China: India’s 2nd Largest Export Destination

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China has become the 2nd largest export destination for India in the fiscal year 2021 surpassing UAE irrespective of the covid-19 crisis and deadly fight on the border. The United States of America ranks first among India’s export destination and the official reports show that exports to China increased to 28% i.e., above $21 billion in FY21 from previous year while those to the UAE has reduced by42%  to around $17 billion. The big-scale investment of China has made it import large quantities of iron ore and steel from India and UAE being hit by a fall in oil prices has cut down its purchases during the pandemic year. The total merchandise exports of India have been decreased by 7% in the previous fiscal to $291 billion.

Even though India’s exports to the US have fallen by 3%, the shipments to China were still less than those to the US i.e., $21 billion vs $52 billion. The shipments to China have to be increased in a sustained fast manner for years before the trade deficit has to be corrected. The country’s current trade deficit with China including Hong Kong has dropped to $49 billion in FY21 from $55 billion in the previous year. The trade deficit to China alone has reduced to $44 billion in the last fiscal from around $49 billion in the previous year.

Despite the above facts, China’s share in our country’s total goods trade deficit has increased to 43% in FY21 from 30% compared to the previous year. The reason is that the imports from China were more than $65 billion in the last year which is almost similar to FY20.

The high self-centered trade policies of China and not permitting key market access by implementing non-tariff barriers have been an obstacle to our country’s interest. There is a remarkable increase of 33% growth in shipments to China in the April to June period but it reduced to 20% in the September quarter and about 2% in the December quarter. The exports to China in the March quarter showed a 2 times increase compared to the last year.

On the contrary, shipments to the US have fallen to 39% in the 3 months through June and in the September quarter witnessed a 3% increase and again there is a 5.5% increase in the December quarter. But again from January to March, exports to US-grown by 20%, thus thereby limiting yearly contraction to about 3%.

The widespread lockdown in India from March 25 to battle the covid-19 has resulted in disruptions in the supply chain affecting internal and external demand which resulted in a fall in exports. The lifting of lockdowns will ease supply chain disruptions and the destruction caused by the second wave of coronavirus can be recovered only through a sustained, quick expansion to enable the country to achieve its goal of $400 billion for FY22.

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