Covid-19 and China are the two challenges India is struggling with – The Economic Times

Clipped from: https://economictimes.indiatimes.com/news/politics-and-nation/view-covid-19-and-china-are-the-two-challenges-india-is-struggling-with/articleshow/79612426.cms

SynopsisIncidentally, India’s biggest pharma initial public offering capitalised on both these aspects. Last month, a Hyderabad based injectables company, owned by Chinese major Fosun Pharma since 2016, mopped up nearly Rs 6,500 crore. In a contrasting incident around the same time, the Shanghai Stock Exchange pulled the plug on the listing of Jack Ma-owned Ant Group.

Covid-19 and China are the two challenges India is currently struggling with. On both fronts, its efforts remain inconclusive. Incidentally, India’s biggest pharma initial public offering (IPO) capitalised on both these aspects. Last month, a Hyderabad based injectables company, owned by Chinese major Fosun Pharma since 2016, mopped up nearly Rs 6,500 crore.

In a contrasting incident around the same time, the Shanghai Stock Exchange pulled the plug on the listing of Jack Ma-owned Ant Group. The fintech giant was all but ready to launch its $37 billion public offer in China and Hong Kong, in what was to be the world’s largest IPO, valuing the Ant Group in excess of $300 billion.

The suspension allegedly was Beijing’s response to Ma’s disparaging comments on China’s financial system in a public gathering. Against this, the Securities and Exchange Board of India (Sebi) providing approval to the first Chinese-owned company to list on Indian bourses, even as border tensions continued to simmer between the two countries, seems commendable. It seems indicative of the maturity and independence of the Indian financial regulatory system.

Institutional investors in India also lapped up the Fosun offering as plain economics trumped over geopolitical considerations. They promptly saw value in buying into the strongly performing company at a time when pharma is a favourite theme of Covidimpacted stock markets. Fosun subsidiary Gland Pharma listed with 14% gains and surged 48% from the issue price within the first five trading sessions of being listed. That it was Chinese-owned seems to have been ignored by Dalal Street.

Coincidentally, citing sovereignty and integrity of the country, GoI banned 43 more Chinese mobile apps within four days of the Gland stock getting listed on Indian bourses. To be fair, Gland differs from Chinese mobile apps. It was founded by an Indian entrepreneur and has predominantly Indian management and trappings of an Indian company. Its Chinese ownership is relatively recent and helps it to make inroads in the Chinese pharma market, the world’s second largest after the US.

When one depends upon a thing too much, then one needs to consider ways of reducing dependence on it. This is the truth of India’s relations with China that GoI is grappling to cope with. Amid its battle with the Covid pandemic and border tiffs with China, GoI is pushing domestic industry to build low-cost capacities to reduce imports from China. Banning of Chinese mobile apps seems to be a lowhanging fruit to pluck in this strategy.

To be sure, shrugging off Chinese dependence from most other aspects of Indian business is not going to be an easy affair. The export-oriented pharma sector is dependent on China for key raw materials. India will have to be careful as it imposes additional layers of checks to monitor investments from China and draws up plans to China-proof its key sectors such as pharma, telecom and technology.

Besides, China has played a key role in funding growth in India. For instance, as a large investor, China has been crucial in funding India’s startup ecosystem. China-backed funds seeking to buy Indian financial assets after the initial outbreak of Covid-19 caused a major slump in valuation of the companies here.

In addition to the requirement of cheaper inputs from the domestic industry as well as the need for capital, the popular demand for Chinese products is yet another reason that keeps India on the back foot against China. Notwithstanding the antiChina sentiment, Indians continue to patronise low-cost China-made products, from consumer products to highend smartphones and SUVs. In this festival season, Chinese smartphone makers registered bumper sales. Chinese-owned British car brand MG Motor, which launched the ZS SUV, its first model in India, last year, rolled out its third model earlier this year.

The company recorded its highestever monthly retail sales in October for its flagship MG Hector SUV. India treads a tightrope with regards to China, the newly listed Gland Pharma stock the latest case in point. It has to be measured in India’s geopolitical response to ensure that the economic implication of the move does not further hurt its Covid-scarred economy.

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