Re: Hyundai and Kia cost India billions of $ in trade deficit: Union Commerce Minister A fairly simple topic is turning out to be quite a contentious one. Never easy these days. Personal examples shared of a small universe not backed by data , tough for many of us to accept.
No malice to anyone who does not agree, I am just going by basic economics of foreign trade, publicly available data and some extrapolation. Would have loved to do some deep research may be paucity of time or plain laziness.
So, Koreans are nationalistic , Indian consumers are optimisers and hence in a roundabout way guilty of guilty pleasure of cheaper imported stuff.
I do not understand it, all countries and their nationals are nationalist and patriots. But they will buy only local stuff out of love for their country , I think these are over generalisations, based on similar samples over time or may be smaller samples.
Koreans buy local made stuff as, it is cheaper, gives better value, has quality and are durable. They are world leaders in engineering, electronics, vehicles, chemicals and so on, possessing an enviable collection of globally respected brands. So if they prefer them over others , then one cant blame them.
As Indian should we buy only India made stuff? Over other, better quality, cheaper stuff? I dont have to answer that, each according to his or her need and belief and of course money. I buy what I can afford and gives me best value for my money, and for my patriotic duty I pay my taxes on time. And I dont think any other large body of consumers behaves differently in any part pf the world. Those with wealth and high level of patriotism can spend their money fattening inefficient local manufactures. Will that help them build local, only time will tell. Past it could not. Have no view there. Their own money. Not my call.
But I know very well that be Indian buy Indian slogan, failed year after year, spectacularly. Hope meets a better fate this time.
Korean industry was supported by Government’s fiscal support, tax breaks , import restrictions and what not, long time back. May be some invisible barriers still exist but even if they do, their consumers will reject it. Everyone knows prices, quality of stuff across the globe.
Even tougher to implement in Korea , its economy is trade dominated as opposed to local consumer dominated. It is nearly 2 trillion economy with 60% accounted for by trade. Ours will be around 30% or so.
If Government were to subsidise it with fiscal support, they would have had to incur a lot fiscal deficit , accumulate a lot of public debt and give up lot resources for interest payment. Inflation would have been consistently high and they would have poor quality of life. None apply on a consistent basis. Almost all indexes fare far better.
Stories, experience of working with Koreans for decades , may have a lot of anecdotal value but cant be expanded for nation as whole. That , while, very valuable, will be only true for a small group as nation wide numbers don’t support it.
India also had similar strategy since the 60s till 90s. We wanted to encourage Indian manufacturing, promote exports, believed in self sufficiency. Spent crores in subsidising exports and had all kinds of barriers to prevent imports of good and services. Well results are for all to see, we had shortage of goods, paid through our noses for poor quality domestic stuff and Indian exports never picked up despite all this.
Reasons, with the benefit of hindsight, were many. Subsidies were all over the place, not directed, rent quota permit raj ensured that connected ones cornered all the scheme benefits and never invested in quality, quantity etc. Most of the investment Was to perpetuate the license quota permit raj and strangle imports. All of them.
Then hell froze over in the 90s. We opened the floodgates. In 2000, China happened.
It had its issues. Domestic manufacturing could not face the onslaught.
Could we have done something differently?
Korea, as studies show, before opening up the borders, increased domestic competition, generous license, directed subsidised credit etc and then opened up gradually. Support of US was there, may be as a counter to Japan. They also engaged deeply with Japan and systematically absorbed good practices and technology.
In this day and time , is it easy to subsidise trade with visible invisible barriers, yes quite possible. China did it and built scale, with a single minded purpose. But not easy now, nations complaint and there is bug bear Called WTO. We could have gone to WTO if there were barriers in Korea. US allowed it and WTO ignored it, whole world benefited out of cheaper Chinese imports. Now Xi an team are working hard to lose that advantage. For all to see.
We are trying it, and looks like we may make break through. Time will tell but policies are far better directed now. And subsidies have a lot of scrutiny and a sunset clause. Look at the stoppage of payment to EV manufacturers are they are trying to circumvent the norms and siphon off subsidy. Sharper and better monitored support may build up local industry but preliminary views say we have picked up a lot of sectors, we may mot have enough to support all. Let us see.
What I can surely make out from this discussion, economics, trade theories financial management are not part of most of the arguments. At macro levels we all know they help take a business decisions and not xenophobia or love for motherland.
Do not wish to make it acrimonious, personal or score the last shot, this is an august gathering so thought I should share my views and thoughts behind it. I am sure everyone will have their now logic or thoughts behind their views. All views are welcome as long as I learn something from them.
It took Maruti ages to indigenise critical parts, protection of core tech, lack of confidence in Indian expertise. In the end they did. Economics made sense. If Koreans are not importing enough and if they are losing value, they ultimately will, if it make commercial sense.
My feeling is , this playing to the gallery by the Minister may be ploy to push them, like Mr. Bhaskarudu and team did during Maruti Suzuki tussle with GOI in the 90s. And Korean Government will surely push domestic industry to act. We are big now.
Let us see if it yields some good results for its. |