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Why does China see PLI scheme as a threat?.
Recent numbers have shown that trade between India and China has surpassed $100 billion mark. The share of imports is way higher than exports, indicating India’s overdependence on Chinese products such as chemicals, automobiles and electronics.
Strategic and economic implications
- Supply chain disruptions Any internal problems in China can result in supply chain disruptions. The dependent sectors in India will be completely in disarray.
- Artificial shortage Source countries can create artificial shortages as part of economic war. This will hamper economic growth and situation can worsen.
- Higher trade deficit The destination country, in this case India, will have to spend its foreign reserves to pay for Chinese imports. This is not fruitful in long run.
- Local production The product will be manufactured locally, making it easier to control its production based on demand and supply.
- Low cost The cost of product will reduce significantly as transportation costs will be removed. The end product will also be cheaper as a result of easy availability.
- Regular supply There will not be fears of abrupt stoppage and regular supply can be expected. In addition, revenue can be earned by exporting.