Challenge for India to reduce dependence on China

by Ramesh pokhrel
india china

Commerce and Industry Minister Piyush Goyal recently told the Rajya Sabha that the trade deficit with China continues to be a challenge for India. He said that there was a trade deficit of $1.48 billion between India and China in the financial year 2004-05, but it increased to $36.21 billion in the financial year 2013-14. Thus it increased by about 2346 percent. Imports from China also increased more than tenfold during these years.

The situation was that in these years the whole country was flooded with substandard Chinese products made in China and India became increasingly dependent on a lot of Chinese goods. Though there have been continuous efforts in the last few years to reduce imports and trade deficit with China, they are proving to be insufficient. There was a trade deficit of $44.33 billion between India and China during the financial year 2020-21, which increased to $73.31 billion during the financial year 2021-22. Despite the tension on the border, bilateral trade between the two countries has increased by 43.3 percent.

It is worth mentioning that from the financial year 2014-15, efforts are being made to reduce imports from China by encouraging indigenous products in every possible way. In this episode, due to tensions with China in the years 2019 and 2020, since China’s aggression and expansionist policy towards India came to the fore, the wave of use of local products has been seen increasing across the country. Strong boycott of Chinese goods across the country and ban on various Chinese apps including Tik-Tok by the government, increase in duty on many goods to control the import of Chinese goods, the trend of using local products as far as possible in place of Chinese products in government departments. Due to continuous incentives, there has been a comparative decrease in demand for Chinese goods in India.

Prime Minister Modi’s repeated endorsement of the local economy and the spread of the Vocal for Local campaign have also seen more support for buying local products on Diwali and other festivals than before, yet festive products from China continue to import into India. Imports have increased. As a result, the festive months of September to November 2022 have seen the dominance of China in the country’s markets. According to data from the Ministry of Commerce and Industry, LED lights and lamps worth $7.2 million were imported from China in August this year, compared to $4.2 million in August last year. Gift items worth USD 1.97 million were imported from China in August this year, while gift items worth USD 81,000 were imported from China in August last year.

According to traders, the middle class people who could afford to pay higher prices were giving preference to local indigenous goods while the lower income group people were preferring cheaper Chinese goods. It is clear that the challenge of breaking China’s supremacy in festive shopping remains. Meanwhile, under the self-reliant India campaign, 24 sectors are being taken forward rapidly with priority under manufacturing. In the last two years, the government has allocated about two lakh crore rupees to 14 industries under the Production Linked Incentive (PLI) scheme to create an alternative to chemicals and other raw materials imported from China. Some producers of the country have also been successful in making an alternative to Chinese raw materials.

According to commerce ministry data, due to the success of the PLI scheme, there has been a 40 per cent decrease in the import of pharma products during April-August this year as compared to the same period last year and exports have decreased as compared to the same period last fiscal. There has been an increase of about 3.47 percent. Earlier, almost all the smartphones in the country were sourced from China, as there were only two plants for mobile handsets, but now 200 companies are active in manufacturing mobile handsets in the country.

Undoubtedly, trade deficit with China is a major economic challenge for the country. Especially at a time when China is showing aggression on the border. In such a situation, by moving forward strategically, we can change the scenario of increasing imports and trade deficit from China to a great extent. In order to compete with Chinese products in the local markets and further reduce the trade deficit with China, we have to remove the weaknesses of the industry-business sector. India will have to increase its electronic and chemical manufacturing capacities. Manufacturing will also have to be promoted in the public sector undertakings of the country.

We can make local products global by taking forward the Make in India campaign in the country. Government has to promote entrepreneurship along with implementing some micro economic reforms to make indigenous products competitive with Chinese products. This will encourage more businesses to come forward and offer local alternatives to imported Chinese goods, raw materials. Expect that such strategic efforts will be made by India under the chairmanship of G-20 in the year 2023, due to which India will move fast on the path of becoming the world’s new supply center and manufacturing hub. Only if this happens, our dependence on China will be reduced.

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