The government on Friday said the devaluation of the Chinese currency is a “worrying” development that would make Indian exports expensive and widen the trade deficit with the neighbouring nation.
“It is going to make imports from China even more cheaper. Our products are going to be more expensive... The fact is my deficit with China will (also) grow,” commerce and industry minister Nirmala Sitharaman said.
India’s trade deficit with China has been a long-standing concern, rising 70% over the last five fiscal years to $49 billion in 2014-15 against $29 billion in 2010-11, while bilateral trade in 2014-15 was $72.3 billion.
Sitharaman’s comments come a day after China’s central bank devalued its currency by 0.51% to 6.5646 against the US dollar — the lowest since March 2011 — putting pressure on major stock markets and currencies across the globe.
“Currency volatility all over the world is a matter of worry,” she said. “It is a cause for concern because your exports in terms of quantity in many sectors are remaining the same... But you are not earning out of it because of the volatility in the currency.”
She said commerce ministry officials would soon meet chief economic advisor Arvind Subramanian and Niti Aayog vice-chairman Arvind Panagariya to get a bigger picture of China in the context of steel imports as well as cheap imports.
Asked if India has any action plan to deal with cheap imports from China, the minister said if any imported product causes injury to the Indian industry, “some anti-dumping duty can be brought in,” on a case to case basis.
Asked if the government would consider a rupee devaluation, she said: “If you look at one school of thought... ‘If my currency is devalued, my exports would do better.’ But, there is also another school of thought, which will say why should India’s currency be devalued? If it is holding out against other currencies, let it hold out.”
The commerce ministry is looking at setting minimum import price (MIP). “We have done a fairly good amount of groundwork... But at this stage, we are not rushing into it,” the minister said.