Modi govt’s call for Chinese products’ boycott a red-herring

China’s growing vice-like grip on Indian economy and govt’s bid to play it down is of grave concern. Its stated position on its trade and investment policy with regard to China has clearly failed

Representative image
Representative image

Nantoo Banerjee

India’s massive annual imports from China are known. But little is told about India’s large unclear imports from the communist neighbour, a global nuclear heavyweight. Last year, India’s second largest category of import from China was under the grouping of nuclear reactors, boilers and machinery. The import was valued at $12.37 billion, accounting for well over 20 percent of the total cost of imports from China.

Ironically, China has been a major stumbling block to India’s inclusion in the 48-nation Nuclear Suppliers’ Group (NSG) despite strong support from several countries, including Russia, the US, France, the UK, Germany and Switzerland.

Imagine China, Russia or any other county sourcing such large imports from their strong diplomatic adversaries year after year! There may not be any such example, except India. Paradoxically, the country remains covertly soft on imports from China despite the government’s overt restrictions on trade and investments from its giant neighbour. The pandemic-hit economic slowdown, growing border tension and the latest development in Afghanistan, with China and Pakistan joining hands to support the Taliban regime ushering in a fresh possibility of terrorist strikes in Indian Kashmir and other parts of the country, have practically no impact on India’s import from China.

In the case of India’s foreign trade, imports have always outpaced exports. But what’s a matter of grave concern is China’s growing vice like grip on the Indian economy and the government’s bid to constantly play it down. Clearly, the government’s stated position on its trade and investment policy with regard to China has failed. Even the widespread economic disruptions caused by Covid-19 in 2020 and a good part of this year did not change this reality.

China has re-emerged as India’s No. 1 import trade partner through this period. India is buying anything and everything from China — from nuclear reactors, consumer electronics, machinery and equipment, industrial raw materials, household goods, to cosmetics, clocks and watches, musical instruments, sports goods, furniture, mattresses, toys and even extra-sharp kite flying threads, which cause many accidents and deaths every year.

The Commerce Ministry’s monthly report on international trade mostly highlights India’s export growth efforts. The public information on imports provide little insight on the nature of Indian imports and their origins. Take for instance the Ministry’s press release for August, which boasts of a 45 percent export growth for the month. It carries little information on why such an impressive export growth failed to arrest the growth of trade deficit that logged a four-month high level last month. The monthly bulletin detailed what contributed to the August export growth and downplayed the aspect of import surge. It talked about the current year’s national export target of US$ 400 billion.

Does the government also have an import target or item-wise import contraction target for the year? Are the importers and domestic producers under any pressure to develop and support the local market? The present government is in power since May 26, 2014. It has been talking about ‘Atmanirbhar India’ or self-reliant India. Unfortunately, it does not seem to have a clear roadmap to achieve such a lofty objective.

It would have made sense to ensure that the annual trade deficit was programmed to go downward every year to make the country reasonably ‘self-reliant’ within a stipulated period. In practice, it is a different story. India's trade deficit increased from barely $6 billion in 2090-91 to $180.3 billion in 2018-19. The country’s trade deficit with China alone was 391.7 billon Yuan ($56.8 billion), according to China’s General Administration of Customs (GAC).

China’s contribution to India’s total trade deficit is almost 30 percent. It is to be noted that nearly 62 percent of India’s total imports by value in 2020 were purchased from Asian countries, led by China. European trade partners supplied 15.9 percent of import purchased by India while 8.8 percent worth originated from North America with another 7.5 percent came from Africa. Much smaller percentages arrived from Latin America (3.7 percent) excluding Mexico but including the Caribbean, and Oceania (2.1 percent) led by Australia.

This is despite the fact that China does not feature in India’s top five items of import led by crude petroleum (21.6 percent); gold (5.9 percent); petrol products (5.8 percent); coal, coke and briquettes (4.7 percent) and pearl, precious and semi-precious stones (4.7 percent).

India’s imports from China was US$58.8 billion during 2020, according to the United Nations COMTRADE database on international trade. This exposes that India’s trade pattern has practically no link to its so-called strategic concern with regard to China and its Quadrilateral Security Dialogue (Quad) with the US, Japan and Australia. There is little effort on India’s part to take advantage of Quad to diversify and improve its technology base to emerge as a major global manufacturer.

Given the potential size of the Indian market, improved economic and technological cooperation among Quad nations will benefit all the parties. Unfortunately, India is yet to express any such stated objective.

Under the UN COMTRADE database, India’s key imports from China in 2020 were: Electrical, electronic equipment ($ 17.84 billion); Nuclear reactors, boilers and machinery, ($ 12.37 bn.); Organic chemicals ($ 8.20 bn.); Plastics ($2.16 bn.); Fertilizers ($ 1.67 bn.); Optical, photo, technical, medical apparatus ($1.58 bn.); Chemical products ($1.24 bn.); Engineering articles of iron and steel ($1.23 bn.); Vehicles other than railway, tramway ($1.20 billion) and, additionally, Iron and steel ($835.08 million).

According to published reports, in 2018-19, at least 60 percent of India’s total import of electrical machinery and equipment came from China, nearly 70 percent of machinery and nuclear reactors arrived from the neighbouring country, plastic imports were a whopping 82 percent from China, fertilisers and organic chemicals too were above 60 percent.

During the pandemic year of 2020, China toppled the US to become India’s top trading partner. The bilateral trade between the two Asian neighbours stood at $77.7 billion. Exports to China stood at only $19 billion. Indian imports from China eclipsed its imports from the US and UAE combined. India loves Chinese goods largely because they are cheap and easily available in abundant volumes.

Interestingly, the government rarely speaks about its nuclear import linkage with China and how critical it is to India’s nuclear power generation programme.

(IPA Service)

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