumers to boycott all Chinese products en masse, so as to hurt the Chinese economy, especially at a time when it is reeling. This has obtained mass support from not only the ordinary citizens, but is being backed by influential MPs and others from the political class.

Such a move is neither practically feasible in order to obtain the desired result, nor will it be in our national interest to do so. Let us examine the feasibility angle first.

India is the biggest importer of Chinese consumer goods and the trade deficit of India with China is one of the biggest between two significant trading partners. India imports almost seven times more from China than it exports to it. The range of goods that we import from China is massive: consumer durables such as electronic products, mobile phones, plastic items, industrial goods, vehicles, solar cells, essential pharmaceutical products, including tuberculosis and leprosy drugs, antibiotics, among many others.

Impractical, at best. Impossible, in reality

Even if we wanted to, it is nearly impossible to keep China out of our daily lives. There’s a little bit of China in every product we consume. Ironically, the laptops and mobile phones that we use to forward the message to boycott Chinese goods are made in China itself. The modern day production process is complex and interconnected. Every good that we use has different components from various countries. Take the mobile phones: it will have some rare earth elements from China, uses the labour and land from China, has investment and capital from the US or an European country, has entrepreneurship from Japan or Korea, and it finally, might use software made in India. Thus, it is impossible to isolate any country and boycott its products.

It is also important to understand that this kind of consumer boycott movements is hardly new or unique. It has been tried and it has failed many times in the world previously. China itself tried to boycott all Japanese products in the early 1930s to protest against Japanese colonisation. The US consumer forums tried to boycott French goods in 2003 to protest against France declining to send troops to Iraq post 9/11. Ghanians boycotted European goods; Jamaicans boycotted goods made from Trinidad and Tobago; Russians boycotted European agricultural products, etc. The list goes on. The only common thing between all these various events is that none of the boycotts were successful in their mission. It all failed and dissipated within a few weeks and the reason for that is always simple: economics. To understand why the boycott movements started, we have to understand why the countries imported these goods in the first place. We have to realise why India is so heavily dependent on China for imports.

Comparative Advantage

Why does India rely so heavily on China for its imports? The answer lies in practical economics. China can produce many of these goods cheaper and more efficiently than India can. Thus, the average consumer, who is price conscious, does not really care whether the products are made in China or in Eritrea, as long as he gets the best goods for the cheapest price. The only practical way to boycott Chinese goods is to deploy an import-substitution method and produce alternatives at home, which is far from ideal. If we as a nation would want to boycott Chinese goods, we would be traveling back in time to the autarkic nation that we were post-independence and this would effectively harm overall social welfare. We tried import substitution methods in the 1960s and 1970s and our rate of economic growth was low and stagnant for a long period. Basic economic theory tells us that each nation will produce the goods that it has a comparative advantage in and then trade it for goods with other countries.

If India were to try and make all the products that we currently import from China at home, it would involve a considerable reallocation of our resources from productive to unproductive uses. Immediately, the range of products available as a choice to the consumer would diminish, the quality of the products would be worse and the prices would be higher. The welfare gains from trade would be wiped out and the cost of all the products would become considerably higher and the retailer and the consumer who relied on cheaper imports would suffer.

What is India’s national interest?

The important thing here is to distinguish what is in India’s national interest. If we define our national interest as the greatest good (higher income) for the greatest number of people, then import substitution would just not work. Imported products allows consumers from all income levels the ability to consume these products at lower prices and retailers to maximise on their sales.

How do you respond to the Chinese actions in the UN, then? It is a political problem and largely needs a political resolution. If we were to impose trade sanctions against each country that has mildly annoyed India in the geopolitical realm, we would be left with no one to trade with. The US has traditionally given monetary aid to Pakistan despite Pakistan’s unwillingness to curb home grown terrorism. Can we afford to not trade with the US? Saudi Arabia and other middle Eastern economies fund Pakistan’s terrorism directly or indirectly. Can we afford to stop importing oil from these countries?

Harming one’s own citizen’s in order to extract revenge on another country seems to be an ill-advised move. Each citizen can take a call on what they want to buy or not. If Chinese made plastic diyas during Deepavali is not to your liking, don’t purchase it. But, that’s no reason to call for a universal boycott on Chinese imports.

Finally, is this dependence on China for imports good? Perhaps not. As of now, we do not have a comparative advantage in producing the goods that we import from China. However, with the right policies, we can produce some of these items or contribute a greater amount in the global production value chain. For that, we need to improve our productivity, free up labour laws, reform land acquisition policies, fix our credit system, and so on.

Anupam Manur is a Policy Analyst at the Takshashila Institution.

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Commercial models for Public Wi-Fi

Can we have a proliferation of broadband access through public Wi-Fi networks? What are the issues and challenges?

blue-and-yellow-wifi-hotspot-sign

The Telecom Regulatory Authority of India held a public workshop in Bangalore on the 28th of September 2016. The objective of the workshop was to look at the possible commercial models for providing public Wi-Fi hotspots.

The first welcome step in this workshop was the emphasis on finding commercial models for providing public Wi-Fi and not on making Wi-Fi free for all. It is quite surprising that a vast majority of people expect public Wi-Fi systems to be provided for free of cost.

The present number of Wi-Fi hotspots in India is abysmally low compared to most other countries. There are 35,000 Wi-Fi hotspots in India compared to around 10 million in the US. The real challenge is to build a network of Wi-Fi hotspots through the country that can provide seamless internet access to millions of Indians.

The different network operators shouldn’t consider public Wi-Fi as being a competitive threat to their sale of data plans. Mobile data and public Wi-Fi has to work in tandem to provide seamless connectivity. However, there is an obvious benefit by increasing the reach of public Wi-Fi. The average cost of accessing the internet through the cellular network is around 23 paisa per minute as against 2 paise per minute on Wi-Fi.

