International Business

December 2023 Examination

Q1. In our country many products from China dominate our markets and have made
production unprofitable for Indian manufacturers. In your opinion should we allow the
entry of Chinese products in our country? (10 Marks)

Ans 1.

Introduction

The globalization era has ushered in a wave of interconnectedness, where products from one
corner of the world can easily find their way to another. One such dominant force in the
global market is China, often dubbed as the "world's factory." With its vast manufacturing
capabilities, China has managed to export a plethora of products worldwide, including India.
The influx of Chinese products in the Indian market has been a topic of debate for
policymakers, economists, and the general public alike. On one hand, Chinese products,
known for their affordability and variety, have found a vast consumer base in India. They
cater to a wide range of needs, from electronics to toys, and from home appliances to
clothing. On the other hand, the overwhelming presence of these products has raised
concerns about the viability and profitability of domestic Indian manufacturers. The core of
the debate revolves around the balance between ensuring consumer access to affordable
products and safeguarding the interests of domestic industries. As India grapples with this
dilemma, it becomes imperative to delve deeper into the implications of allowing the
unrestrained entry of Chinese products and to weigh the pros and cons from an economic,
social, and strategic perspective.

Concept and application

The debate surrounding the influx of Chinese products into the Indian market is rooted in the
broader context of globalization, trade policies, and economic strategies. To understand the
implications, let's dissect the concept into three main areas: Economic Impacts, Domestic
Industry Challenges, and Strategic Considerations.

1. Economic Impacts:
Trade Balance: One of the most immediate concerns is the trade imbalance between India
and China. As of recent data, India has a significant trade deficit with China, meaning it
imports more than it exports. While imports can boost consumer choice and drive down
prices due to competition, a persistent trade deficit can strain foreign exchange reserves and
impact the value of the national currency.

Consumer Benefits: Chinese products, often priced lower than their counterparts, provide
Indian consumers with a wide range of choices. This affordability has democratized access to
various goods, especially electronics, which might have been out of reach for many Indian
consumers otherwise.

Investment Flow: Along with products, China has also been a source of foreign direct
investment (FDI) in India. Several Chinese companies have set up manufacturing units, tech
hubs, and research centers in India, creating jobs and contributing to the economy.

Graphical Representation: Trade Balance

[Here, a bar graph can be used to show the trade balance between India and China over the
past decade, highlighting the increasing deficit.]

2. Domestic Industry Challenges:

Competition and Profitability: The influx of Chinese products has undoubtedly intensified
competition. Indian manufacturers, especially in sectors like electronics, toys, and textiles,
find it challenging to compete on price. This has led to reduced profitability and, in some
cases, closures of businesses.

Dependency and Supply Chain: Over-reliance on Chinese imports, especially in critical

sectors like pharmaceuticals and electronics, has exposed vulnerabilities in the Indian supply
chain. Any geopolitical tension or global disruption can lead to supply chain bottlenecks.

Innovation and R&D: The dominance of Chinese products can potentially stifle innovation.
When the market is flooded with cheap imports, domestic companies might find it
economically unviable to invest in research and development.

3. Strategic Considerations:

Geopolitical Implications: Trade ties are not just economic but have geopolitical
implications as well. A significant trade deficit gives China an upper hand in diplomatic and
strategic negotiations, potentially influencing India's foreign policy decisions.
Self-reliance and Atmanirbhar Bharat: The Indian government's push for 'Atmanirbhar
Bharat' (Self-reliant India) aims to reduce dependency on imports and promote domestic
manufacturing. The influx of Chinese products can be seen as a challenge to this vision,
emphasizing the need for strategic trade policies.

Quality and Standards: There have been concerns about the quality and safety standards of
some Chinese products. Ensuring that imports meet Indian standards is crucial to safeguard
consumer interests.

