China: India’s 2nd Largest Export Destination

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Export From India to Other Countries
Export From India to Other Countries

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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