IB Economists

Throughout May, the situation between India and China at their border. In June, 20 Indian soldiers were killed in a clash at the Galwan valley which led to an escalation in tensions between the two economic and military powerhouses. This sparked anger among the Indians and many, including politicians called for a boycott of Chinese Imports. However, what is not known is if India can live without Chinese goods. China is India’s largest trading partner and India runs a trade deficit with China, which means the value of goods imported from China is more than the goods exported from India to China. The problem with boycotting Chinese goods is that the goods imported from China are to a large extent goods which are cheap but to an extent quality goods, such as mobile phones. Although goods from European and American competitors tend to be better than the Chinese, they are expensive and only a small proportion of Indians can afford them. Therefore, those who are rich are less likely to use g...

India is said to be developing land of more than 450,000 acres, in order to attract Companies who would want to leave China. Tensions between the US and China have rised after the US blamed China for the development of the coronavirus disease. A rise in tension could include a trade war by both countries adding tariffs and hence making it worse for companies producing in China. This is the perfect opportunity for India to give shelter to the companies willing to leave China. If India makes the best of this then they could see companies setting up industries in India which will make products in India cheaper, improve the balance of trades, contribute to GDP growth, create employment and generate tax revenue. The industries setting up will make the goods cheaper since the goods will be produced in India and tariffs and quotas can be avoided. Some amount of goods will also be exported and the overall imports will be reduced, hence increasing the injection and reducing the leakage from the...

The People's Bank of China increased its stake in India's largest private sector bank HDFC to more than 1%, this move has been seen by the authorities as a risk of an opportunistic investment by the Chinese. The share prices for the Bank were above Rs.1200 throughout February but due to coronavirus have fluctuated at around Rs.800. The bank also showed a 15.5% profit in the 4th Quarter of the financial year. Many government owned Chinese banks have been investing in countries around South Asia as a part of the One Belt One Road initiative. India has stayed out of the One Belt One Road initiative however, this move by the Chinese Central Bank seemed to worry the authorities. Taking note of the situation, the government decided to amend the Foreign Direct Investment (FDI) policy in order to discourage opportunistic investment in India. The new FDI policy requires Investors from the neighbouring countries, sharing land borders will require investment through a government r...