This is not the first time the topic has made headlines. Time and again ‘Ban Chinese Products’ has been used as a slogan in many speeches and discussions. However, for the first time, it is the Government who has officially called a ban on 59 (Chinese) mobile apps and a few days ago, additional 47 clone apps of the above, citing the apps are “prejudicial to the sovereignty and integrity of India, defence of India, security of state and public order”. The mobile app companies have been given a chance to explain their case and this might take some time. The ban arrives at an hour when the India Chinese relations are unstable after the recent military faceoff in Galwan Valley. The Government is allegedly using every economic recourse to control or restrict imports from China. On the other hand, China has been allegedly using the Vietnam route to dump goods in India, at a lower duty without additional checks. Meanwhile, media and citizens are elated and once again ‘Ban Chinese Products’ is making rounds.There have been several other bans over the past few years, however, one question that remains unanswered is ‘Are they serving their purpose?’ Well, various factors have to be considered here and we will leave for you to decide. However, here’s some insights into this entire debacle.
The sequence of major events relating to China
- China’s ambitious Belt & Road initiative
- China building forces in Pakistan, the Indian Ocean
- US-China trade war, China border issues
- China claims the South China Sea
- Sentiments about China spreading COVID-19
- Suit against China in the US Court for the spread of the virus
- Policy for FDI by neighbouring countries changed
- India-China Galwan Valley faceoff
- China occupying Nepal, Nepal amending its map
- India slaps anti-dumping duty on China
- India bans 59 (Chinese) apps
- Sentiment to ban Chinese products rises in India
- India bans additional 47 clone apps
Do Chinese companies generate employment?
Foreign entities find the labour in India cheaper than the same in other countries. Most parts cannot be manufactured in India because India does not have the facility to produce the same. However, India being a huge consumer market, parts are usually manufactured outside India, and assembled in India. This generates huge employment opportunities for Indians. Following are major Chinese investments in India who are generating employment for Indians:
- Automobiles – MG Motors (SAIC Motors), BYD, Wanfeng, Colsight, YAPP Automobiles, Volvo
- Industrial – Dongfang, Fiberhome, ZIT, TG Advait, and Hengtong
- Services – Alibaba, Tencent, Steadview, Didi Chuxing have investments in Bigbasket, Zomato, Delhivery, Byju’s, Flipkart, Makemytrip, Paytm, Policy Bazaar, Swiggy
- Technology – Xiaomi, Oppo, Vivo, Huawei, Oneplus, Realme and 13 more brands, 100s of Apps by bytedance, Tencent, Cheetah Mobile, etc. (Huawei has a permit to conduct 5G trials in India)
Do Chinese companies contribute to tax revenue?
- Foreign companies in India are taxed at the rate of 40% in general and 50% for royalty income, besides surcharge and cess. This rate is higher than the rate applicable to Indian companies.
- Goods and Services Tax (GST) is an indirect tax where the seller collects tax from the buyer and deposits the same to the Government. All taxes paid on all eligible purchases are reimbursed to the seller when it claims the input tax credit in returns. Thus, tax is indirectly paid by the end consumers while business entities merely act as collection agents for the government and pay indirect tax only when they are end consumers of certain services. Thus, only a small percentage of indirect tax is paid by a company whether Indian or Foreign.
- Imported products in India are subject to customs duties at various rates, irrespective of the importer. Thus, foreign companies assembling or manufacturing products in India pay custom duties in India for product components imported. The cost is subsumed in the price of a product and competes at par with Indian products. Various levies of customs ensure that products imported are at part with the prices of the same in India.
- Every large corporate in India contributes 2% of its profits towards Corporate Social Responsibility every year. This spending is for the people in India and foreign companies are not exempt.
- All local taxes are equally applicable to foreign companies, as applicable to the Indian companies.
Why were the Chinese apps banned?
There cannot be a definitive answer to the same. Google – one of the largest technology company in the world provides all its services free of cost – search engine, email client, web browser, maps, app store, voice assistant, news, podcasts, etc. It thrives on the data collected from all these apps and uses it (after anonymising) to show relevant advertisements where advertisers are the real customers. Apple and Microsoft as well have similar platforms, however, less popular. Popular social media apps Facebook, Instagram and WhatsApp are all owned by the same parent entity to pool data (amongst other benefits).
Reliance Jio is an Indian company which has entered the same sphere to achieve similar benefits. All apps today operate on a similar model – collect data, store and use it for advertisements. Companies like Google, Apple, Microsoft or Facebook can maintain higher security standards, however, the same may not be the case with other apps. There aren’t only 59 apps on the apps store which violate data privacy. While some apps are using data (access with permission) some others are stealing data (access without permission), but in conclusion, everyone is collecting data. Google, Apple and Microsoft have their policy on handling such apps and have banned numerous apps when found to have malware or violate privacy.
The data from the apps are stored on servers which may or may not be located in India e.g. in case of Tiktok the data is stored in Singapore and the United States. The apps were banned probably under the suspicion of sharing such data with China and other countries. However, Facebook (a US company, with servers in the US) was probed for meddling by Russia in the US elections. Google has been fined $2.7 billion (world record) by the European Union for anti-trust breach and unfair trade practices. Apple, Microsoft, Softbank, Alibaba, Tencent, etc. all technology companies have faced some sort of probes for fooling around with data. So, neither having data locally helps, nor having a domestic company.
Did the Government ban all Chinese apps?
Tiktok, Vigo Video and Helo are apps owned by Bytedance which were banned. However, Risso another app owned by Bytedance wasn’t banned because the same was listed with ‘Moon Video Inc’, a company registered in ‘British Virgin Islands’ – a tax haven. India had also imposed heavy anti-dumping duties on Chinese products, however, the same products made their way through Vietnam, Thailand and other countries. Tiktok and others are moving their offices and servers to India to comply with the data privacy conditions. So, it is pertinent to ask, ‘Is ban serving the purpose portrayed?’
Can India survive without Chinese products?
Mobile apps are replaceable and so are the Diwali lights. We can easily give up on such products. However, these are relatively insignificant in value as the real import of India consists of technology and industrial raw material. Countries like China, Japan, South Korea, etc. excel in technology and are a global hub for the production of certain parts and products. Before banning Chinese imports, India will need to produce such components and raw material in India first. However, India does not have even a single company operating in the same sphere, and with global oligopolies, the market is competitive and difficult to survive. Chinese companies with manufacturing India heavily serve our consumer needs – even recent Government projects are given to the Chinese companies. Most unicorns in India are owned by Chinese investors. India does not have Alibaba, Tencent or SoftBank of its origin who would fund the home-grown startups.
The vision of Aatma-nirbhar Bharat is ambitious – the one that our country needs. However, the country needs more than just a vision to become self-reliant.