Imports from China used to push up exports from India, says MoS Commerce Jitin Prasada

India's merchandise trade deficit widened to a record high of $37.84 billion in November from $27.14 billion in the previous month due to a sharp rise in inbound shipments of gold, data released on December 16 showed.

Most of the goods imported from China, including Active Pharmaceutical Ingredients, auto, electronic components and mobile phone parts are used for making finished products, which are also exported out of India, said Jitin Prasada, Minister of State for Commerce on December 20.

He was responding to a question in the Rajya Sabha on steps taken by New Delhi to reduce its import dependency on Beijing.

As India is increasingly integrating with Global Value Chains (GVC), imports matter as much as exports for successful GVC integration, Prasad said.

"These goods are imported to meet the demand of fast expanding sectors like electronics, pharma, telecom and power in India. India's dependence on imports in these categories is largely due to the growing domestic demand driven by rising income levels," added the Minister of State for Commerce.

In 2023-24, India’s total merchandise imports were worth $677.2 billion, out of which $101.8 billion came in from China, accounting for 15 percent of India’s overall inbound shipments.

Responding to a different question on the fall in exports, Prasada said that that outbound shipments of goods between April to November have grown by 2.2 percent over
previous year.

"However, the exports are impacted by persisting geopolitical tensions including Russia-Ukraine Conflict, Israel-Palestine Conflict, and monetary tightening along with recessionary fears that have led to a decline in consumer spending across advanced nations and the consequential slowdown in demands."

Prasada added that a fall in commodity prices of petroleum, coal, and others have also contributed to muted exports in value terms in the current fiscal so far.

India's merchandise trade deficit widened to a record high of $37.84 billion in November from $27.14 billion in the previous month due to a sharp rise in inbound shipments of gold, data released on December 16 showed.

While, an almost 50- percent year-on-year jump in gold imports was seen as the primary culprit for the record-rise in merchandise deficit, a fall in prices of petroleum products also weighed in on the gap due to a drop of 49.69 percent on-year in outbound shipments of this item in the previous month.

Prasada said that the central government has taken various steps to reduce India's import dependency thorough measures such as Production Linked Incentive (PLI) schemes for 14 key sectors, approved by the Cabinet back in November 2020 with an outlay of Rs 1.97 lakh crore.

However, the incentives disbursed under the PLI schemes stands at just Rs 9,721 crore till FY 2023-24, as per data available officially.

In 2023-24, the PLI schemes led to spurring investments worth Rs 1.46 lakh crore, production or sales of Rs 12.50 lakh crore, exports worth Rs 4 lakh crore (US$48 billion) and direct and indirect employment for 9.5 lakh individuals.

While answering another question on the the output-linked plans, Prasada said, as of now 764 applications have been approved under various PLI Schemes, out of which 176 fall within the ambit of MSMEs covering sectors such as bulk drugs, medical devices, telecom, food processing, textiles and drones.