Current Affairs

Issue

Imports from China has continued to surge despite India signaling intention to move away to reduce reliance on the country.

 

Background

During Covid-19, many import dependent sectors suffered from supply chain disruptions caused due to lockdown in China.

 

Details

• Tensions with China have been continuing along the Line of Actual Control (LAC). The disengagement talks have come to standstill.

• Other aspects such as investments have been in freeze but trade numbers show that situation is reaching pre-pandemic levels, after facing lows during Galwan conflict.

 

Imports

• Indo-China trade is valued at $125.6 billion. This is the first time trade has surpassed $100 billion between the two nations.

• Imports from China accounted for $97.5 billion whereas exports to the country reached $28.1 billion. The trade deficit has increased by 22% since 2019.

 

Reasons for rise in imports

• Electrical and mechanical machinery are the biggest imports. They are followed by chemicals used in intermediate imports by industries.

• The Active Pharmaceutical Ingredients (API), auto components and medical supplies make up the rest of the imports.

• The value of top 100 import categories grew by $16 billion. The highest growth was seen in integrated circuits, laptops, computers and oxygen concentrators.

 

Indications

• The biggest cause of concern is India’s dependence on China for finished goods. The intermediate goods rise show that Indian industries are recovering.

• India’s exports have also grown by more than 50% but they are majorly raw materials such as ores, seafood and cotton.

 

Implications on relations

• India has clearly indicated that it cannot be business as usual while tensions are taking place along the border.

• The investments emerging from China has slowed down owing to tighter curbs and scrutiny. Major players like Tencent and Alibaba have reduced their participation.

• India has banned more than 200 Chinese apps and Chinese companies have been kept away from 5G trials taking place across the country.

• India needs to plan speeding up its local manufacturing or source from other places. Else the trade relations remain to be same.