It is no secret that India’s dependence on Chinese imports has been increasing and this has led to near deindustralisation of Indian economy. Our industries suffered major losses and many of them had to be closed down. It's significant that imports from China were hardly $4.05 billion in 2003-04; which increased to $51.1 billion by 2013-14, showing a growth of nearly 29 percent annually. With realization of this problem, the new government under Narendra Modi came up with an idea of ‘Make in India’ first and then a full-fledged ‘Aatmanirbhar Bharat’ since May 2020, during COVID-19 pandemic.
It is notable that the import of Chinese merchandise, which was doubling every two-and-a-half years, during UPA’s decade, went down to 5.4 percent in first six years of the Modi government, but increased after May 2020, though for other reasons.
Since May 2020, with the Modi government’s launch of Aatmanirbhar Bharat policy, it gave hope that we might be able to reduce our dependence on Chinese imports and bring the manufacturing sector back on track and avoid security, health and economic risks arising from dependence on Chinese products.
But, the recent reports about continued and increasing dependence on Chinese imports have raised an alarm not only about the efficacy of the Aatmanirbhar Bharat policy, but also about security and economic risks attached to Chinese imports. The Global Trade Research Initiative’s (GTRI’s) report has recently revealed that China and Hong Kong account for 56 percent of India’s total imports of electronics, telecom and other electrical products. Also, China has become India’s largest trade partner, where total bilateral trade with China has reached $118.4 billion in 2023-24, against $118.3 billion with USA. In this bilateral trade, share of Chinese imports is $101 billion, whereas exports are merely $16-17 billion. Though this figure of imports looks staggering, we see that during NDA regime the rate of growth of Chinese imports has been only 7.0 percent per annum, against growth of 29 percent during UPA regime.
The GTRI report says that 15 years ago China accounted for 21 percent of our merchandise imports, and now in 2023-24, China’s share in merchandise imports has increased to 30 percent. Our dependence on China has not been limited to electronics, telecom and electrical, it has spread to eight key industrial sectors which include machinery, chemical and pharmaceuticals, steel and base metals plastic and articles, textile and clothing and automobile sector also.
Results of Government’s Efforts
Noting our dependence on Chinese products, special efforts are being made to become self-reliant. Though, there is always a lag between the announcement of policy and its outcome, but we see green shoots of manufacturing, which give us hope of reducing dependence on China in the forthcoming years.
For instance, in the pharma and Active Pharmaceutical Ingredients’ (APIs) we see significant capacity creation. Among the 12 categories of goods identified for PLIs, APIs was included. As many as 41 products were included in PLI scheme for the API sector with special emphasis on medicines for diabetes, tuberculosis, steroids and antibiotics. It is notable that by September 2023, under the PLI scheme, pharma companies had been given investment permission for nearly Rs 4,000 crore in APIs and Rs 2,000 crore for medical equipment. Apart from this, the Centre has developed three bulk drug parks at a cost of Rs 3,000 crore.
Besides reduction in imports there has been a significant increase in export of bulk drugs and drugs intermediates. Against total import of Rs 25,552 crore in 2022-23, India exported bulk drugs and drugs intermediates worth Rs 37853 crore in 2022-23, which is Rs 12,302 crore more. In chemicals also India is more or less self-reliant and exports are also booming.
India used to import nearly 70 percent of defense equipment, but now most of the required equipment is produced domestically. Additionally, India's export of defense goods have been increasing in leaps and bounds. India has been exporting the most advance defense equipment including big and small guns, rifles, missiles and many others. Whereas between 2004-05 and 2013-14 India's defense export were hardly Rs 4312 crores; between 2014-15 and 2023-24, India's defense export has been recorded at Rs 88319 crores (growth by 21 times). In single year 2023-24 defense exports have touched a record level of Rs 21083 crores (approximately $ 2.63 billion).
Future is Promising
Thanks to the efforts of the government to revive manufacturing in the country, General Index of Industrial Production (IIP) has recorded a growth of 3.8 percent during this period. Given the dependence on Chinese intermediate and components for domestic industry, growth in Chinese imports was an obvious outcome of this growth.
Automobile and ancillary industry made an announcement of nearly Rs 1.28 lakh crores of investment in the last three years which is nearly 6 times more than the announcement three years prior.
Similarly, the electronics industry shows a total announcement of Rs 4 lakh crores investment in the last three years between 2021-22 and 2023-24, which is 102 times more than the previous announcements.
In the drug and pharma sector, there has been an announcement of Rs 18,112 crores, which is 15.5 times higher than three years ago; similarly, in the food industry announcement of Rs 23,484 crores were made with regard to investments, which is again 8 times higher than the three years prior to that.
In conclusion, India still imports a significant amount of Chinese goods, which generally consists of intermediates and components, helping India to export the products manufactured with their help, the government of the day is treading the path of Aatmanirbhar Bharat and adopting several measures to reduce the dependence on Chinese and imported products. As a result of these efforts, investment is gearing up in an unprecedented way. We can say that green shoots are seen very visibly. At the same time rising exports of defence products, toys, chemicals and pharmaceutical product are witness to this change, which is destined to reduce the dependence on Chinese imports.
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