India’s growing trade dependence on China

Context

India’s trade dependence on China has been growing rapidly over the past few years, despite efforts to reduce it. In 2021, India’s imports from China were worth $65.2 billion, while exports to China were worth $21.2 billion, resulting in a trade deficit of $44 billion. This trend is expected to continue, with India’s trade deficit with China projected to grow to $63 billion by 2024.

Growing Dependence on China

The dependence of India on China for the goods that are for the manufacture is increasing, even though the government is trying to strengthen the domestic manufacturing through the initiatives such as “Make in India” and “Atma Nirbhar Bharat Abhiyan”. In 2021, China was the immediate world leader. 6% of the total import of India, which is almost double the number of the total import of the country, is motorcycle. 4% in 2007. To the contrary, the exports of India to China have not been so amazing, indicating an annual average growth of 10%. The figure is 1% between 2007 and 2021, which is one. 63 times less than 14 is the lowest possible hardship caused by not taking college classes. The president has made an 8% import tax on China’s products.

What India Imports from China

• Electronics and electrical goods: India procures the electronics and electric products from China which includes smartphones, laptops, and televisions, for the most part of the time.
• Machinery: China being a substantial provider of machinery to India ranging from industrial machinery, automotive parts and engineering goods is significant.
• Chemicals and pharmaceuticals: India imports a big quantity of its chemicals and pharmaceuticals from China, which also include the active pharmaceutical ingredients (APIs) and formulations.
• Textiles and clothing: Majority of the Indian textiles and clothing are imported from China, which includes the fabrics, yarns, and finished garments.

What India Exports to China

India’s exports to China are mainly comprised of:

• Engineering goods: India exports tools, automotive parts, and industrial machinery which are part of its engineering equipment to China and the share of it is big.
• Electronics: India exports a great many of its electronics to China, which includes smartphones, laptops, and televisions among others.
• Marine products: India exports the major part of its marine products to China, which includes seafood, fish and other aquatic products.
• Spices: India is the main producer of spices in the world, and from these spices, it exports to China.

Impact on India’s Economy

• Trade deficit: The trade deficit between India and China of India is likely to be $63 billion by 2024, which may be the factor that is causing the pressure on India’s balance of payments and currency.
• Domestic industry: The dependency of India on China for the manufactured goods might be a threat to its domestic industry particularly in the sectors such as electronics, machinery, and chemicals.
• Employment: India’s reliance on China for manufactured products can thus be a cause of the job losses in the domestic industry in the following years.

Efforts to Reduce Dependence

• Production-linked incentive schemes: The government has promoted the production-linked incentive schemes to establish the domestic manufacturing sectors in the areas of electronics, pharmaceuticals and automobiles.
• Import substitution: Besides the government has been promoting the replacement of imports with local production. In particular, the government has been encouraging import substitution especially in the electronics and pharmaceuticals sectors.
• Diversification of trade: The government has been making efforts to broaden the scope of India’s trade, particularly with countries like the US, EU, and ASEAN.

Source:  The Indian Express

UPSC Mains Practice Question

Q. India’s increasing trade dependence on China has been a subject of considerable debate and concern. Analyse the factors contributing to this growing dependency and suggest policy measures that India could undertake to mitigate the risks associated with it.

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