PLI footprint in India-China trade

Source: This post is created based on the article “PLI footprint in India-China trade” published in the Business Standard on 19th May 2023.

Syllabus Topic: GS Paper 2 – India’s International Trade

News: India’s imports from China are reducing compared to imports from other countries.

India’s imports from China increased at a slower growth rate in comparison to global imports.

In FY23, India’s import of electronics products from China decreased from $30.3 billion to $27.6 billion.

The decrease is most noticeable in sectors where the PLI (production-linked incentive) scheme is in operation.

For instance, there was a 70.9% decrease in imports of solar cells and parts, 23.1% in laptops and PCs, and 4.1% in mobile phones between FY22 and FY23.

China’s share in India’s merchandise imports has also decreased from 16.4% in FY18 to 13.8% in FY23.

What are the other areas of concern?

China is India’s fourth-largest export destination, with exports during FY23 being $15.3 billion.

India had a trade surplus with China until 2005. However, due to China’s technical advancement and India’s product profile, this surplus turned into a more than $83.2-billion deficit in FY23.

The major problem is not high imports but low exports. The figures of Chinese exports to Japan, Korea, and the US are 25.8 per cent, 21.4 per cent, and 21.4 per cent, respectively.

China still is India’s number one supplier of import items.

Therefore, to become self-reliant India must invest in deep manufacturing. For electric-vehicle batteries, India must produce lithium-ion cells; for laptops, printed circuit boards should be made; for mobile phones, components should be manufactured and not merely the outer shell of the final product.

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