Why is there a huge dependence on Chinese imports and why is there a need to reduce dependence on Chinese imports? What can be done to achieve this?

China is the global manufacturing hub and many countries including India depend on imports from China. India has a huge trade deficit with China, which makes the already complicated India-China relations even more difficult to navigate.

Factors responsible for India’s dependence on Chinese imports:

• India needs a lot of intermediate goods for its growing manufacturing sector, which cannot be fulfilled by the Indian market. Hence there is a dependence on China for such goods like Active Pharmaceutical Ingredients in the pharmaceutical sector.
• India’s supply chains are not diversified and the attempts to diversify them will take time.
• Cheaper components and products offered by Chinese firms makes them a lucrative option for the consumers in India.
• Geographical proximity to China.
• Made in India is often dependent upon Made in China, as India is dependent on China for a wide variety of machinery, semiconductor devices, etc.

Need to reduce dependence on China:

• Border tensions with China and aggressive stance of China.
• Growing trade deficit with China.
• Making India self-reliant.
• Increasing the resilience of India from disruptions in global supply chains.
• Dumping of cheap goods by China into India has rendered much of the domestic manufacturing industries uncompetitive.

Steps to reduce dependence on China:

• Boosting domestic manufacturing and making India an important part of global supply chains.
• Reducing and removing structural bottlenecks to increase the competitiveness of domestic industry.
• Need to analyze imports from China and develop a way forward.
• Sourcing from alternate suppliers in the short term and developing indigenous competencies in the long-term.
• Incentivising and supporting the MSME sector in India.
• PLI scheme for promotion of manufacturing and investment in India.
• Trade agreements and increased cooperation with countries around the globe.

Way forward:

With the rising tension on borders with China and geopolitical instability around the globe, there is an urgent need for India to reduce its dependence on China and improve its domestic capabilities.