India’s Atmanirbhar Bharat initiative promotes Indian self-reliance. It supports domestic industries and encourages import substitution of products that can be manufactured locally. But ever since the border skirmishes between Indian and Chinese troops in Galwan in May 2020, the union government has been implementing economic policy initiatives that seem specifically intent at curbing Chinese economic interests and influence in the country.
Most recently, these have included banning 54 Chinese apps, some of which belong to tech giants such as Alibaba and Tencent. Here’s what you need to know:
Section 69A of the Information Technology Act
The Ministry of Electronics and Information Technology (MeitY) claims the banned apps threaten the privacy and security of Indians because they transfer sensitive data about Indian citizens to servers in China. Therefore, it has demanded that access be blocked on app stores such as Google’s Playstore.
In issuing the ban order, MeitY is enforcing Section 69a of the Information Technology Act, 2000, introduced by an amendment to the Act in 2008. The amendment permits the government to block public access to any online information that threatens national defense, sovereignty, and integrity, India’s relations with other countries, or public order.
More Than 200 Chinese Apps Are Now Banned
Since June 2020, India has banned more than 200 Chinese apps in three rounds of ban orders, including the popular TikTok, WeChat, and Mi Community. From August 2020, the Department for Promotion of Industry and Internal Trade (DPIIT) has mandated e-commerce companies to display the country of origin on products listed on their sites.
However, a number of the most recently banned apps constitute rebranded copies of previously banned apps that have changed hands and host countries to hide ownership but which still ultimately direct data to Chinese servers. In some cases, such as Tencent’s WeChat, the apps are available through alternative means like APK files.
Indian Entrepreneurs Also Hit by Ban Orders
The ban on Chinese apps led to a sudden but short-lived spike in downloads of locally produced apps such as ShareChat, Roposo, and Chingari. But Indian apps that have received significant Chinese funding from companies like Tencent, Alibaba, and Ctrip were also targeted by angry Indian consumers who uninstalled the apps and sabotaged them with negative reviews on app stores.
As of mid-2020, 60 percent of Indian startup unicorns included Chinese investors on their cap tables. And diversifying portfolios in the current post-pandemic climate where banks are experiencing a scarcity of capital will not be quick or easy.
Other Industries Hit by Anti-Chinese Policies
In 2020, the DPIIT requested detailed lists from a comprehensive selection of trade and industry bodies of Chinese products substitutable with local products. And Chinese imports were discouraged through a combination of tariffs and non-tariff barriers, including time-consuming checks of Chinese consignments.
With India’s existing electronics manufacturing facilities still recovering from the pandemic closures and suffering from the absence of migrant labor, its ability to meet demand has been severely hampered. As a result, many local manufacturers have resorted to assembling products from imported components and labeling them "made in India."
For example, as much as 70 percent of components of smartphones are typically imported from China, and they now attract 22 percent import duty. Additionally, delays in clearing Chinese imported components can bring production to a halt and even destroy temperature-sensitive components like displays. However, in the end, Indian consumers, whose discretionary spending is under pressure, continue to select Chinese handsets with better specs, making it difficult for local manufacturers Lava, Micromax, and Karbonn to gain market share.
What Does the Future Hold?
India isn’t the only nation to discourage reliance on Chinese imports or regard China's access to citizens' personal data as a security threat. In September 2020, President Trump announced a ban on WeChat and TikTok in the US, although both apps remain available. However, he was more successful in banning the import of Huawei products and telecommunications gear and its use of American intellectual property.
But although India is one of the fastest developing nations, its production capacity and capital resources are still far inferior to the US and other developed countries. Anti-Chinese economic policies may prove detrimental to its development if its central fundamentals aren't addressed.
Access to technology, production capabilities, and capital is essential to the electronic component manufacture that will make India self-reliant when it comes to finished products. The government must also ensure the port infrastructure and logistics necessary to support such growth.
In the meantime, there is no end in sight to the hostilities between India and its neighbor. Currently, the disputed Himalayan border separating them is quiet due to sub-zero conditions. The two countries have held fourteen rounds of talks since the 2020 Galwan river valley clash, which left troops on both sides dead. The latest of these was in January and ended without any progress being made as each side has different perceptions of the ownerships of several sectors along the 3,500-kilometer border.