India expects exports to China to pick up in 4-5 months: Source

India's trade deficit with China widened in FY23, due to the rise in imports and a fall in exports, according to commerce ministry data.

India’s trade ministry expects exports to China to increase over the next 4-5 months on the back of marine products and gems and jewellery shipments, as the government moves to battle the country’s widening trade deficit, sources said.

“Efforts are on. We are reaching out to trade missions through events. With China the challenge with marine products is now removed and exports are picking up. There were a lot of challenges regarding shrimp as exports were stuck. All that is now removed,” a senior government official told Moneycontrol.

China had suspended imports from 99 Indian seafood processing and exporting units over Covid concerns in 2020. Constant dialogue, efforts by the Marine Products Export Development Authority (MPEDA), and China’s economy opening up post Covid, led to the suspension being lifted in 2023. India exports frozen shrimp, fish, cuttlefish, squid, dried items, as well as live and chilled items. Of these, frozen shrimp is the largest marine export to China.

Gems and jewellery exports to China have also been picking up. The Chinese market is reviving slowly and the opening up of the Chinese economy will help Indian exports, the official said.

The commerce ministry is carrying out an internal assessment of all other sectors to analyse why their exports to China have declined.

“We are looking at how much of the decline in exports to China was due to Covid closure, how much was non-Covid closure, and with its market opening up, are there different signals,” the source said. “For this fiscal, in 4-5 months we will assess the trend of exports to China, identify export push, and assess if the plan to reduce the trade deficit is going in the right direction. We will also see what the export pickup will be in 4-5 months in terms of orders and shipments and design a further strategy,” he said.

India's trade deficit with China widened in FY23, due to the rise in imports and a fall in exports, according to the commerce ministry data. Exports to China declined 28 percent to $15.3 billion in FY23, while imports rose 4.16% to $98.51 billion during the last fiscal year. The trade deficit widened to $77.6 billion in FY23 from $72.9 billion in FY22.

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Imports from China have increased as it supplies critical inputs, including active pharmaceutical ingredients (APIs) and renewables.

China is the world’s largest producer and exporter of APIs and many Indian pharmaceutical companies depend on imports of the ingredients to produce various formulations.

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“However, if China is exporting intermediary goods, and we are adding value and exporting them, then there is no issue,” the official said.