CHENNAI: India’s month-long standoff with China at Doklam in Sikkim has yet again accentuated the country’s growing trade deficit with its northern neighbour. There has been a growing pandemonium for import restrictions on all Chinese goods, particularly electronic goods which currently constitute a huge chunk of shipments from across the border. However, experts say that it is not trade restrictions but the country’s weakness for these goods that explain India’s widening trade gap with China.
India’s trade deficit with China continues to balloon. Deficit currently stands at over $51.1 billion, on imports of $61.3 billion, indicating a steady rise in imports while growth in domestic manufacturing remains sluggish.
China, however, has not encouraged Indian exports as much. Major exports to China consist of input products used by China’s own manufactuers, which it ships abroad — often back to India. For example, iron ore is one of largely exported items in the basket.India imports products are much higher up the value chain from the neighbouring country. “In order to balance the Indo-Chinese trade, India has to promote Indian brands in China, besides exports of value added goods from the country,” said A Sakthivel, regional chairman (South), Federation of Indian Export Organisations.
From toys to idols, watches to electronic gadgets and kitchen appliances, Chinese versions of everything is available at a cheaper price and is the root cause of infiltration of these goods in the Indian market. “Though their quality is not up to the mark, consumers buy them anyway and this is one of the main drivers of the trade imbalance between the two neighbours,” pointed out an analyst.
Trade skewed in favour of China also implies that the government’s efforts to tighten rules for business might end up doing more harm than good. As per the latest data released by mobile shipment tracking firm IDC, a whopping 51.4 per cent of India’s $8 billion plus smartphone market in Q1 2017 was occupied by Chinese vendors with brands like Xiaomi, Oppo, Vivo and OnePlus.
The country’s telecom imports also stand at over `80,000 crore annually, much of it from Chinese firms like Huawei and ZTE. In a bid to provide affordable electricity, India today mostly uses Chinese equipment for power generation.And, while the popular impression is that China is dumping consumer goods into India, it is a fact that India depends on China for capital goods too. According to Sakthivel, reduction in import of cheaper capital goods will also push up production costs.