Import diversification: India reduces dependence on China by 1,100 items

The decision is also in tune with the recent collaborative effort by Japan, India and Australia to forge and expand a supply chain partnership, a move seen as a counter to China’s dominance in global trade.

Concerned about China’s unreliability as a supplier in the aftermath of the Covid-19 epidemic and frustrated by its perennial reluctance to grant India greater market access, the trade ministry intends to diversify the country’s import base for well 1,068 products, including 168 major ones. , to curb excessive dependence on Beijing.

Key products include auto parts, consumer electronics, electrical machinery, select steel and aluminum products, a source told FE.

The trade ministry identified an alternative source of imports and shared its analysis with Indian overseas missions to “explore sourcing and exporting opportunities in their respective countries”.

The decision is also in tune with the recent collaborative effort by Japan, India and Australia to forge and expand a supply chain partnership, a move seen as a counter to China’s dominance in global trade.

At the same time, India is boosting domestic production of key products through production-related incentives (PLI). A total of 13 PLI schemes – from auto and telecom to food processing – have been announced on this tax, involving incentives worth around `2 crore lakh over five years.

In a note to the Standing Parliamentary Committee on Trade, the ministry admitted that despite intensified efforts in recent years to solve market access problems by signing several protocols, Indian exports to China have not grown significantly.

Of the nearly $ 82 billion bilateral trade in goods in FY20, India’s exports were only about $ 17 billion. Although India’s trade deficit with China appears to have dropped sharply from a record $ 63 billion in FY18 to less than $ 49 billion last fiscal year, its trade balance with Hong Kong, considered a proxy for Beijing, has greatly exacerbated during this period.

As a result, India’s actual trade deficit with China (after including Hong Kong) only dropped by about $ 4 billion, from $ 59 billion in FY18 to nearly $ 55 billion in FY20, according to official data.

The massive trade balance in favor of China was also a major topic of discussions between Prime Minister Narendra Modi and Chinese President Xi Jinping, when they met in Wuhan, Qingdao and an informal summit in Chennai in October 2019.

India mainly imports products and components manufactured in critical segments such as consumer electronics, capital goods, computer hardware, active pharmaceutical ingredients, fertilizers, project goods, electrical machinery, etc. However, its exports to China are characterized by low-value primary goods, raw materials and intermediate products mainly iron ore, copper, minerals, cotton, peach, spices, etc.

The ministry’s note to the House panel highlights that in the past two years, China and India have signed various protocols to facilitate exports of Indian rice, fishmeal, fish oil, tobacco leaves and chili flour, without much success. . Several other protocols are being negotiated to catalyze Indian soybean meal, soybean, pomegranate and okra supplies to China.

However, as recently reported by FE, the recent surge of Chinese imports of agricultural commodities to take advantage of relatively stable global prices has not benefited India, thanks to limited access to the Beijing market, through tariff or non-tariff barriers. Between March and October, Chinese imports of wheat increased by nearly 232% year-on-year, while those of pork increased by 135%, corn by 102% and sugar by 23%. However, it barely imported these goods from India.

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