The entry of Chinese products into the Indian market is a double-edged sword. While it
offers economic benefits in terms of consumer choice, affordability, and investments, it
poses challenges to domestic industries and has broader strategic implications. Balancing
these aspects requires a nuanced approach. Protectionist measures, while beneficial in the
short term, might not be sustainable in the age of globalization. Instead, focusing on
strengthening domestic industries, ensuring quality, fostering innovation, and strategic trade
negotiations can pave the way forward.

Conclusion

In conclusion, the question of whether to allow the entry of Chinese products into India is not
a straightforward one. It's a multifaceted issue that requires a balanced approach. While the
benefits of affordable and diverse products for consumers cannot be overlooked, the long-
term implications for domestic industries and self-reliance are equally significant. It's
essential for India to strike a balance between open market policies and protectionist
measures. Encouraging domestic industries through incentives, fostering innovation, and
focusing on quality can make Indian products more competitive in the global market. At the
same time, strategic trade policies can be employed to ensure that the influx of foreign
products does not stifle domestic growth. Ultimately, the goal should be to create a symbiotic
relationship where both domestic and foreign products coexist, complementing rather than
competing against each other. This would not only ensure consumer satisfaction but also
pave the way for a robust and self-reliant economy.
Q2. Countries like US have at times stated “America First” as their policy. Do you
consider that our country should adopt “India First” policy? In this context, explain
how countries can create barriers to promote their own products. (10 Marks)

Ans 1.
Introduction

In an era of globalization, where the world is more interconnected than ever, the idea of
prioritizing one's own nation over others has gained traction in various countries. The
"America First" policy, as advocated by the U.S., is a prime example of this nationalist
approach. It emphasizes the importance of prioritizing national interests, economic self-
reliance, and self-sustainability. Similarly, the question arises: Should India adopt an "India
First" policy? As the world's largest democracy with a diverse population and a rapidly
growing economy, India stands at a unique crossroads. Balancing its global commitments
with domestic priorities is a challenge that requires a nuanced approach. An "India First"
policy could potentially mean prioritizing domestic industries, safeguarding national
interests, and ensuring that the benefits of globalization are equitably distributed among its
vast population.

Concept and application

The concept of a nation-first policy, such as "America First" or "India First," is rooted in the
principles of economic nationalism and protectionism. These policies prioritize domestic
industries and workers over foreign competition. Let's delve deeper into the mechanisms
through which countries can create barriers to promote their own products and the
implications of such actions.

1. Trade Barriers: Trade barriers are restrictions imposed on the movement of goods
between countries. They can be in the form of tariffs, quotas, or non-tariff barriers.

 Tariffs: These are taxes imposed on imported goods. By making foreign products
more expensive, tariffs give a price advantage to domestically produced goods. For
instance, if India imposes a tariff on electronic goods, it would make imported
electronics more expensive than those produced within the country, thus promoting
domestic industries.
  Quotas: These are limits on the quantity of a particular product that can be imported.
By restricting the volume of imports, quotas protect domestic producers from being
overwhelmed by foreign products.

 Non-Tariff Barriers: These include licensing requirements, product standards,

bureaucratic hurdles, and other regulations that make it difficult for foreign products
to enter the market.

2. Subsidies and Grants: Governments can provide financial assistance to domestic

industries, making them more competitive. For example, subsidies can lower the production
costs for domestic industries, allowing them to offer products at competitive prices. This can
deter foreign competitors who can't match the reduced prices.

3. Currency Manipulation: By devaluing their own currency, countries can make their
exports cheaper and imports more expensive. This promotes domestic products as they
become more cost-effective compared to foreign products.

4. Buy National Policies: Governments can prioritize purchasing domestically produced

goods for public projects and state functions. This ensures a steady demand for domestic
products and services.

5. Intellectual Property Rights (IPR): By enforcing strict IPR laws, countries can protect
their domestic industries from foreign imitations and knock-offs. This is especially crucial
for industries that rely heavily on innovation and R&D.

6. Promotion of Local Content: Governments can mandate a certain percentage of local

content in products. This ensures that domestic industries are involved in the production
process, even if the final product is from a foreign brand.

