China’s share in India’s industrial goods imports jump to 30% from 21% in last 15 years: GTRI

China’s share in India’s industrial goods imports jump to 30% from 21% in last 15 years: GTRI

Sub: Economy

Sec: External Sector

Context:

• Beijing’s share in New Delhi’s imports of such goods rose to 30% from 21% in the last 15 years.

More on news:

• As per the report of the economic think tank Global Trade Research Initiative (GTRI), the growing trade deficit with China is a cause of concern.
• China has reclaimed its position as India’s largest trading partner, surpassing the United States after two years.

Recent trends:

• From 2019 to 2024, India’s exports to China have stagnated at around $16 billion annually.
• Imports from China have surged from $70.3 billion in 2018-19 to over $101 billion in 2023-24.
• Cumulative trade deficit exceeding $387 billion over five years.
• Over the last 15 years, China’s share in India’s industrial product imports has increased significantly, from 21% to 30%.
• Growth in imports from China has been much faster than India’s overall import growth.
• China’s exports to India growing 2.3 times faster than India’s total imports from all other countries
• In 2023-24, India’s total merchandise imports amounted to $677.2 billion, with $101.8 billion of that coming from China.
• China accounted for 15% of India’s total imports.
• Out of these imports from China, $100 billion or 98.5% were in major industrial product categories.
• China’s contribution is quite significant, representing 30% of India’s imports in the industrial product sector. 
• Half of the imports from China consist of capital goods and machinery, indicating a critical need for focused research and development in this area.

Rising India Dependence:

• The key sectors, where India’s dependence is rising significantly are electronics, telecom and electrical; machinery; chemicals and pharmaceuticals; products of iron, steel and base metal; plastics; textiles and clothing; automobiles; medical, leather, paper, glass, ships, aircraft and remaining categories.
• April-January 2023-24, the electronics, telecom and electrical products sectors had the highest import value at $67.8 billion, with China contributing $26.1 billion.
• In the machinery sector, China accounts for $19 billion, which is 39.6% of India’s imports in the sector.
• Intermediate goods like organic chemicals, APIs (Active Pharmaceutical Ingredients), and plastics, which represents 37% of imports.

India’s trade perspectives with other countries:

• The US was the largest partner in 2021-22 and 2022-23. 
• In 2023-24, the UAE with USD 83.6 billion was the third largest trading partner of India.
• It was followed by Russia ($65.7 billion), Saudi Arabia ($43.4 billion), and Singapore ($35.6 billion). India’s trade deficit in FY 2023-24 is estimated to be $78.12 billion, an improvement of 35.77 percent compared to FY 2022-23, when it was $121.62 billion.
• During the last five years, trade with the US showed positive growth, with exports increasing significantly by 47.9 per cent from $52.41 billion to $77.52 billion.
• Saudi Arabia  showed a more balanced growth, with exports more than doubling and imports rising at a slower pace.
• Russia vaulted to the second spot amongst India’s top import sources, surpassing the UAE and the US, in 2023-24. India’s import from Russia rose 34 per cent to $61.44 billion during the fiscal comprising mostly oil. The UAE slipped one spot to the third place with imports from the country declining 9.8 per cent to $48.01 billion. The US, too, slid a rank to the fourth spot with imports from the country falling 19.83 per cent to $40.77 billion
• Russia’s trade figures have seen a dramatic increase, with exports growing by 78.3% and imports soaring by 952%, leading to a significantly widened trade deficit.
• Exports to the UAE rose by 18.3 percent from $30.13 billion to $35.63 billion, and imports increased substantially by 61.2 per cent from $29.79 billion to $48.02 billion.

What is Trade Deficit?

• Trade deficits occur when a country imports more goods and services than it exports, resulting in a negative balance of trade.
• They can affect domestic industries, employment, and economic growth, and are influenced by factors such as exchange rates, trade policies, and global economic conditions.

What are Active Pharmaceutical Ingredients (API)?

• An active pharmaceutical ingredient (API) is the component of an over-the-counter (OTC) or prescription medication that produces its intended health effects.
• These are the active ingredients contained in a medicine.
• It is that part of the medicine that produces the intended therapeutic effects.
• Only a small amount of the API is required to produce the effect and so the medicine contains only the required amount of the API.
• China is one of the largest producers of Key Starting Material (KSM) and APIs in the world.

What is the Global Trade Research Initiative (GTRI)?

• GTRI aims to create high quality and jargon-free outputs for Governments and Industry on issues related to trade, technology and investment from the perspective of development and inequality reduction.