Most world Asia attention of late has been on China, for good reason. China is now the 2nd largest world economy after the US. India is the 9th largest economy in the world (GDP of $1.9tln, on par with Canada). China’s population is 1.38bln, India is 1.285bln (India per capita GDP US$1,500 or $6.00 per business day).
Trump’s advisors have chosen the “Idiot’s Guide to World Trade” as their debate, if not pre-policy playbook and have equated imports to losing. Trump most recently expounded that the US is losing $500bln a year to China. The USA’s net trade balance with China in 2015 was actually $366bln, made up of $482bln of losing (imports from China) and $116bln of export to China.
Mexico ended up in the Trump campaign’s managers crosshairs by “winning” too much as well, to the tune of $50bln + per annum. The USA exports a sizeable 236bln to Mexico but imports almost $300bln for a $58bln balance of net losing. Oreos and car manufacturing aside, many more absolute jobs are being lost by the US to China than Mexico.
India does not rate on the losing metric it would appear. The net losing is only 2.5X Trump’s reported (waiting on US Federal tax filing) net worth at 23.2bln. The USA exports $21.5bln of goods to India and imports $44.7bln. India has 450,000 illegal immigrants in the USA (4% of total, most visa over-stays), well in excess of the 300,000 Chinese. No walls are possible of course, but a dam via the revised H1-B visa program (limiting Indian IT sector uptake) is under construction.
The USA only net lose $15bln presently to Canada, one of its largest trading partners at > 1/2 tln per annum (2-way). The trade balance is often in fact a “push” which will likely delay the North Wall, at least until Trump figures out how to get the wildlings to pay for it.
Incredible India is the successful tourism slogan currently in use. Modi’s “Make in India” program is meant to re-invigorate onshore manufacturing (the majority of the gains expected to come at the cost of China). With the domestic infrastructure issues in India, nobody expected a straight autobahn shot to success, but we have seen some interesting speed bumps as recently as this month. As with Africa, most of India has leapfrogged the PC era and gone directly to smartphones.
Sometimes if it seems too good to be true, it likely is. This Make in India advertised Freedom 251 smartphone looks to be a hoax/scam. The sponsoring company is called Ringing Bells Pvt Ltd. The 251 hook is a reference to the price, Rs. 251 (US$3.65 at the current USD/INR exchange rate of 68.775 per US$1). Apparently over 700,000 eager Indian buyers have pre-ordered via paying the 251 Rupee to Ringing Bells. The alleged refurbished ADCOM handsets are made in China/Taiwan. The point of this post is not to highlight a $2.5mm phone scam, but rather to highlight that things are often not what they appear.
Even if China plays nice on the pace of RMB devaluation in 2016 and beyond, we are likely too see other forms of competitive devaluation via dumping of industrial goods (steel, etc.) via regional trade partners, facilitated by One Road, One Belt, aka the New Silk Road.
They say that those who do not study history are bound to repeat it.
A full 30% of world trade comes through the Strait of Malacca (running between Malaysia, Indonesia and Singapore), a passageway between India and China, used extensively for commercial trade. A full 80% of China’s energy imports come through the Strait of Malacca. Geopolitically, more concern has been evident on the activity of North Korea in the region. China’s chest pounding via naval build up in the South China Sea, as a means to mark their territory and expanding sphere of influence, is 2nd only to Putin’s free range aspirations in Eastern Europe in terms of import.
They say even the “Made in China” label is often “Made in India” these days. Major trading partners might be better served by setting a T-account for net losing with India/China as a trading block. JCG
Note: Freedom 251 background: (India – local press):
“This is not a government project. ‘Make in India’ team has nothing to do with this,” wrote Amitabh Kant, secretary of department of industrial policy and promotion (DIPP), in a Twitter post.
The tweet comes on the heel of the fact that the government is already keeping a close watch on “Freedom 251” and its Noida-based maker Ringing Bells Pvt. Ltd.
On February 23, Communications Minister Ravi Shankar Prasad said his department is keeping a close watch on Ringing Bells. The minister said the Department of Telecommunications has inquired whether the company can provide phones at such a low price, which works out to less than US$ 4.
“This was done to ensure that there are no discrepancies later. If there are any, we will take action as per the law. Our department is keeping a watch,” Mr Prasad said in New Delhi.
Earlier, informed sources told IANS that the telecom ministry has done an internal assessment on viability of the handset ‘Freedom 251’ and found such a device cannot be offered for not less than Rs. 2,300-2,400.
Ringing Bells has promised to deliver 25 lakh handsets by June 30.
In an earlier chat with IANS over phone, Ringing Bells president Ashok Chadha said the company will hand over 25 lakh “Freedom 251” phones to the people who have registered for it online.
“I am hopeful that we will be able to start delivery latest by April 10 and finish well before the June 30 deadline,” Mr Chadha told IANS.
According to Mr Chadha, the company is looking to set up two more units – one each in Noida and Uttarakhand. But how fast the company is going to start the manufacturing and churn out devices is a big question.
Mr Chadha said that while the manufacturing cost of the phone is high, it will be recovered through a series of measures like economies of scale, innovative marketing, reduction in duties and creating an e-commerce marketplace.
However, how well is the little-known firm placed to achieve this task is not yet clear.
Taking the world by surprise, the company launched “Freedom 251” smartphone last week that, it said, has been developed “with immense support” from the government.
There are, however, some apprehensions about its final appearance and performance.
The Indian Cellular Association has also written to the telecom ministry, urging the government to get to the bottom of the issue as selling a smartphone this cheap is not possible.