April 28th 2024.
New Delhi: A recent report has revealed that India has become increasingly reliant on Chinese industrial goods such as telecom, machinery, and electronics. In the last 15 years, China's share in India's imports of such products has risen from 21% to 30%, according to the economic think tank Global Trade Research Initiative (GTRI). This growing trade deficit with China is a cause for concern, as it not only affects the economy but also has strategic implications for national security.
In fact, from 2019 to 2024, India's exports to China have remained stagnant at around $16 billion annually, while imports from China have surged from $70.3 billion to over $101 billion. This has resulted in a cumulative trade deficit of over $387 billion in just five years. Ajay Srivastava, the founder of GTRI, has emphasized the need for the Indian government and industries to evaluate and potentially recalibrate their import strategies in order to foster more diversified and resilient supply chains. This is not only to mitigate economic risks but also to bolster domestic industries and reduce dependency on single-country imports, especially from a geopolitical competitor like China.
The report also highlights the fact that China's share in India's industrial product imports has increased significantly over the last 15 years, from 21% to 30%. This growth in imports from China has been much faster than India's overall import growth, with China's exports to India growing 2.3 times faster than India's total imports from all other countries. In 2023-24, China accounted for 15% of India's total imports, which amounted to $677.2 billion. Out of these imports from China, $100 billion or 98.5% were in major industrial product categories.
The key sectors where India's dependence on China is rising significantly include electronics, telecom and electrical products, machinery, chemicals and pharmaceuticals, iron and steel products, plastics, textiles and clothing, automobiles, medical, leather, paper, glass, ships, aircraft, and other categories. The report also shows that during April-January 2023-24, the electronics, telecom and electrical products sectors had the highest import value at $67.8 billion, with China contributing $26.1 billion. This represents a substantial 38.4% of the total imports in this category, indicating a heavy dependence on Chinese electronic goods and components.
In the machinery sector, China accounts for $19 billion, which is 39.6% of India's imports in the sector. This underscores China's key role as a supplier of machinery to India. India's chemical and pharmaceutical imports during the period stood at $54.1 billion, with China contributing $15.8 billion. This resulted in a Chinese share of 29.2%, highlighting the importance of Chinese chemical and pharmaceutical products in India.
The report also points out that many products imported from China, such as textiles, apparel, glassware, furniture, paper, shoes, and toys, are from categories dominated by micro, small, and medium enterprises (MSMEs). Most of these items could potentially be produced domestically, indicating a need for the Indian government to support and promote these industries. The report also highlights significant gaps in India's industrial capabilities across various sectors, from high to low technology items.
Furthermore, Chinese companies are heavily involved in India's energy, telecommunications, and transportation sectors, and they play critical roles in smartphones, electronics, electric and passenger vehicles, solar energy, engineering projects, and many other sectors. The report warns that with the entry of Chinese firms into the Indian market, India's industrial product imports are set to rise at an accelerated pace. As Chinese firms operating in India will prefer sourcing most requirements from their parent firms, Indian imports will rise sharply. This could have a significant impact on domestic industries, particularly in the auto/EV sector, where every third electric vehicle and many passenger and commercial vehicles could soon be made by Chinese firms in India or through joint ventures with Indian firms. It is clear that steps need to be taken to reduce India's dependence on Chinese goods and promote domestic industries to ensure economic and national security.
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