Implications of an "India First" Policy:

1. Economic Growth: By protecting and promoting domestic industries, there's potential for
increased production, job creation, and economic growth. For a country like India, with its
vast human resources, this can translate into significant socio-economic advancements.

2. Retaliation from Other Countries: While protectionist policies can benefit domestic
industries, they can also lead to trade wars. If India were to adopt strict trade barriers, other
countries might respond with similar measures against Indian products.
3. Impact on Consumers: While protectionism can safeguard domestic industries, it might
lead to reduced choices and higher prices for consumers. If foreign competition is restricted,
domestic producers might not have the incentive to innovate or reduce prices.

4. Global Supply Chain Disruptions: In today's interconnected world, industries rely on

global supply chains. Restrictive policies can disrupt these chains, leading to inefficiencies
and increased costs.

5. Diplomatic Relations: Trade is not just an economic activity; it's also a diplomatic tool.
Restrictive trade policies can strain diplomatic relations between countries.

6. Focus on Self-reliance: An "India First" policy can push the country towards self-
reliance. By reducing dependence on foreign products and services, India can build a
resilient economy that's less vulnerable to global economic shocks.

An "India First" policy, rooted in economic nationalism, can offer several benefits, from job
creation to the promotion of domestic industries. However, it's essential to approach it with
caution. In an interconnected global economy, isolationist policies can have far-reaching
implications. For India, the challenge lies in adopting policies that prioritize its interests
while maintaining its global commitments and relationships.

Conclusion

Adopting an "India First" policy, much like the "America First" stance, can be a double-
edged sword. On one hand, it can boost domestic industries, create jobs, and foster a sense of
national pride. On the other hand, it risks alienating global partners and could lead to
retaliatory measures from other nations. It's essential for India to strike a balance. While it's
crucial to prioritize national interests, it's equally important to remain an active and
cooperative player on the global stage. India's strength lies in its rich history of trade,
diplomacy, and cultural exchange. By blending the principles of "India First" with its
inherent global outlook, the country can chart a path that not only ensures its own prosperity
but also contributes positively to the global community.

Q3. Read the following case study carefully and then answer the questions that follow:
A BBC anchor remark on India while discussing ISRO's historic lunar mission -
Chandrayaan-3. The anchor asked question to a person who was reporting from India -
whether India should really be spending money on a space program the size of
Chandrayaan-3 in the wake of poverty in the nation. He claimed much of
India's population lives in poverty and over 700 million Indians don't have access to a
toilet.
An Indian Industrialist tweeted that a large part, our poverty was a result of decades of
colonial rule, which systematically plundered the wealth of an entire subcontinent. Yet
the most valuable possession we were robbed of was not the Kohinoor Diamond but our
pride & belief in our own capabilities.
Ironically India is home to the largest number of hungry people. Around 213 million go
hungry and are malnourished people as they do not get proper two meals a day. Food
distribution channels are weak and about 10 % of the stored food grains is being
wasted and eaten up by rats and birds while human population is deprived of food.

a) Explain whether India should continue to fund space programs, and do

International business in space technology to other countries, or invest in making of
Toilets? (5 Marks)

Ans 3a.

Introduction

India's space endeavors, epitomized by the Chandrayaan-3 mission, have often been
juxtaposed against the backdrop of its socio-economic challenges. The debate centers around
the allocation of resources: should a nation with significant poverty and infrastructural
challenges invest in ambitious space programs? This question touches upon the broader
theme of national priorities, the balance between immediate needs and long-term vision, and
the role of pride and self-belief in a nation's trajectory.

Concept and application

India's space program, spearheaded by ISRO, has achieved significant milestones, making
the nation a formidable player in the global space arena. The benefits of a robust space
program are manifold:

1. Technological Advancements: Space research leads to technological innovations

that often have terrestrial applications, benefiting various sectors of the economy.
 2. Economic Returns: The global space industry is lucrative. By offering satellite
launch services and space technology to other countries, India can earn substantial
revenue. This revenue can then be reinvested in socio-economic development
projects.

