According to a report by the Global Trade Research Initiative (GTRI), India’s imports from China crossed $101 billion in 2023-24 from about $70 billion in 2018-19. Currently, the share of India’s industrial goods imports has risen from 21% to 30% over 18 years. China is the top supplier in eight major industrial sectors, including machinery, chemicals, pharmaceuticals, textiles and electronics.
India’s total merchandise imports stood at $677.2 billion in 2023-24, of which 15% goods were sourced from China. Industrial goods account for the highest number of imports.
And almost 42% of India’s textile and clothing imports and 40% of its machinery imports, despite India’s strengthening textile industry. However,imports for electronics, telecom and electrical products were at 38.4% only.
China also accounted for 29.2% of chemicals and pharmaceuticals imports, 25.8% of plastic product imports and 23.3% of automobile sector shipments. In contrast, iron, steel and base metal imports were just 17.6% share of inflows coming from the neighbouring nation.
Why does China not import from India ?
In a brief by Ajay Srivastava, founder of think tank GTRI, he summed up the real challenge for India, it was low exports to China and not high imports from the dragon country. In Chinese Year 2021, India’s export to China stood at 5.8% only, compared to Republic of Korea and Japan which stood at 25% and 21% respectively.
The brief further cited two major reasons behind India’s low exports. First, China is already a world leader in producing labor-intensive products, such as textiles, clothing, leather and engineering products, of which India is also a key producer. China has no requirement for such products. Second, China prefers importing goods from other countries to India as a result of the complex regulatory system established between the two countries. There are 4 significant trade barriers, excluding tariffs, regulatory, internal market, trade defense and political barriers.
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Growing trade deficit, a cause for concern
The country is in urgent need to reduce its dependency on China and promote exports. The entry of Chinese firms in the Indian market might hinder the progress if they directly start importing raw materials from their parent country instead of India. Especially, given that geo-political relations are on a strife and sinking diplomatic relations with China.
“Half of the imports from China consist of capital goods and machinery, indicating a critical need for focused research and development in this area. Intermediate goods like organic chemicals, Active Pharmaceutical Ingredients, and plastics, which represent 37% of imports, show a pressing need for upgrading these industries,” GTRI suggested.
India has not always been in a trade deficit with China. The CY 2004-05 were trade surplus years for India with higher exports than imports. The country had exported $10 billion worth of goods to China in 2005. But with time, China reversed the trade play, sending India into trade-deficit for the next 18 years.
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