India’s Import Dependency on China rises: GTRI report

India’s imports from China have surged to over $101 billion in 2023–24 from around $70 billion in 2018–19, according to a report by the Global Trade Research Initiative (GTRI). China’s share of India’s industrial goods imports in the last 15 years has climbed from 21% to 30%, as the report highlighted, predicting a substantial increase in Chinese imports in the coming years.

The GTRI study highlights that imports from China have grown 2.3 times faster than India’s overall imports during the same 15-year period. Contrary to common belief, China is the leading supplier across eight major industrial sectors, including machinery, chemicals, pharmaceuticals, and textiles, not just electronics.

Calling India’s growing industrial sector imports from China a cause of concern, the report by GTRI pointed that Between 2018-2019 and 2023-24, India’s exports to China have stagnated around $16 billion annually while imports have surged, resulting in a cumulative trade deficit exceeding $387 billion over six years.

Earlier this month, the Commerce Ministry announced that India’s exports to China saw a notable increase over the past year in 90 principal commodities out of the total 161 items shipped to the country. These 90 commodities constituted 67.7% of India’s export portfolio to China and encompassed products like iron ore, telecom instruments, and electronic components.

For its analysis, GTRI delineated industrial goods by excluding agriculture, ores, minerals, petroleum, gems, and jewelry products. The industrial goods scrutinized through product-level import data in the study represented 98.5% of India’s imports from China.

In 2023–24, India’s total merchandise imports amounted to $677.2 billion, with 15%, or $101.8 billion, worth of goods sourced from China. Among these, $100 billion of imports fell under major industrial product categories, constituting 30% of such imports, with some products reaching over 70%. Fifteen years ago, China’s share of imports in these categories was 21%, according to the study.

GTRI highlighted the substantial reliance on imports from China across various sectors, citing trends from the first ten months of 2023–24. Approximately 42% of India’s textile and clothing imports and 40% of its machinery imports during the period originated from China, while the figure was 38.4% for electronics, telecom, and electrical products.

China also contributed 29.2% to India’s imports of chemicals and pharmaceuticals, 25.8% to plastic product imports, and 23.3% to automobile sector inbound shipments. However, a lower dependency on China was observed in the case of iron, steel, and base metal imports, with only 17.6% of inflows originating from the neighboring nation.

GTRI concluded that half of the imports from China comprised capital goods and machinery, highlighting a critical need for focused research and development in this area. Intermediate goods such as organic chemicals, active pharmaceutical ingredients, and plastics, which account for 37% of imports, underscored the urgency of upgrading these industries.

Strategic Implications:

This dependency will not only affect economic but also national security dimensions, the study underscores. As per the report, there is a need to reevaluate India’s import strategies, with emphasis on the need to mitigate economic risks and enhance domestic industries while reducing reliance on single-country imports, particularly from geopolitical competitors like China.

The entry of Chinese firms into the Indian market signifies a shift from imports being primarily conducted by Indian firms. With Chinese firms likely to prefer sourcing most requirements from their parent companies, India’s imports of industrial products are expected to surge rapidly, according to the GTRI study.

According to the study, India exported $10 billion worth of goods to China in 2005 and enjoyed a trade surplus with its neighbor between 2003 and 2005. However, since 2005, Chinese goods have dominated trade flows, steadily exacerbating the trade deficit for India.

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