Chinese import surge hits at ‘Make in India’

ByShishir Gupta and Rajeev Jayaswal, New Delhi
Jan 19, 2023 09:07 AM IST

While India’s exports to China fell sharply by 35.58% year-on-year in April-December 2022 , to $11.03 billion due to contraction in Chinese demand, imports from China rose by about 12%to $75.87 billion in the same period.

The government is alarmed by a surge in imports of Chinese finished goods such as electrical machinery, furniture, medical instruments, and implements, including kitchen cutlery, spoon and forks worth billions of dollars, which negates its strategy of Aatmanirbhar Bharat (Self-reliant India) initiative, two officials aware of the development said.

File photo of Chinese President Xi Jinping.
File photo of Chinese President Xi Jinping.

While imports of raw materials and intermediaries from China are “good imports” as they help Indian firms manufacture value-added items, large-scale imports of finished Chinese goods are a matter of concern, they added, requesting anonymity.

There is no rationale for importing items under HS Code 85 worth $21.61 billion in January-November 2021 alone. Similarly, $17.68 billion imports under HS 84 and $1.97 billion under HS 94 were unnecessary, as most of these items could have been produced locally, one of them said.

The Harmonized System (HS) codes are standardised numerical method of classifying traded products. HS code 85 includes electrical machinery and their parts; sound recorders and reproducers, and television image recorders and reproducers. HS 84 pertains to nuclear reactors, boilers, machinery and mechanical appliances and their parts. HS 94 includes furniture, bedding, mattresses, cushions, light fittings, illuminated signs, nameplates and prefabricated buildings.

“It is surprising that India is importing capital goods and machinery worth about $20 billion every year from China. Cumulatively, it is $200 billion in 10 years, which we could have easily saved through local manufacturing. With such demand, we could have set up a manufacturing base for capital goods in India, with tremendous export potential,” the second person, who is senior government official, said.

He added that Indian businesses must overcome “the trader mindset” of making huge profits quickly and, have a long-term perspective.

Nilaya Varma, Co-founder and CEO of consultancy firm Primus Partners, said the government has the right focus and intention – to make India a global manufacturing hub – which is only possible through partnership, incentives and strong procurement policies. “From forks to capital equipment/ goods, the Chinese import list shows the magnitude of the issue as well as potential for ‘Make in India’ that needs short-term, medium-term and long-term focus. PLI [Production Linked Incentive] is one of the key initiatives, India needs additional and sustained efforts in this matter,” he said.

According to the first official, imports of certain items such as organic chemicals, also includes essential raw materials and intermediates for pharmaceuticals. Such imports are for value-addition locally to serve both domestic and international markets. India imported organic chemicals worth $10.71 billion in April-November 2021 under the HS Code 29. Similarly, India is importing fertiliser from all sources because of its growing requirement, he said. China supplied fertiliser worth $2.3 billion during this period.

While India’s exports to China fell sharply by 35.58% year-on-year in April-December 2022 , to $11.03 billion due to contraction in Chinese demand, imports from China rose by about 12%to $75.87 billion in the same period.

According to the most recent official data for April-December 2022, China is India’s topmost merchandise supplier with 13.75% share ( $75.87 billion) in total imports of $551.70 billion. Among India’s top suppliers, China is followed by the United Arab Emirates (7.4%, $40.82 billion)) and the US (7.06%, $38.96 billion).

India’s merchandise exports in the first nine months of current fiscal year (April-December 2022) grew by 9.1% (y-o-y) to $332.76 billion. India’s merchandise imports were $441.50 billion in the corresponding period of the previous year.

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