News Excerpt:
In the fiscal year 2024, China surpassed the United States to become India's largest trading partner after a two-year gap.
India's Trade China and US:
- In FY24, bilateral trade between India and China increased by 4% to $118.4 billion, up from $113.8 billion in FY23.
- In contrast, India-US trade during the same period fell by 8.6% to $118.3 billion.
- While India maintains a substantial $36.7 billion trade surplus with the US, it faces a severe trade deficit with China, highlighting the ineffectiveness of campaigns to boycott Chinese goods and companies.
India’s Trade Deficit with China:
- Last fiscal year, India's trade deficit with China reached a record $85 billion, doubling over the past four years.
- Imports from China grew by 3.3% to exceed $100 billion, even as India's overall imports fell by 5.6% to $675 billion.
- This overshadowed an 8.8% increase in exports to China, which amounted to $16.7 billion, following a 28% decline in FY23.
- Currently, China accounts for 10.6% of India's global trade and 15% of its import bill.
- The significant trade deficit has caused tension between the two countries, with India accusing China of dumping goods in various sectors.
India's Import Basket with China :
- In FY24, machines and electric appliances constituted over half of all Chinese imports to India.
- China exported nearly $54 billion worth of machinery to India, marking a 10% year-on-year increase.
- Additionally, India imported $11.5 billion worth of chemicals, $5.7 billion worth of plastic goods, $4.7 billion worth of iron and steel products, and $2.2 billion worth of fertilizers from China.
Initiative taken by India:
- India has implemented various measures, such as increasing import duties and placing items on restricted lists.
- In 2019, duties were raised on products like air-conditioners, CDs, DVDs, CRT monitors, and TV display panels, and later expanded to include fans, water heaters, ovens, electric vehicles, and refrigerator compressors.
- Following the Galwan clash in 2020, India amended FDI rules to restrict Chinese investments.
- India launched production-linked incentives to boost domestic production of goods heavily imported from China.
Challenges and Requirements:
- China's pricing and size in a variety of industries are unmatched by any other nation.
- In sectors such as renewable energy, electronics, and electric vehicles, India lacks the technology and scale to compete with China.
- Restricting imports in these areas would lead to higher prices for consumers and globally uncompetitive products.
- While well-designed PLI schemes could yield results, they will only be effective in the medium term.
