India’s reliance on Chinese industrial goods, encompassing sectors such as telecom, machinery, and electronics, has steadily increased over recent years. A recent examination by the Global Trade Research Initiative (GTRI) revealed that Beijing’s share of New Delhi’s industrial goods imports experienced a significant escalation, climbing from 21% to a considerable 30% within the past 15 years.
The GTRI report casts a shadow of concern over this burgeoning trade deficit with China, discerning not just economic implications but also those affecting the national security framework. It poses strategic questions about India’s increasing dependency on China for crucial sectors of industry.
Despite efforts to compete with China on economic grounds, India has seen a stagnation in its exports to the Asian giant, hovering consistently around the $16 billion mark annually. Meanwhile, China’s exports to India witnessed a remarkable leap, from $70.3 billion in the fiscal year 2018-19 to a staggering $101 billion in 2023-24—a period that accounts for a cumulative trade deficit that tops $387 billion over the span of five years.
The report calls upon the Indian government and its industries to reassess the current import strategy, advocating a shift toward more diverse and resilient supply chains that might offer relief from economic vulnerabilities. The founder of GTRI, Ajay Srivastava, underlined the urgency to strengthen domestic industries and dilute the heavy reliance on imports from a geopolitical rival.
Scrutinizing figures from the recent fiscal year 2023-24, India’s merchandise imports amounted to $677.2 billion, with an astonishing $101.8 billion worth of imports originating from China. This accounts for a significant 15% of India’s entire import pool, with China’s imprint notably pronounced in major industrial products—accounting for 98.5% of the imports from the nation.
As per the detailed GTRI analysis, the electronics, telecom, and electrical sector soared with the highest import value of $67.8 billion, and China’s contribution was a substantial $26.1 billion of that total. This represents over 38% of this category, revealing a heavy dependence on Chinese goods within these crucial industries.
The machine sector paints a similar picture, with China supplying goods worth $19 billion—almost 40% of India’s imports in this domain. These numbers underscore the increasingly critical role that China plays as a supplier of machinery and associated goods to the Indian market.
Drilling down into specifics, India sourced $54.1 billion worth of chemical and pharmaceutical imports, with nearly $16 billion of this due to Chinese suppliers. This forms nearly 30% of the sector’s total imports—once again underscoring the importance of Chinese goods in the Indian economy.
Moreover, the report highlights that intermediate goods such as organic chemicals, Active Pharmaceutical Ingredients (APIs), and plastics, which account for 37% of imports, require attention for industrial upgrading. On the flip side, the small percentage (12%) of consumer goods imports and negligible raw material imports attest to the broad spectrum of goods sourced from China.
Chinese involvement spans across various sectors of the Indian economy, with tangible presence in energy, telecommunications, transportation, and has penetrated into realms as diverse as smartphones, electric vehicles, solar energy, and engineering projects.
The report outlines a future trend where Chinese firms in India might source most of their requirements from parent firms. This could lead to a swift and sizable increase in Indian imports from China. Illustratively, the automotive sector could experience profound disruption, with Chinese manufacturers potentially capturing a third of the electric vehicle market and significantly influencing the passenger and commercial vehicle segments.
In conclusion, with trade ties that intertwine deeply within the fabric of its industrial framework, India faces the challenge of navigating an economic landscape where reliance on Chinese imports juxtaposes with ambitions for independent growth and the safeguarding of national interests.