3. Strategic Significance: A strong space program has strategic implications, enhancing

national security through satellite surveillance, communication, and navigation
capabilities.

4. National Pride: Achievements in space bolster national pride and inspire the
younger generation to pursue careers in science and technology.

However, the stark realities of poverty, malnutrition, and inadequate sanitation facilities
cannot be ignored. Investment in basic amenities like toilets is not just about infrastructure
but also about public health, dignity, and human rights. The challenges in food distribution
and wastage further underscore the need for immediate interventions.

Yet, it's not a binary choice between space and sanitation. A holistic approach is required:

1. Balanced Allocation: While continuing to fund space programs, a portion of the

revenue generated from international space business can be earmarked for
infrastructural development, including sanitation.

2. Public-Private Partnerships: Engaging with private players can accelerate the pace
of both space research and infrastructural projects, optimizing resource utilization.

3. Innovative Solutions: Space technology can be leveraged to address terrestrial

challenges. For instance, satellite data can aid in better agricultural practices,
reducing food wastage.

Conclusion

India's journey in space is a testament to its scientific prowess and vision. However, the
nation's ground realities necessitate urgent attention to basic amenities. It's not about
choosing between space and sanitation but about integrating the two for holistic
development. By leveraging the benefits of space technology and international business
collaborations, India can generate resources to address its socio-economic challenges. The
key lies in striking a balance, ensuring that while the nation reaches for the stars, its feet
remain firmly grounded in addressing the immediate needs of its people.
b) Explain whether India should continue to export food grains to various other
countries? (5 Marks)

Ans 3b.

Introduction

India, often referred to as the 'granary of the world', has been a significant exporter of food
grains. While the country boasts of abundant agricultural produce, it simultaneously grapples
with issues of hunger, malnutrition, and food wastage. This dichotomy raises a pertinent
question: Should India continue exporting food grains to other countries when there are
domestic challenges to address?

Concept and application

The decision to export food grains is multifaceted, influenced by economic, strategic, and
humanitarian considerations:

1. Economic Perspective: Exporting food grains can be a significant source of foreign

exchange for the country. The revenue generated can be used to fund various
developmental and welfare projects, indirectly benefiting the population.

2. Surplus Management: India often produces food grains in quantities exceeding

domestic consumption. Exporting the surplus prevents wastage and ensures that the
produce is utilized efficiently.

3. International Relations: Food grain exports can be a tool for diplomacy. By aiding
countries facing food shortages, India can strengthen bilateral ties and enhance its
global standing.

4. Market Dynamics: Exporting helps stabilize prices in the domestic market. In years
of bumper production, excessive supply can lead to a drastic fall in prices, harming
farmers. Exporting balances the supply-demand equation, ensuring fair prices for
producers.
However, the ethical dimension of exporting food grains while a section of the Indian
population goes hungry cannot be overlooked. Addressing this requires a two-pronged
approach:

1. Strengthening Distribution Channels: The problem isn't just about production but
also distribution. A significant amount of food grains is wasted due to inefficient
storage and distribution systems. By revamping these systems, India can ensure that
food reaches those in need.

2. Targeted Exports: Instead of blanket bans on exports, a more nuanced approach can
be adopted. The government can set aside a portion of the produce for domestic
consumption, especially for welfare schemes, and export the surplus.

Conclusion

The decision to export food grains should be a judicious blend of economic pragmatism and
social responsibility. While exports can boost the economy and enhance India's global image,
the primary responsibility remains towards its citizens. By modernizing storage facilities,
improving distribution channels, and adopting a strategic approach to exports, India can
ensure that its granaries benefit not just the world but also every Indian. The goal should be
to strike a balance, ensuring that the nation's agricultural prowess is a boon both domestically
and internationally.