There have been several reports on India-China relations after the boycott of the opening ceremony of the Beijing Winter Olympics earlier this month.
Jayantilal Bhandari
In order to compete with Chinese products in the local markets and reduce the trade deficit with China, it is necessary to overcome the weaknesses of the industry-business sector. We can make local products global by taking forward the Make in India campaign in the country. For this the government will have to implement micro-economic reforms.
There have been several reports on India-China relations after the boycott of the opening ceremony of the Beijing Winter Olympics earlier this month. In these, it has been surprised that despite the ongoing tension between the two countries for the last two years, India has recorded record imports from China. If we look at the latest figures of bilateral trade between India and China, it is found that between January and November-2021, there was a total trade of eight lakh fifty seven thousand crore rupees in both the countries, which is 46.4 percent more than last year. .
In these eleven months, India has bought goods worth six lakh sixty nine thousand crore rupees from China. This is fifty nine percent more than the previous period i.e. the year 2020. At the same time, India has exported goods worth one lakh ninety nine thousand crore rupees to China, which is thirty-eight percent more than the previous year. In these eleven months, the trade deficit with China also reached a record level i.e. four lakh sixty one thousand crore rupees.
If we look at the data of India-China trade during the period from January to November of the last four years, it is found that in the year 2017 India’s trade deficit with China was four lakh forty five thousand crore rupees. In the year 2018, it has come down to Rs.4 lakh thirty thousand crore, in the year 2019 it has come down to Rs.3 lakh eighty three thousand crore and in the year 2020 it has come down to Rs.3 lakh thirty thousand crore. But in 2021 this deficit reached the highest. A large part of the increase in India’s imports from China in the year 2021 is also from raw materials used in the manufacture of medical devices and medicines.
At this time, the rapid increase in imports from China is also worrying because the central government has been promoting the use of local products for a long time through self-reliant India campaign. To challenge China’s economic challenge, the government took various steps like banning various Chinese apps including Tiktok, controlling the import of Chinese goods, increasing the duty on many Chinese goods, the trend of using local products as much as possible instead of Chinese products in government departments. Huh. In the year 2020, due to tension with China, there was a strong boycott of Chinese goods across the country.
‘Made in India’ dominated. Festivals such as Rakshabandhan, Janmashtami, Ganesh Chaturthi, Navdurga, Dussehra and Deepawali saw an abundance of Indian products in the market and Chinese goods became less visible in the market. There was a big decline in India’s imports from China. The trade deficit was rapidly shrinking. Concerned about this, China had also expressed its anger many times.
There is no doubt that by moving strategically, we can change the scenario of increasing imports from China and increasing trade deficit. The pharmaceutical industry, mobile industry, medical device industry, vehicle industry, power goods and equipment manufacturing industries in India still largely depend on imported goods from China. However, in the last one-and-a-half year, the government has ensured incentives to thirteen industries under the PLI (Production Linked Incentive) scheme with an allocation of about two lakh crore rupees to create an alternative to China’s raw materials. Many producers of the country have also been successful in making substitutes for raw materials from China. Now the demand for additional investment in these areas appears to be being met.
By implementing the provisions of the new concept related to Special Economic Zone (SEZ) in the budget of the coming financial year (2022-23), quality manufacturing will be done at low cost for domestic and international markets by making full use of available resources in the SEZs. This will help China reduce imports by increasing exports. In fact, now under the new concept of SEZ, the government will give special facilities to the producers manufacturing for the international and domestic market. The vacant land and construction area in the SEZ can also be used for export. The SEZ will have the facility of customs clearance through full time portal and all clearances required for manufacturing will also be given there. States will also be involved in this process.
The big advantage of this would be that the infrastructure facilities would increase, especially by increasing the supply chain facility, the cost of production would be reduced and Indian goods would be able to compete easily in the international market. Large network of facilities like rail, road, port will make India cost globally and help in making India an export based economy. In order to attract domestic and foreign investment under SEZ, establishment of new ventures will also be encouraged along with domestic and foreign investment.
It is also important that the strategic announcements made in the budget of 2022-23 to realize the potential for India to become a global manufacturing hub can reduce imports from China. The government has identified ten key sectors to make the country a manufacturing hub. These include power, pharmaceutical, medical equipment, electronics, heavy machinery, solar equipment, leather products, food processing, chemicals and textiles. Export incentives will also be given to these sectors. There will also be an increase in the export of gems and jewellery, which constitute a major share in the exports. Gati Shakti program will bring down the cost of freight.
It has also been announced in the proposed budget to build one hundred cargo terminals. This will also facilitate the movement of goods and reduce the cost. In the budget, the import duty of diamonds and gems and the duty on the import of fashion jewellery has been reduced. This will put a stop to cheap fashion jewelery coming from China and encourage its manufacture in India. To encourage export of textile and leather products, import of zippers, lining materials, buttons, special types of leather, packaging boxes have been made duty-free, so that their exports will be encouraged.
In order to compete with Chinese products in the local markets and further reduce the trade deficit with China, it is necessary for us to overcome the weaknesses of the industry-business sector. We can make local products global by taking forward the Make in India campaign in the country. For this the government will have to implement micro-economic reforms. Research and innovation also need a lot of attention to make Indian industries stand out against China. Along with this, the new concept of SEZ will have to be properly implemented and maximum production will have to be done for the domestic and global market. Certainly all these measures will increase the economic pressure on China. At the same time, self-reliant India with the encouragement of local industries will prove to be an effective way to give an economic competition to China and control the increasing trade deficit with China.