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Chinese imports 29% down, but up in key sectors
India has taken a series of punitive actions against China amid a military standoff in the Ladakh sector along the Line of Actual Control (LAC); on June 15, a violent brawl in Galwan Valley in eastern Ladakh left 20 Indian Army personnel dead and caused an unspecified number of Chinese casualties.
India imported more petroleum products, handicrafts, medical and scientific instruments, agrochemicals and other chemicals from China although overall shipments from the neighbour declined 29% from a year earlier to $16.6 billion in the first four months of the financial year. Purchases of bulk drugs and intermediates registered a minor decline.
Recent efforts to replace Chinese goods with indigenous products and more diversified sources have resulted in a significant reduction in imports of 45 out of 50 principal commodity groups from China in the April-July period, but purchases in five sectors increased, said the Directorate General of Commercial Intelligence and Statistics (DGCI&S).
India has taken a series of punitive actions against China amid a military standoff in the Ladakh sector along the Line of Actual Control (LAC); on June 15, a violent brawl in Galwan Valley in eastern Ladakh left 20 Indian Army personnel dead and caused an unspecified number of Chinese casualties.
Citing national security concerns, New Delhi on June 29 banned 59 mostly Chinese mobile applications such as TikTok, UC Browser and WeChat, and added 118 more apps to the list on September 2. India has also restricted the imports of Chinese television sets and prohibited Chinese companies from competing for government contracts.
Despite the punitive measures, imports of agrochemicals from China jumped 17.49%, to $377.65 million in April-July compared to $321.43 million in the same period last year. Purchases of other chemicals rose 13.46% to $240.96 million, according to DGCI&S data.
Purchases of Chinese petroleum products rose 13.61% to $68.83 million during the period. India’s imports of Chinese handicrafts, excluding carpets, increased by 7.55% to $168.08 million; and medical and scientific instruments by 2.55% to $205.64 million.
Although there was a small dip in the import of bulk drugs and intermediates from China, data shows India’s continued dependence on China for this crucial raw material used by the pharmaceutical industry. Imports of bulk drugs and drug intermediaries fell 0.13% to $859.66 million in April-July from $860.85 million in the same period last year.
The commerce and industry ministry did not respond to queries on the subject.
Two government officials with direct knowledge of the matter said imports from China were on a constant decline, which will be even more prominent in the September numbers. Imports from China have dropped by over $320 million in the first three weeks of the current month to about $1.2 billion, the officials said, requesting anonymity.
A significant drop has been recorded in two key categories, with purchases of fertilizer (crude and manufactured) from China falling 70%; and machinery (electrical and non-electrical) declining 30% in first three weeks of September 2020, one of the officials said.
That’s the outcome of an Indian effort to scale up domestic manufacturing capacity and diversify the sources of imports of goods and services to reduce reliance on China, the officials said.
“The government is also conscious about the needs of the domestic consumer and industry. There are certain essential products such as bulk drugs and APIs (active pharmaceutical ingredients), which are globally supplied from China. While efforts are there for import substitution, there is no ban on the import of such items from China,” the second official said.
Measures are being taken to import bulk drugs from alternative sources such as the US, Italy, Singapore and Hong Kong, and to ramp up domestic capacity to reduce dependence on China. In the medium to long-run, the government has decided to set up three bulk drug parks for ₹3,000 crore and approved a ₹6,940 crore production-linked incentive (PLI) package for promotion of domestic manufacturing of critical drug intermediates and APIs.
“This is how there is a marginal decline in their imports from China during April-July 2020,” the second official said.
Over 63% of India’s pharmaceutical imports are APIs and intermediates, and almost 70% of those come from China. Intermediaries and APIs are crucial chemical compounds (raw materials) required to manufacture formulations or medicines. While India is one of the leading exporters of formulations or generic medicines, China has a virtual monopoly in production of intermediaries and APIs.
“It is time we revive our domestic API industry, which has been deeply affected because of policies such as stricter implementation of pollution control norms, implementation of DPCO [Drug Price Control Order], 2013, lower import duties, and complete collapse of the indigenous fermentation industry,” said a report titled Reviving India’s API Industry, prepared by consulting firm PwC.
According to the report, the percentage of API imports from China spiked from around 1% in 1991 to about 70% in 2019.
Divakar Vijayasarathy, founder and managing partner at consulting firm DVS Advisors LLP, said a 100% boycott of Chinese products or import substitution was not immediately possible in a scenario where the trade deficit is highly skewed in favour of China.
“The import substitution is a long-drawn process and there are no quick fixes as in the case of apps. The government has realised this and is setting up parks for API domestic manufacturing but the results would be visible only a year or two later... Ban or import restrictions on these products, essential in nature, would only hurt India. Import substitution requires long-term vision and strategy which the government is trying to address but l think there is still a very long way to go,” he said.
