China share in India imports up 5% points in April-July over last year, despite overall decline

  • 25-Sep-2020
  • China share in India imports up 5% points in April-July over last year, despite overall decline

Despite numerous calls to boycott Chinese goods in the aftermath of the Ladakh stand-off and the Galwan Valley clash, China’s share in India’s import basket has risen steadily in the current fiscal, led by imports of chemicals, electrical machinery and medical equipment.

China’s share in India’s total imports has gone up to 19 per cent in the April to July period of 2020-21, up from 14 per cent in the year-ago period.

Trade data from the Ministry of Commerce shows that the trend continued in July, as China’s share in India’s imports stood at 20 per cent, up from 15 per cent in the same month last year. After two months of lockdown, economic activity bounced back in July, raising demand for imports.

Overall, India’s total imports declined by 48 per cent in the April-July period compared to a year ago, but the decline in imports from China was much slower — the figure contracted by 29 per cent.

India’s exports to China have risen 31 per cent in the April-July period, with a total value of $7.3 billion. China’s share in the overall export basket has also increased by 4.5 percentage points to 9.7 per cent. All the figures are in comparison to the year-ago period.

Trade experts ThePrint spoke to pointed out that India’s dependence on China for items like active pharmaceutical ingredients for medicines and electrical equipment will continue in the near term, though India may be able to cut back on imports of non-essential items like toys and plastics.

Sharp rise in chemicals, electrical machinery & equipment
Calls to boycott Chinese goods reached a crescendo in June when a clash between Indian and Chinese troops at the Line of Actual Control resulted in the killing of 20 Indian soldiers. Bodies like the Swadeshi Jagran Manch and the Confederation of All India Traders have been at the forefront of these calls.

The trade experts, however, said the data for July included import orders placed in the previous months, when the clamour for boycotting Chinese products was not strong.

Trade data shows that the import of goods like organic chemicals, electrical machinery and equipment and sound recorders, medical equipment and pharmaceutical products grew in July, while imports of items like toys, explosives and plastic fell.

“Items like electrical and medical equipment are long-term buys and it’s difficult to find a replacement immediately. We will not immediately see a fall in imports from China unless companies find other sources at competitive prices,” said T.S. Vishwanath, principal adviser at APJ-SLG Law Offices, who specialises in trade matters.

“Overall there will be a fall in imports from China going forward. But it will take some time. The government has been trying to encourage domestic industry to produce much of this equipment. But this has to be a long-term plan. We might start seeing changes over the next one year,” Vishwanath said.

China — the only major economy doing well
Experts such as Biswajit Dhar, professor at Jawaharlal Nehru University, said the data can be explained by the fact that China is the only major economy that is growing right now.

The Chinese economy grew at 3.2 per cent in the April-June period, while economies like the United States, United Kingdom, Germany and France contracted by 9.1 per cent, 20.1 per cent, 10.1 per cent and 18.9 per cent respectively as they struggled to contain the pandemic and the resultant impact on economic activity.

The Indian economy was among the worst-hit, contracting by 23.9 per cent in the quarter.

“It is extremely difficult to decouple from China. India’s dependence on China will remain in some major areas. For instance, APIs required by the Indian pharmaceutical sector have to be imported,” Dhar said, adding that it may be easier to reduce dependence on non-essential imports like toys and plastic items.

“For India to decouple from China, two things need to happen. India needs to step up its domestic production to replace imports. This won’t happen immediately. The other option is to look for alternative suppliers in other countries. That, again, may be difficult as Chinese products are relatively cheaper. Indian consumers want low-priced products,” he added.

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