India’s imports from China totalled $65.1 billion in fiscal 2020 and exports at $16.6 billion, which translated into a trade deficit of $48.5 billion. MUMBAI: India can reduce its trade deficit with China by $8.4 billion or 17.3% of its deficit with that country over fiscal 2022, through subsitution of imports from sectors like chemicals, automotive components, bicycles parts, agro-based items, handicrafts, drug formulations, cosmetics, consumer electronics and leather-based goods, Acuite Ratings & Research said in a note.
The ratings agency analysed the current import portfolio from China and found 40 sub-sectors that have the potential to lower their import dependency on China.
These sectors contribute to $33.6 billion worth of imports from China and about 25% of these imports can be substituted by local manufacturing without any significant additional investments, Acuite said.
“This would have a positive cascading effect on the economy as equivalent quantum of revenues would not only be added to the turnover of domestic enterprises including MSMEs but is also likely to translate to benefits through forward and backward linkages, better economies of scale along with cost competitiveness and importantly, enhancing the scope of employment generation,” Acuite said.
This will translate into savings of 0.3% of India’s GDP.
India’s imports from China totalled $65.1 billion in fiscal 2020 and exports at $16.6 billion, which translated into a trade deficit of $48.5 billion. Chinese imports contributed to over 30% of India’s aggregate trade deficit.
Over the past 3 decades, India’s exports to China grew at a CAGR of 30% but its imports expanded at 47%.
Acuite said that India can slash imports in sectors like chemical where it is the world’s sixth largest chemical manufacturer. Similarly, the pharmaceutical industry imports bulk drugs (API) and other intermediate raw materials worth over $2.6 billion annually and the bicycle and bicycle parts industry $100 million worth of items.
“We believe that Indian industry has the wherewithal to successfully safeguard its interests and reduce India’s dependency on China albeit in phases. With a strategic intent and highly calibrated approach from both the government and industry, Indian economy can see a new narrative that can not only reduce its trade deficit but also kickstart the long-awaited cycle of fresh private sector investments,” said Sankar Chakraborti, CEO, Acuité Ratings & Research.
Source: indiatimes.com