China top import source for India in 2024

Context: China was India’s top import source with USD 65.89
billion, a 9.8 per cent year-on- year increase, worth of inbound shipments
during the April-October period of this fiscal. Exports to China, however, dipped
by 9.37 per cent to USD 8 billion. During the period, the top 10 export
destinations of the country were the US, the UAE, the Netherlands, the UK,
China, Singapore, Saudi Arabia, Bangladesh, Germany and Australia. The US emerged
as the top export destination for the country with outbound shipments
increasing by 6.31 per cent to USD 47.24 billion. The top 10 import sources of
India were China, Russia, the UAE, the US, Iraq, Saudi Arabia, Indonesia,
Korea, Switzerland and Singapore.

Key points

·      
Overview: In 2023-24, the US was India’s largest trading
partner, followed by China. China was India’s top trading partner from 2013-14
till 2017-18 and in 2020-21. Before China, the UAE was the country’s largest
trading partner. The US was also India’s largest trading partner in 2021-22 and
2022-23.

·      
China
shock: China shock refers to the
flooding of low-cost Chinese goods in the global market. This leads to a global
slump in prices of the goods, causing job-losses worldwide.

Ø  China Shock 1.0 - The entry of China in WTO, led to flooding of low-cost Chinese goods
causing job losses in the US and other countries, including India. The motive
behind US allowing Chinese entry into WTO, was to lead to political reform in
China and increase US exports into China. However, ‘China Shock ‘followed and
the ‘communist dragon ‘became the ‘capitalist tiger ‘.

Ø  China Shock 2.0 - China’s exports have surged post-COVID, despite a global slowdown. The
International Monetary Fund (IMF) has noted that China’s share of global exports
has increased by 1.5 percentage points, while other major economies like the
US, Japan, and the UK have seen a decline in their global export shares. These
concerns are similar to the early 2000s, when China’s WTO accession led to a
surge in global exports, and damaged manufacturing sectors worldwide.

·      
Sectors
with most imports: India’s
renewable energy sector - Despite investing $4.5 billion in clean energy
manufacturing, 80% of India’s solar cells and modules are still imported from
China.

Steel sector imports - In India, steel imports from China hit a seven-year high in 2024, while
domestic steel exports have declined significantly. The influx of cheap Chinese
steel is eroding profits for Indian manufacturers.

Electronic components import - Despite increasing investments in mobile phone
manufacturing, India remains heavily dependent on China for electronic
components. In FY24, India imported over $12 billion in electronic components
from China, comprising more than half of its total electronics imports.

·      
India’s
increasing imports from China: Slump
in prices on account of Chinese dumping- China is using predatory
techniques to dominate high-tech sectors like solar equipment, electric
vehicles, and semiconductors. The dumping of these goods has led to a crash in
their prices, leading to increased imports from China.

Chinese use of exports to stave off domestic economic
crisis- China is relying on exports
to drive growth to counter its domestic economic slowdown, property crisis,
weak credit, and low consumer demand. This increase in export volume has led to
fall in slump in prices of Chinese goods, making them attractive to import in
countries like India.

Chinese dominance on global supply Chains- China dominates the global solar supply chain of most
of the new technology products. This leads to increase in import dependency on
China. For ex- China produces 85% of solar cells and 97% of silicon wafers,
making it difficult for India to reduce its dependence on China for solar
sector.

Lack of Domestic Capacity- In certain sectors, India has failed to develop the manufacturing scale
or technical expertise needed to produce goods at the same quality or volume as
China. For ex- The reliance of Indian electronics sector on China for finished
products and components like smartphones, semiconductors, and displays.

Technology and Innovation Gaps- China has developed advanced capabilities in
high-tech sectors like electronics, telecom equipment, renewable energy (e.g.,
solar panels). However, India lacks the research and development (R&D)
capacity to match the Chinese technological advancement, leading to reliance on
Chinese products.

India’s Industrial Policy Limitations- Challenges such as regulatory hurdles, infrastructure
bottlenecks, and high input costs have slowed the growth of India’s domestic
manufacturing sector.