After Curbs and Restriction, Take a Look on How Dependent Is India on China Imports?

Imports from China drop by 27.63% during April-August this fiscal as against the same period the previous year. Let’s take a look at how dependent is India on China imports after curbs and restrictions. 

Imports From China Decline by 27.63%

Data released by Commerce and Industry Ministry reveals that Chinese imports have declined to $21.58 billion this year. Imports from the Asian nation in July and August stood at $5.58 and $4.98 billion respectively. Further, exports have also grown by 10% during the first half of September.  

Government Proposes Plans to Reduce Dependence on China

Government officials stated that the government had proposed a plan worth Rs 25,000 crore for the next five years. It aims to boost the production of chemicals used in pharmaceuticals, insecticides, and other crucial industries. It includes 10% of production value as an incentive. For this, it has identified 75 such chemicals and more are likely to be added to the list. Further, the Department of Chemical has formed a committee to submit a proposal for the same to the expenditure department.

Along with this, it is also launching an import surveillance scheme for aluminium and copper imports. Similar to the European Union’s strategy, India aims to move copper and aluminium imports on a restricted items list. This will make it compulsory for importers to get a government-issued license for every shipment. This will facilitate an easy imposition of quotas or duties on copper and aluminium as required.

Households and Industries Heavily Rely on China Imports

Even though the Indian government is trying hard to plug in loopholes to make India self-reliant, it is going to be difficult as households and industries both primarily rely on Chinese imports. Data from the Ministry of Commerce and Industry reveals that around 30%, the largest share of Chinese imports is of electrical machinery and equipment. Further, items like lithium-ion, used in batteries of mobile phones, has registered a 100% increase in imports over the last two years. In household items category, Knitted fabrics account for the largest share in Chinese imports. Glass and glassware is the least imported item with around 50% share.

Extent of Dependency on China

Several toy traders in the Lajpat Rai market in Delhi stated that it was good to hear PM Modi about making India a toy hub. However, the quality of Indian toys does not match Chinese imported toys. Though they have brought down the toy imports from China from 95% in July to 80%, it is a tough call as Indian manufacturers are unable to meet the demand.

Traders at Bhagirath Palace, India’s largest light market, state that there are hardly eight to ten brands of Indian manufactured lights. Around 90% of the stuff in the market is Chinese. The fancy and inexpensive varieties offered by Chinese manufacturers make it difficult to convince customers to buy Indian products. Moreover, they said that most of their customers do not face a nationalistic dilemma while purchasing. Despite this, traders have made a specific portion for Indian products as a response to the government’s call.

India’s Trade Deficit with China Widens, Faster Rebound in Imports 

Data released by the department of commerce revealed that the imports from the United States and UAE, the second and third largest importers to India contracted by 30% in June. Also, imports from China rose to $5.58 billion in July as against $3.3 billion in June. That apart, exports to China fell to $1.74 billion in July from $2.1 billion in August. This has widened India’s trade deficit with the country to $3.8 billion. However, Dharmakirti Joshi, chief economist at CRISIL, said that the trade deficit with China would narrow in the long run.

Director of the Indian Institute of Foreign Trade, Manoj Pant said that foreign trade with China had recovered quicker than with other nations. Further, he added that changes in policies after border tensions had signalled the Asian country that business might not be usual between the trade partners. Besides, it has served as an opportunity to build-up the domestic capacity of Indian industries. 

India’s dependence on China for trade is enormous. China’s share in India’s total imports was 18% while it was 9% in exports in the last fiscal. That said, India usually imports finished and semi-finished products from China and exports raw material. 

 The Way Out

Experts suggest using a combination of tariff and non-tariff instruments such as anti-dumping duty, countervailing duty, safeguard duty, and quality control measures. Further, empowering custom officials to detain unnecessary imports will prove beneficial. 

In all, India has allowed China to advance in every sector for over two decades. Hence we can expect the road back to self-reliant Indian would be long and perhaps painful.

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