The Budget may announce measures to reduce India’s import dependence from China, through various tariff and non-tariff measures, pursuing its strategy of Atmanirbhar Bharat (self-reliant India) in a “calibrated” manner, two officials aware of the matter said.
While India will continue to import raw materials and intermediates from its neighbour, it may disincentivise through strict enforcement the entry of finished Chinese goods imported directly into India or shipped in via a third country violating the ”rules of origin” norm, they added, requesting anonymity.
The move comes amid India’s efforts to get China to respect existing agreements regarding the Line of Actual Control in the context of the 20-month long standoff between the two countries along the Line of Actual Control (LAC) in Ladakh. It also comes in the immediate context of a clash between the two sides along the LAC in Arunachal Pradesh following an attempted incursion by Chinese soldiers that was repealed.
One way to check influx of Chinese finished products is to recalibrate customs duties. The other is by levying anti-dumping duties, non-tariff measures such as strict enforcement of rules of origin, and encouraging cost-effective local manufacturing through incentives, the officials said. “Recalibration of customs duties is expected on several items,” one of the two added.
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Indian companies and government departments have raised red flags over the import of more than 100 Chinese products, including polyester yarn, optical fibre, solar cells, vinyl tiles, saccharin, ophthalmic lenses, various steel items, chemicals, ceramics, tableware, kitchen ware, glassware, aluminium foil and pharmaceutical formulations such as amoxycillin and ofloxacin, the second official said. “Matters are under examination for appropriate actions. It is expected that the Budget will address this issue,” he said.
“There has been a fall in imports from China recently. While price corrections due to demand contraction globally could be one of the reasons, the government’s policy of Atmanirbhar Bharat has also played a major role,” the first official said. According to the commerce ministry’s data, India’s merchandise imports from China in October 2022 contracted by 9.73% to $7.85 billion compared to $8.7 billion in the same month a year ago.
Experts said the government’s trade policy and the production-linked incentive (PLI) scheme to boost local manufacturing, is working well in reducing overdependence on “unreliable” China and that the Budget may pursue the same policy line aggressively.
“China’s share in India’s imports in the last one year (April-September 2022 over the same period in 21) has declined…In many segments, alternative sources of supply have been arranged as China, with zero Covid policy, was not considered as a reliable supplier,” said Ajay Sahai, director general and chief executive of the Federation of Indian Export Organisations (FIEO).
India’s main items of imports from China are electronics, electrical goods and machinery — and all have been covered under PLI to develop domestic capabilities, he said. “ PLI has already reduced imports in some electronics products while augmenting exports.”
Nilaya Varma, co-founder and CEO of consultancy firm Primus Partners, said India not only needs additional short-term measures around tariff and non-tariff regime, but also requires a long-term strategy on establishing a reliable supply chain. “Proactive approach in identifying and taking measures against goods being dumped has shown some success in the short term. To win the marathon, India needs continuous focus and expansion of schemes like PLI, cluster development and Gati Shakti, aimed at improving logistics,” he said. Electronics, engineering and chemicals, which constitute over 80% of imports from China, need special focus, he added.
Indian industry is aligned with the government’s policy of self-reliant India, said Saket Dalmia, president of PHD Chamber of Commerce and Industry (PHDCCI), expressing concerns over the dumping of cheap, but poor-quality Chinese goods.
Citing a study of PHDCCI, he said, there are approximately 36 subsectors where India can reduce its dependence on Chinese imports. “These sectors together account for around $35 billion in imports.”
