India's 'Anti-China Economic Retaliation' Threatens Global Supply Chains

Deliberate Delay in Customs Clearance of Chinese Parts
Mobile Phone Parts Procurement and Assembly Also Delayed
Concerns Arise Over Impact on India's Economic Recovery

[Asia Economy Reporter Naju-seok] Following the military clash in the Himalayas, the deterioration of relations between India and China has raised concerns that it could threaten global supply chains. The Indian government is delaying customs clearance of Chinese products both officially and unofficially, and is urging companies to reduce imports of Chinese goods.

According to the Indian Cellular and Electronics Association (ICEA) on the 25th (local time), the Indian government is deliberately delaying customs clearance procedures for Chinese products at ports and airports.

At the BRICS Summit held in Goa, India, in October 2016, Indian Prime Minister Narendra Modi (right) and Chinese President Xi Jinping are looking in different directions.
[Image source=AP Yonhap News]

ICEA members include Western companies such as Apple and Nokia, as well as Chinese firms like Oppo, Xiaomi, and Vivo. These companies have been sourcing key smartphone components from China and assembling them in India. Following a just-in-time production method, they imported necessary parts from China for manufacturing. Many imported parts had previously qualified for expedited customs clearance. However, the Indian government suddenly tightened customs procedures, causing disruptions in parts procurement.

Pankaj Mohindru, chairman of ICEA, expressed concerns in a letter to the Indian Ministry of Finance, stating, "All Chinese imports related to the electronics business are facing hostile actions by customs without any prior warning," and added, "Logistics, which should proceed uninterrupted, have fallen into total chaos." According to the letter, some products that had completed customs clearance are even being returned to warehouses for re-inspection.

There have been no official announcements from the Indian government regarding these measures. However, Indian customs reportedly conducts physical inspections of Chinese goods upon arrival. Furthermore, the level of customs clearance varies significantly depending on the port where the goods are unloaded. ICEA also worries that manual customs inspections could lead to damage or contamination of parts.

In addition, the Indian government is reportedly urging domestic automobile and pharmaceutical companies to reduce their dependence on Chinese products. India is also considering imposing trade barriers to reduce reliance on Chinese goods.

India has traditionally enhanced its manufacturing competitiveness by importing key components from China, processing them, and then exporting the finished products. Due to this industrial structure, India imported $70.3 billion (approximately 84.3 trillion KRW) worth of products from China last year, while exports to China amounted to only $16.7 billion.

Within the Indian industry, there are concerns that the government's retaliatory measures could backfire on the Indian economy. Barba, chairman of Indian automaker Maruti Suzuki, pointed out, "We import (Chinese) products not because we want to, but because we have no choice."

If Chinese parts cannot be used, India's manufacturing competitiveness could deteriorate. ICEA also believes that the Indian government's actions will negatively impact the Indian economy, which has been recovering since the COVID-19 pandemic.

This content was produced with the assistance of AI translation services.