Near-shoring, friend-shoring and localisation have gained traction globally post-Covid, with many countries looking to de-risk supply chains and reduce sourcing ties with China.
The Aayog will firm up its action plan recommending policy interventions needed in the form of tariff and non-tariff barriers as well as changes to the regulatory framework, said a senior government official with knowledge of the matter.
Focused Intervention
As part of the exercise, the Niti Aayog will rope in a consultancy firm to review India-China trade, with its report expected in six months. The official said the need for focused intervention had arisen due to the centrality of China to India’s supply chains in certain sectors. “Dependency and vulnerability of the Indian supply chains and production networks was highlighted during crisis situations such as the Covid-19 and geopolitical conflicts,” the official said, adding that there was need for supply diversification. Export Edge
The trade study will aim to discern patterns of India’s trade dependency on China and the underlying reasons for this. It will compare supply chains related to the country’s trade with other Asian countries with the aim of de-risking them. It will examine product categories where India has a comparative advantage and a sizable market in China to scale up exports to that country.
The study by the consultancy will also analyse the type and quantum of foreign investment needed to possibly bridge technology gaps and the utilisation of domestic manpower for competitive products, making recommendations on how best to achieve these goals.
Trade Gap
According to the Aayog, among top trading partners, India ran the highest trade deficit with China in FY23. India’s merchandise exports stood at $450 billion while imports were $714 billion, implying a merchandise trade deficit of $263 billion. About 32% or $83.1 billion of India’s trade deficit was with China alone.
India largely imports capital goods ($47 billion in 2021) from China, followed by intermediate goods ($30 billion), consumer goods ($9.4 billion) and raw materials ($1 billion), while it mainly exports intermediate goods ($11 billion) to China followed by raw materials ($6 billion), consumer goods ($3.4 billion) and capital goods ($2.4 billion).
Experts said any disruptions will have significant implications for local supplies.
