Thursday 03 / April / 2025
India's merchandise imports from World grew at an average rate of 8% from 2019 to 2024, while imports from China grew at a slower rate of 5%, reflecting reduced reliance on Chinese goods.
Although India has faced many challenges due to its over-dependence on Chinese imports, the strategic initiatives taken by the government in the recent years to reduce this dependency while promoting domestic manufacturing capabilities have become visible.
India’s trade relations with China have been a subject of considerable scrutiny over the past few decades. For years, India was heavily reliant on China for imports, particularly in sectors like electronics, machinery, textiles, and chemicals. However, in recent years, there has been a noticeable shift in the pattern of India’s imports from China, particularly in the post-COVID era. The pace of imports from China has been receding, a development that carries significant implications for India’s economic landscape.
The concerns with high imports from China
India’s growing reliance on Chinese imports was a cause for concern for several reasons. Prominent among these concerns was the trade deficit between the two nations, which had been steadily widening for years. The imbalance in trade had become a major issue for India, as it imported far more from China than it exported to the country.
One of the most pressing issues India faced was the dumping flow-cost products into the Indian market by China, which severely impacted local industries. This phenomenon, known as "dumping," occurs when a country exports goods at prices lower than the cost of production, often leading to unfair competition. The influx of cheap Chinese goods led to affect production possibility frontiers of many small and medium enterprises (SMEs) in India, especially in sectors like electronics, textiles, and chemicals, which were unable to compete with the low prices of Chinese imports.
For India’s domestic industries, particularly its micro, small, and medium enterprises (MSMEs), the situation was even direr. MSMEs play a crucial role in India’s economy, providing employment to millions of people, particularly in rural areas. The availability of cheaper Chinese alternatives made it difficult for local producers to expand their operations, invest in new technology, and create new jobs. This had long-term consequences for India’s economic growth and employment generation.
India’s shift toward diversifying imports
In response to these challenges, India has undertaken significant efforts to reduce its dependence on China for imports. This shift is part of a broader strategy to promote self-reliance, boost domestic manufacturing, and create a more resilient and competitive economy.One of the key initiatives driving this shift is the “Atmanirbhar Bharat Abhiyan” (Self-Reliant India Campaign), launched by the government in 2020.
These initiatives aims to build indigenous capacities and reduce dependency on foreign imports, particularly from China. This vision is aligned with the “Make in India” campaign, which was launched earlier in 2014 to promote local manufacturing, attract foreign investment, and generate employment.
Through these programs, the government has focused on creating a conducive environment for the growth of domestic industries. This includes reducing the cost of doing business, improving ease of doing business, and enhancing infrastructure. By addressing issues such as high taxation, regulatory hurdles, and bureaucratic hurdles, India aims to create a more attractive environment for both domestic and international businesses. Furthermore, the government has been actively promoting the growth of sectors such as pharmaceuticals, electronics, machinery, automobiles, textiles, and garments.
India's imports from the world grew at an average rate of 8% between 2019 and 2024, despite fluctuations. Imports from China, however, grew at a slower average rate of 5%, indicating a decreasing dependence on Chinese goods. While imports from the world saw a significant surge in 2021 and 2022, imports from China grew more modestly, with a decline in 2024.
India’s import growth from World and China
Year India imports from World
(USD Bn) YoY
(%) India imports from China (USD Bn) YoY
(%)
2019 479 -6 68 -8
2020 368 -23 59 -17
2021 570 55 88 33
2022 733 29 102 14
2023 672 -8 122 16
2024 703 5 109 -12
Average -- 8 -- 5
Source: ITC Trade Map
Enhancing competitiveness and building domestic capabilities
A central pillar of India’s strategy to reduce imports from China is the emphasis on strengthening domestic manufacturing capabilities. The government has invested heavily in developing indigenous resources, skilled manpower, and technological infrastructure to produce high-quality products that can compete in both domestic and international markets. This is evident in sectors such as electronics, where the government has implemented policies to encourage the growth of local manufacturing and reduce reliance on imports.
India’s growing focus on skill development has also been an essential aspect of this transformation. With the establishment of numerous skill development centers and training programs, the country aims to develop a workforce that is equipped with the technical skills required to drive the growth of various sectors. This focus on skill development not only supports domestic industries but also ensures that India’s workforce can compete globally.
The government has also worked towards improving supply chain logistics and integrating MSMEs into global value chains. This is critical for ensuring that Indian industries are not only competitive within the country but are also able to tap into global markets. By creating a more integrated and efficient supply chain, India aims to reduce the cost of production, increase competitiveness, and ensure long-term growth.
Promoting "Vocal for Local" and encouraging consumer preferences for domestic products
Another significant strategy to reduce imports from China has been the promotion of the "Vocal for Local" campaign. This initiative encourages Indian consumers to prefer domestically produced goods over imported ones. The idea is to cultivate a sense of pride in Indian-made products and shift consumer preferences towards supporting local industries. The long-term goal is to create a robust domestic manufacturing ecosystem that can deliver high-quality products at competitive prices. By increasing domestic production, India aims to reduce its dependence on imports and create a more sustainable and resilient economy.
Role of innovation, research, and development
Innovation and research play a crucial role in driving the competitiveness of any economy. To ensure that India’s domestic industries can compete with the global market, the government has significantly increased investments in research and development (R&D). These investments are aimed at fostering innovation, improving product quality, and developing new technologies. The focus on R&D is particularly evident in sectors like pharmaceuticals, electronics, and renewable energy, where India has significant potential to become a global leader.
India is increasingly focusing on building a more self-reliant economy that can stand on its own feet and reduce external dependencies. While economic relations with China are strong, the shift in India’s trade dynamics is significant.
In conclusions, the pace of India’s imports from China has been steadily receding in the post-COVID years due to a combination of strategic initiatives, policy measures, and a growing emphasis on self-reliance and domestic manufacturing. By focusing on strengthening indigenous production capabilities, promoting local industries, and reducing dependency on foreign imports, India is on its way to becoming a more competitive and resilient economy. This shift not only has the potential to improve India’s trade balance but also to create new opportunities for businesses, enhance employment prospects, and contribute to the long-term growth of the economy.
