While  India’s industrial growth is steadily forging ahead, the fact is that India’s dependence on imports from China for critical inputs for sustaining industrial growth is also increasing, at nearly the same rate as that of industrial growth. In the case of several industrial sectors in India, the growth tempo would considerably slow down,  if imports of critical inputs from China were to be curtailed due to any reason.

The harmonized code analysis of 10 of the major industries in India shows that India’s cumulative import share of 10 sectors from China has increased in FY 2022, to touch 47 per cent; the highest in the last four years.  During the period FY 2002 to FY 2012, India’s trade deficit with China increased from $1.1 billion to $37 billion which then touched an all-time high of $73 billion in FY 2022.

 Over 60 per cent of the   Indian pharmaceutical industry’s inputs come from China. As a result, even if there is a delay in imports from China, manufacturing in the pharma industry can severely slow down.  This situation is similar in so many other sectors including the renewable energy sector where critical parts from China are required to increase installed capacity for wind and solar power generation.  With 5 GW of cumulative orders since 2017-18, Chinese wind turbine manufacturer  Envision Wind Power is  India’s top supplier of wind turbines, climbing past entrenched multinational companies such as Suzlon and Siemens Gamesa.

Large gap in technology base

Considering the political relations with China and China’s aggressive posture in claiming Indian territory, there is certainly justifiable concern in India about increasing import dependence on China for equipment parts, intermediate and finished chemicals, electronic parts, and so on.

In recent times, the Indian government has taken earnest steps to promote self-reliance in the country and several proactive schemes have been introduced such as the Production Linked Incentive (PLI). While the government can give subsidy support and incentives to domestic players to boost domestic production and achieve self-reliance in order to reduce dependence on imports from China, there is still a large gap in the technology base built up in China over the last several decades, which enabled China to make the big leap forward, in comparison to the domestic capacity build-up of India 

Indian buyers often find that procurement of critical inputs and chemicals from China is cheaper and the quality of the material in most cases is now on par with global companies. As China has created huge capacity in several sectors and has many world-size capacity plants, the response from the producers and traders from China to the inquiries are often immediate and delivery is done without delay.

Today,  China has a mixed economy with government-owned units,  private domestic units and overseas units operating in China and all three entities play almost an equal part in boosting  China’s industrial and technological output. In the case of several products, multinational companies have built large capacities in China targeting not only the Chinese market but also the market in Asia and Africa. In such circumstances, some of the items imported from China by Indian units are not from Chinese government-owned units or Chinese domestic industry but from multinational units operating in China.

Business has mutuality of interest

It also needs to be noted that while India has become a necessary importer from China, China also should feel that it is a necessary exporter to India in view of the large capacity built up in China for several products,  much more than China’s needs, and the excessive dependence on the export market for its economic growth. While India may not have a large share in China’s overall export trade, India’s share in China’s exports is significant enough that China cannot afford to ignore.

The conflict of interest between India and China on the political front is likely to continue for a long time to come, with China’s territorial greed being what it is.  However, business dealings between both countries must continue since such business is of mutual interest to both India and China.

(The author is a Trustee, NGO Nandini Voice for the Deprived, Chennai. Views are personal. He can be contacted at nsvenkatchennai@gmail.com)