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Last Updated on February 24, 2025 6:15 am
Despite tense bilateral relations between India and China, following the Galwan Valley clash in 2020, and Prime Minister Narendra Modi’s Aatmanirbhar Bharat push, India’s trade deficit with Beijing has crossed the $100 billion mark for the first time ever in the history of India-China bilateral relations,
According to analysts, the recovery of India’s manufacturing sector, which relies heavily on imports of Chinese goods, could have played a role in driving up imports of Chinese goods. India’s trade deficit stood at $101.02 billion for the calendar year of 2022, a sharp rise from the 2021 figure of $69.38 billion, according to agencies citing Chinese customs data.
Total bilateral goods trade with China reached a record level of $135.98 billion in the calendar year 2022, overtaking the $125 billion mark reached in 2021.
Official figures for December are yet to be published on the General Administration of Customs of the People’s Republic of China (GACC) website. However, preliminary GACC data cited by news agency PTI indicate that Indian imports of Chinese goods rose to $118.5 billion in 2022, a 21.7 per cent rise from 2021, and Indian exports to China fell 37.9 per cent compared to 2021.
High imports of Chinese goods could have been driven by India’s manufacturing sector which is recovering well from the Covid-19 pandemic and other disruptions, but continues to depend heavily on critical intermediates like active pharmaceutical ingredient (API) and electronic components from China, analysts said.
Speaking to ThePrint, Biswajit Dhar, trade economist and professor at the Centre for Economic Studies and Planning at Jawaharlal Nehru University (JNU), said this reflected poorly on India’s Production Linked Incentive Scheme (PLI).
“The import numbers show that the PLI scheme is yet to make any significant dent in imports from China. This implies that if India’s manufacturing sector expands rapidly in the near future, the country’s dependence on China will increase substantially,” Dhar said.
The PLI scheme seeks to provide incentives to domestic industries to boost local production.
“China is also the largest source of imports of some strategically important products. For instance, more than 70 per cent of accumulators and batteries imported by India during April-November 2022-23 are from China,” he said.
He added that India’s push for larger reliance on electric vehicles could also result in larger imports from China.
India’s manufacturing sector activity rose to a 13-month high in December, supported by healthy inflows of new business as well as strong demand conditions, a recent assessment by the Indian arm of financial information services provider, S&P Global, showed.
The S&P Global India Manufacturing Purchasing Managers’ Index (PMI) stood at 57.8 in December, up from 55.7 in November, indicating the “best expansion in production since November 2021”.