Watch | Why are India’s imports from China rising?

A video explainer on India-China trade relations amid continuing tensions with China along the Line of Actual Control

February 15, 2022 11:57 am | Updated 12:16 pm IST

In the wake of COVID-19 and the subsequent disruption to supply chains, many countries, including India, have spoken of the need to reduce reliance on China. But trade figures show imports have only continued to surge in 2021.

The rising trade comes amid continuing tensions with China along the Line of Actual Control. However, it does not suggest a return to normalcy in relations.

Other areas, such as investment, remain in a deep freeze amid the continuing chill in bilateral relations.

What did India import from China in 2021?

India’s trade with China in 2021 reached $125.6 billion. This was the first time that trade mark crossed the $100 billion.

India’s imports from China accounted for $97.5 billion, while exports reached $28.1 billion, both records.

What is driving India’s imports?

India’s biggest imports are:

  • electrical and mechanical machinery
  • a range of chemicals that are intermediate imports used by industries
  • active pharmaceutical ingredients
  • auto components
  • and since 2020, a large amount of medical supplies

All those key imports continued to rise in 2021. Each of the top 100 import categories accounts for more than $100 million in imports. The total value of which was up by $16 billion in the last year, reaching $45 billion.

Also read | China still ‘largest source of critical items’ for India

The top items included both finished goods such as:

  • integrated circuits (up 147%),
  • laptops and computers (up 77%)
  • and oxygen concentrators (up four-fold)

and intermediate products such as:

  • chemicals (of these, acetic acid imports were up eight-fold)

What does the recent trend of trade figures suggest?

Experts say India’s dependence on China for finished goods has shown no signs of easing. The rise in intermediate imports is less of a concern as it is a sign of industrial recovery and greater demand for inputs.

Indian exports to China have also grown by more than 50% in the last two years.These are mostly raw materials such as ores, as well as cotton and seafood, and not finished products.

The five-year trend shows the trade deficit continues to widen. The deficit has grown from $51.8 billion in 2017 to $69.4 billion in 2021.

What are the implications for India-China relations?

While trade continues to boom, other aspects of economic relations have dramatically changed in the past two years.

In the wake of the LAC crisis starting April 2020, the message from New Delhi was that it cannot be business as usual while there are tensions along the border.

Investments from China in the past year have plunged amid tighter curbs.

In the tech and telecom space, the once rapidly increasing Chinese investments in start-ups including from tech giants such as Alibaba and Tencent, has come to an abrupt halt.

More than 200 apps remain banned. Chinese firms have been kept out of 5G trials so far.

India has also tightened scrutiny on Chinese firms in India. Tax investigations were recently conducted in companies including smartphone manufacturer Xiaomi.

These moves prompted a statement from China’s Ministry of Commerce calling on India to “provide a fair, transparent and non-discriminatory environment for Chinese businesses”.

The trade pattern is unlikely to dramatically change in the near future. New Delhi is considering a long-term plan to reduce some of these import dependencies.

Options are to either accelerate long-discussed but slow-moving plans to manufacture some of these critical goods in India or source from elsewhere.

The rest of the India-China economic relationship still remains somewhat in a state of freeze as talks continue to resolve the tensions along the border.

Reporting | Ananth Krishnan

Voiceover & Production | K Rajashree Das

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