Imports from China expected to reach record high in FY22 despite rise in domestic manufacturing​

With global trade flows beginning to normalise, India's merchandise trade activity has shot up. Overall export earnings jumped above $305 billion in the first 10 months of the year, which is also a record. Officials now hope to crack the $400 billion target in the full 2021-22 financial year.

Similarly, imports climbed rapidly in FY22, and are expected to cross their pre-pandemic figures. With an average $50 billion worth of imports every month, India's import figures are also set to cross the 2018-19 record in the fourth quarter of the financial year.

Officials argue that the high import figures denote healthy industrial and consumer demand and the latest spate in shipments into India is directly proportional to the sudden drop the year before.​

However, a big chunk of the imports continues to come in from India's largest source of foreign goods, China. In FY22, the Commerce Department expects imports from China to breach the historic high of $76.2 billion, similar to 2017-18. “At an average of $8 billion worth of imports from China every month, it looks likely that the figure from five years ago may be breached by the end of the current financial year,” a senior official said.

Chinese footprint on imports

Despite a series of restrictions aimed at Chinese goods, along with the combined blows of the pandemic and a global shortage of shipping containers, imports from China rose to $67.6 billion in the first nine months (April-December) of FY22. This means the value of incoming shipments has already crossed the level of imports from China over each of the previous two full financial years, at about $65 billion.

While the FY22 figures represent a jump of 49 percent over the corresponding period in FY21, they are also 30 percent more than imports in April-December of FY20. “China was the first country with which India's trade rebounded to pre-pandemic figures after the national lockdowns were over in 2020. Given the current pattern of trade, imports are set to see a similar rate of growth for the next 4-5 months at least, according to our estimates,” a senior Commerce Department official said.

This was despite India managing to reduce import dependence on China across several key categories, such as electronics and machinery.

Imports from China represented 15.34 percent of India's total imports worth $440 billion till December of this financial year. This ratio has held steady for the past few years.

Major imports from China

Key imports all up

Officials say that rising domestic value-addition for key items has reduced India's import dependence on China and lowered the shipment of products such as electronics, machinery and engineering goods. However, while imports in these crucial categories remain lower than they were pre-pandemic, imports of all these items were higher in the current financial year, compared to FY21, official data show.

India has historically imported a large share of its electronic needs across the value chain from its northern neighbor over the decade. Over the past five years, India has slowly cut down on imports of items such as LCD and LED TVs, compressors used in ACs and refrigerators, and gadgets such as smartwatches.

However, the country continues to depend on Chinese smartphones and components along with electronic integrated circuit systems used in a wide array of industries and photovoltaic cells used in harnessing solar energy.

Representing the largest component of the electronics import bill, shipments of telephony apparatus, including mobile phones and components from China, stood at $5 billion in the April-December period of FY22, up from $4.7 billion in the same period of FY21. Similarly, electronic integrated circuits and micro assemblies worth $3.4 billion came in, up from $2.2 billion in the previous year.

Also, $3 billion worth of semiconductors and photovoltaic cells were imported from China, up from $1.1 billion. The import of computers, laptops, and other automated devices also rose to $4.9 billion, up from $3.2 billion in the previous year.

Among heavy equipment items, import of centrifuges, pulleys, furnaces, pumps, filters, turbines, and valves went up in the latest year. Machinery used in agriculture, printing, compression and metalworking also saw a rise in imports. It was the same story for machine tools, such as those used for rolling, hammering, welding, binding, and weaving, according to official data.

Policymakers worried

Even as the trade sector comes out of the clutches of the pandemic-induced slowdown, the latest jump in India's overall import bill has policymakers worried. As the global supply chain failed, imports crashed during the peak of the pandemic. But with the logjam in Chinese ports clearing and more containers being pressed into service, imports from China have exploded.

“Unlike India's overall import statistics, the largest incoming product categories from China are not simply growing as a result of higher global commodity prices. There has been some uptick in the import bill of chemicals, fertilisers, and ores from China, but most of the major products from China are not classified as commodities. Instead, they are products higher up the manufacturing value chain,” said a senior trade expert currently working with the government to cut down Chinese imports.