Present Challenges for Public Wi-Fi hotspots:

There are numerous challenges for creating public Wi-Fi hotspots, which needs careful attention at this early stage:

  1. There are inherent hardware limitations: Where do you put the modems and routers and in what frequence? Do each of the ISPs get their own routers? These are not small or insignificant logistical problems.
  2. Who will be responsible for the service and maintainence of these routers? What about the electricity needed to run these stations?
  3. How do you ensure about quality of service and uninterrupted broadband access? How do we check and maintain records of those who are logging on the public Wi-Fi systems? Security concerns are definitely a non trivial concern for providing public Wi-Fi
  4. How can we ensure business viability for the ISPs who provide the internet access?
  5. How can we ensure interoperability between the different ISPs? Do we need to log in separately for each ISP that we choose in different areas?
  6. There’s also the problem of the availability of infrastructure needed to provide public Wi-Fi hotspots. Specifically, this sort of operation needs plenty of unlicensed spectrum for ISPs.
  7. Finally, how to ensure smooth and easy payment systems? If the payment procedure is arduous and time consuming, many people will be dissuaded right away.

Once the problems were identified, the rest of the workshop focused on attempting to find solutions for these, though it slightly fell short, according to my assessment. The broad ideas were in the right direction, but the specifics of the mechanism got lost in a beauty contest of the different solution providers.

Pipe vs. Platform model:

One of the interesting big ideas was the emphasis on switching from the current piped model to a more open platform model. In short, the pipe model would expect the entire vertical of setting up public Wi-Fis to be done by the ISPs. This would involve each ISP to get spectrum, provide the internet access, set up routers, authenticate consumers, accept payments, and so on. Instead, using an open-ended platform would allow for innovation in the different layers of the verticals. The payment can be taken care of an external app based on UPI/mobile wallets, etc. The authentication and KYC can be taken care of using Aadhar or any trusted authentication method (even mobile phone numbers can act as auntheticating tools). Local shop-keepers can take up the initiative for setting up routers and ensure its maintainence if they are compensated correctly for this.

More importantly the viability of a truly public Wi-Fi network would work only if individual users are allowed to resell broadband access. This is like the solar rooftop model, where individuals can set up solar power generators and sell it back to the grid. Imagine an open national grid, where each individual can sell/resell their broadband access. This would create a truly seamless public Wi-Fi system.

Anupam Manur is a Polcy Analyst at the Takshashila Institution and tweets at @anupammanur

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Has Modi lost the Narrative Dominance?

Modi’s PR machinery, which achieved such narrative dominance during the elections, has failed to take a hold of public discourse in the recent past.

It’s barely 18 months ago when there was jubilation from all corners when Mr. Modi took the office of Prime Minister of India. In the analytical circles, it was largely commented that the Modi narrative of development won the election much before the results came out in May 2014. Modi campaigned by building on the narrative of development, higher economic growth, rising incomes of the Indian population, etc. He promised better roads and bridges, better educational facilities, healthcare and overall, a better standard of living. He was especially successful in reaching out to the middle class. He tapped into their aspiration and made them believe that he would deliver in realising those aspirations. He also succeeded in getting the support and backing of the business community by his emphasis on governance over government. He made assurances of easier procedures to do business, cutting red-tapism, and improving the investor confidence in the India story. Given all of this and the exhaustive election campaign trail, the result of the elections was decided a long time before the actual votes were cast.

There were other narratives too. Competing, but not compelling – ‘The ‘Harbinger of Death’ and the communal agent. Godhra was thrown about without any hesitation. There were other stories existing as well. A dictator and an autocrat in the making, who would centralise all power. However, these narratives failed to gain traction despite a protracted effort by the opposition and Modi won the election with a comfortable margin. Modi’s PR machine, spin doctors and campaign managers were simply better.

This post is not to deal with whether the promises made by Mr. Modi were kept up; rather, it is to explore how he lost the narrative dominance in India. The issues that have been discussed in the media recently have nothing to do with what Mr.Modi achieved or failed to achieve. There have been a few achievements surely, but that has not gained the kind of national attention that his promises gained. The opposition has been extremely successful in taking charge of the national discourse and has diverted it from economic issues to more political ones. Dadri got more attention that the rural electrification program; ‘intolerance’ over the fact that 2015 saw the largest FDI inflows into India (double than that in 2014), Rohit’s death over Startup India. This is not to say that any of these issues are not important, but it is a cause of wonder as to how the BJP’s PR machine has entirely broken down and allowed their achievements to be sidelined while simultaneously giving way for constant criticism. The very same BJP’s campaign managers who successfully deflected attention away from these very issues and fears of communalism into the development story are failing miserable these days. Where are the spin doctors now?

Modi’s silence has not helped either. An extremely vocal person against his critiques during the election trail, he now barely responds to criticism. When the entire nation is worried, justified or not, over intolerance or minority persecution in the country, it is the duty of the Prime Minister to speak up and placate the citizens. Silence from him is handing over the narrative dominance to the opposition.

There’s also an appreciable lack of ‘chest-beating’ from the BJP about their achievements. People are not barged with full page ads, social media campaigns, etc about their achievements so far. There are a few ‘bhakts’ who religiously try to highlight the economic achievements, but these are not taken seriously as the label itself is designed to remove credibility.

Whether the BJP has actually achieved all that they wanted to or not is an entirely different matter. Achievement, usually, in Indian politics has nothing to do with publicity. And what the Modi government desperately lacks is clear messaging, a publicity strategy, and a hold on public narrative. They have allowed themselves to be sucked into issues from which they would rather stay far away.

Anupam Manur is a Policy Analyst at the Takshashila Institution and tweets @anupammanur

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