New Delhi: There are nearly 86 ‘line items’ in which India is “critically dependent” on Chinese imports, and different administrative ministries should explore the possibility of setting up domestic production facilities or diversifying import supplier base, a group of ministers (GoM) has recommended.
Line items include consumer electronics, computer hardware, telephone equipment, electronic items, and air conditioners and refrigerators, said the GoM that was set up to promote manufacturing in India. The GoM headed by Textiles and Women and Child Development Minister Smriti Irani submitted its report to the government in October. India’s share in global manufacturing is at a minuscule 2.8 per cent.
China has the largest share in India’s imports — more than 18 per cent in April-September 2020. This share has risen over the last year despite the pandemic, with China managing to curb the spread of Covid-19 and keep its factories open.
The GoM report said there were 119 tariff lines in which India’s imports exceeded $100 million annually in 2018-19. Further, imports from one country were more than 50 per cent of the total imports of that commodity in these line items. Of these, while 86 tariff lines were dominated by China, 17 tariff lines were dominated by South Korea and six by Vietnam.
“These lines may be shared with concerned (sic) administrative ministries for exploring the possibility of setting up domestic production facilities or diversifying import supplier base,” the GoM report said.
“Furthermore, by way of identifying tariff lines where India is critically dependent on one country for its imports, the same could become the key lines for setting up and expanding domestic production capacity,” it added.
The findings of the report present the challenge the Narendra Modi government faces in pushing for India to become self-reliant or Atmanirbhar.
China’s comparative advantage in low-cost manufactured goods means that India’s dependence on China may continue in the near term, especially in items like electrical machinery and equipment, even though it could reduce imports of items like plastics and toys.
The GoM report suggested reducing imports of finished goods like refrigerators, and pointed out how this alone could result in identifying $2 billion of components for substitution.
It has also flagged how the ‘One Nation, One Ration Card’ scheme and the rollout of 5G technology could result in an exponential rise in India’s imports of point-of-sale (POS) machines and optical fibre in the near future.
“The POS machine-related imports stand at over $400 million (Rs 2,800 crore) (thermal paper + cash register + POS machine) in FY 2018-19. With the push under the ‘One Nation, One Ration Card’ scheme, e-POS will have to be installed at over 500,000 fair price shops as a condition for all states to access additional borrowing limits,” the report stated.
“The market is expected to grow by Rs 5.25 billion (Rs 525 crore or $70 million). A similar opportunity was missed in case of optical fibre cables, which witnessed a 250 per cent growth in imports due to high demand,” it detailed.
The GoM also suggested that high-volume low-technology products like artificial flowers and festival items should be curbed to reduce India’s import bill.