The widening of India’s trade deficit with China in the fiscal year 2024-25 is driven by a surge in import of electronic goods (E.g. EV batteries, solar cells) and consumer durables.
- Meanwhile, India's exports to China dropped to $14.3 billion in the same period.
Key concerns associated with rising Trade Deficit/Import Dependence with/on China
- Threat to Domestic Manufacturing: Artificially low-priced Chinese imports threaten to undermine Indian domestic manufacturing, particularly in vulnerable sectors like steel, chemicals, and electronics.
- Strategic Dependency Concerns: The widening trade deficit signifies structural dependence on Chinese goods, creating supply chain vulnerabilities.
- Poses threat over National security.
- E.g. China may utilise benefit India’s dependency during negotiations on border disputes or during any other emergency.
- Poses threat over National security.
- US Trade Rule Bypass: India could be used to sneak Chinese goods into US markets, risking damage to India-US relationship.
- Market Diversion and Dumping Risk: Chinese manufacturers may divert exports to India due to US tariffs, potentially engaging in price dumping.
- Other: Continuous outflow of foreign exchange, etc.
Key Initiative Taken by India to Check Rising Trade Deficit/Dependence
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