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Anti China script goes awry, India’s trade deficit with China grows for the first time in four years, Auto News, ET Auto

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November 15, 2021
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Anti China script goes awry, India’s trade deficit with China grows for the first time in four years, Auto News, ET Auto
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In the automotive sector, China accounts for nearly 30 percent of all components that the industry imports and is the biggest sourcing destination.
In the automotive sector, China accounts for nearly 30 percent of all components that the industry imports and is the biggest sourcing destination.

India’s trade with the world at large has rebounded in fiscal 2022 recording a strong 70.1 percent jump at $ 472.16 billion if the first half on the back of increased economic activity this year. It is even higher than the first half of the pre pandemic fiscal 2020 when overall trade was around $ 470.24 billion, data from the ministry of commerce has revealed.

Thanks to higher price of global crude the value of India’s import basket expanded faster by 80.3 percent at $ 273.9 billion while exports grew at a more sedate 58 percent at $ 198.26 billion. While the growth in overall trade is a welcome trend there are worrying signs especially in the context of China. Despite all the efforts that have been made to reduce dependence on the dragon and make the country more self-reliant, both trade and deficit have grown.

In the first half of this fiscal, India’s bilateral trade with China was worth $ 54.6 billion growing by 43.6 percent from $ 38.02 billion in the April-September period of 2020-21. More ominously the trend of a reduction in trade deficit that had been sustained since fiscal 2019 has also been reversed. The deficit which peaked at $ 63 billion in 2016-17 had come down to $ 44 billion in 2020-21. In the first half of this fiscal however, it stood at $ 30.07 billion, up 80 percent over last fiscal, It is at the highest for a six month period since the first half of fiscal 2018 when it was $ 32.14 billion.

“The data should not come as a surprise. We are still not there yet to decouple ourselves from China,” said a senior commerce ministry official. “But the intent is there. A number of schemes are being drawn up including the PLI schemes. They will not show results overnight but bit by bit our reliance not just on China but other countries will start to go down. It is difficult to say in how many years but it will happen.”

China’s dominance as the biggest source for items and commodities like electronics, machinery, plastic, minerals and iron and steel continues unabated. India imported electrical machinery and equipment worth $ 12.6 billion in this fiscal so far, a 52 percent growth over last year. It also imported machines and components worth $ 8.7 billion, plastic goods of $ 2 billion and organic chemicals worth $ 6 billion.

In the automotive sector, China accounts for nearly 30 percent of all components that the industry imports and is the biggest sourcing destination. In fiscal 2021, automotive components worth nearly $ 4 billion were sourced from across the great wall. In the future, as electrification gains momentum, dependence on China, world’s largest electric vehicle market, is likely to only go up. China is a key supplier for sub-components used in engines, electronics, alloy wheels, tyres and is also a major source for key components in EVs including lithium-ion cells. An estimated 70 percent of components in EVs today are imported from just three countries: China, Taiwan and South Korea. In fiscal 2021, lithium-ion cells worth $ 700 million, parts of rotating electronics worth $ 165.1 million, and switching diodes worth $ 65.1 million came into India from China.

The only silver lining is that in overall terms, the US once again emerged as India’s largest trading partner overtaking China at $ 56.34 billion. India also enjoys a healthy trade surplus with the US at $ 15.82 billion which has also grown from $ 10.13 billion last year.

Also Read:

There are early signs that India may be recalibrating its approach towards PTA negotiations. The direction in which its trade policy tilts will determine the success of India’s plans for export-led economic growth. It will also influence India’s positions on emerging global trade issues.

Exports in October were the highest monthly figure on record, rising 24.6% from a year earlier to $40.14 billion, the Ministry of Finance said on Monday.





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