India-China Tussle May Result In Massive Job Losses

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The Sino-Indian border dispute has been a hot topic in Indian news and media ever since it escalated to unprecedented levels back in June. Soon after, Indian politicians, including Prime Minister Modi, began encouraging a movement to #boycottChina. However, it was soon apparent that what seemed like a revolutionary call for minimizing consumption of Chinese goods in India and promote local consumption, wasn’t as subversive as the public believed it to be.

With the sentiment to boycott Chinese goods still gaining traction, especially following major moves like the ban of 59 Chinese apps, including giants like TikTok, it is clear that the Indian Government and the public are hell-bent on clamping down on Chinese competitors. In addition, changes to India’s FDI policies were made earlier this year, mandating government approval for all investments from neighboring countries.

In the midst of such a volatile environment, experts still remain ambivalent about India’s approach to becoming self-reliant. Many have come forward with statistics and years of expertise behind their backs to point out ways in which the aggressive economic retaliation against China will do more harm than good in the short and medium runs.

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Chinese Investments in India: Reaching Far and Wide

Several sectors can be looked at to gauge the negative impact of India’s political-economic action against China.

Smartphone Manufacturing

One angle lends us insight into China’s stronghold in the Indian smartphone and electronics market. Up until Q1 2020, the Chinese smartphone brand Xiaomi has had the largest share in the Indian smartphone market. 3 other Chinese brands, Oppo, Vivo, and RealMe, also make it into the top 5, with the only exception being Samsung. Due to this overwhelming market share, Xiaomi, Oppo, and Vivo have set up factories in India in order to match the area’s high demand.

It goes without saying, then, that these factories also hire local labor and produce jobs for thousands of unskilled, unorganized workers. According to Forbes, Tarun Pathak from Counterpoint research estimates that these factories produce approximately 100,000 jobs in the Indian economy.

At the same time, all Indian smartphone brands combined only hold a market share of 1%, due to the competitive technology, design, and prices foreign brands offer. In other words, at this point in time, India lacks the technological prowess to produce one of the most widely purchased consumer goods in the country.

The Startup Ecosystem

Another sector that derives tremendous support from Chinese investors is India’s startup ecosystem. Unofficial estimates suggest China invests up to $8 billion in the Indian economy. 18 out of India’s 30 startup unicorns have major Chinese stakeholders such as Tencent and ByteDance. These include Ola, Paytm, Zomato, and Byju’s.

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Apart from progress and advancement, startups also generate jobs. For instance, a company like Zomato requires delivery personnel, customer care reps, company reps, etc. A lot of these positions only require on the job training, thus creating opportunities for India’s massive unskilled sector.

In the face of the COVID-19 pandemic, the Indian startup landscape is already facing massive losses. During such a time, investments have become utterly crucial for companies to keep afloat and get back up on their feet. However, with the change in FDI policies, many such companies have now been left to their own devices after severance from major sources of capital.

The (In)famous App Ban

Finally, it is becoming increasingly evident that the decision to ban Chinese apps comes with consequences for India, as well.

In TikTok’s case, influencers and content creators will now lose a major source of income. Out of the 1.2 billion Indian creators on the platform, many landed deals with major brands for promoting their products on the app. One such creator attributed 40% of her income to TikTok paid promotions.

Similarly, the online shopping app Club Factory came out with a statement highlighting that despite being of Chinese origin, it featured products from 30,000 local sellers.

Still, the government is adamant about its decision to continue the ban, and with each passing day losses for banned companies are only mounting. Just to put things in context, the ban on TikTok in India is estimated to be to the tune of $6 billion.

India’s Shoes: Too Big for its Feet

All of the above factors will have a direct impact on the employment scenario in India. Financial stress, declining sales, and halted operations will lead companies to cut corners. Employees in support, operations, the sales departments will be the first ones to face the music.

What India is attempting – aatmanirbharta – or self-reliance, is indeed admirable. But the way this goal is being executed seems haphazard, impulsive, and poorly calculated.

The examples above only scratch the surface of the true impact of the Indo-Chinese conflict. However, India still remains aggressive in its approach to wipe out traces of its East Asian neighbor from its economy.

Many experts have said that such a plan must always be executed in carefully measured phases. At the same time, such a move should come at an opportunistic moment. Additionally, clamping down on Chinese competition might not ensure success for local brands, but will surely open up space for other powerful international entities to establish a presence. However, the future might not be completely bleak, as investments from countries and regions like Japan, the US, and the Middle East are increasing.

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