In a press release dated April 6, 2019, the PHD Chamber of Commerce has highlighted that the demand for Chinese products in India is decelerating, despite there being a substantial volume of imports from China lately. India’s import growth from China has shrunk from 24% between April-January 2018 to (-)5% between April-January 2019. During this time, Indian imports from China stood at USD 60 billion.
On the other hand, there has been a major breakthrough vis-à-vis exports to China, in the form of a remarkable turnaround by Indian exporters between April to January 2018-19. According to the press release, Indian exports to China grew by 31% in April-January 2019, with an increase in value from USD 10 billion to USD 14 billion approximately.
The trade deficit between India and China has also eased from USD 53 billion in April-January 2018 to USD 46 billion in April-January 2019. At present (2018-19), China is the 3rd largest export destination and the largest source of imports for India. Between 2001-02 and 2017-18, the total trade between India and China has witnessed a massive jump from USD 3 billion to USD 90 billion.
In April to January 2018-19, the top ten Chinese imports to India comprise 78% of the overall imports from China. Electrical equipment holds the majority share at 30%, followed by mechanical appliances at 19% and organic chemicals at 12%. During the same period, the top ten Indian exports to China comprise 81% of the overall exports to China. Organic chemicals hold the majority of the share at 19.4%, followed by mineral fuels at 19.3% and cotton at 10%.
In terms of diversification, the Chinese basket of exports to India is highly concentrated upon certain products, thereby making the situation highly volatile for China, given the higher reliance on select products.However, over the years, intra-industry trade has consistently expanded between both countries. This share has increased from 28% in 2007 to 53% as of 2018-19.
Interestingly, India is one of the largest manufacturers of generic pharmaceutical products in the world, with exports of generic drugs to the European Union and the USA. However, India is unable to export to China, given the stringent non-tariff barriers in China.
Moreover, the extra barriers imposed on agricultural and processed products must be mitigated in order to boost the trade of agri-products. Another surprising aspect of Indian-Chinese trade is the high trade cost between both countries, despite the fact that they share borders.
Despite these factors, the changing tastes and preferences for Chinese products and consumption patterns of Indian consumers, coupled with the growing competitiveness of Indian production capabilities, the terms of trade with China are shifting in favour of India.
In the last ten years, China has enhanced its trade footprint in India, but this trend has reversed in April to January 2018-19. Despite the fact that the mounted trade deficit with China is substantial, the volume of trade deficit is expected to ease up in the coming years, given recent trends and the amendments to the Foreign Trade Policy 2015-20.
India Outbound
April 8, 2019
source https://indiaoutbound.org/decelerating-chinese-imports-to-india/
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