It is a matter of immense pride that India has become the fifth largest economy in the world and it seems with some degree of certainty that leaving Germany and Japan behind is not going to be a herculean task .  At present, the Indian economy is slightly less than 4 billion US dollars and the economy of Germany and Japan is just over 4 billion US dollars.  That’s why it seems possible that in the next few years, India will definitely make its mark as the third largest economy of the world.  But the path ahead of US and China would be very difficult for India because even today China is 6 times bigger than the Indian economy, whereas America is 8 times.  Since China comes from the continent of Asia and according to the size of the population, it has the same challenges like us, so many times it appears that the competition with China is little bit easier, but in reality it is a biased thinking.

The fact is China has dominated India a lot in global trade because India’s imports are increasing continuously with China.  According to data from a reliable source, India’s imports with China have more than doubled in the last 10 years.  In 2012, India imported about  39.3 billion US dollars from China, while in the first 9 months of 2022, the import figure was around  90 billion US dollars.  It is clear from the above account that India’s dependence on China is continuously increasing.  In this context, one thing also emerges that since the size of the Indian economy is increasing continuously, it is justified to increase the imports continuously and this is a positive trend for the development of the economy.  But statistics also show that India’s imports have increased by 46 percent in the last 10 years, while India’s imports with China have increased by 127 percent.  Certainly this figure is shocking and also raises the question whether the ever-increasing dependence on China is appropriate for India according to international diplomacy?

For the past many years, India’s international trade with China has been continuously running into losses as exports have remained the same.  During the year 2021, India’s trade deficit with China was equal to 70 billion US dollars, in which imports were more than 97 billion US dollars, while exports were only 25 billion US dollars.  The reason for concern is that in the current financial year till now, imports have increased by 44 percent and exports have decreased by 30 percent.  For this reason, the trade deficit with China is likely to be around 100 billion US dollars in the current financial year, which can also be seen as 25 billion US dollars per quarter.  In this context, it is also necessary to mention that India’s military and defence budget was 73 billion US dollars in the year 2021 and 76 billion US in the year 2022.  This automatically explains that India is paying more to China in the form of deficit in international trade than what it is spending on its army and defence.  This situation is also a major challenge in moving towards self-reliant India.  In the midst of all this, when some mobile applications of China were banned by India, it seemed that the youth of India would achieve a new position by adopting entrepreneurship in this field, but the situation still remains contradictory.

 India mainly gives priority to capital goods while importing from China which are increasingly used by Indian industries in the construction sector,  energy sector and in the nuclear sector.  For the last many years, the import of capital goods from China is witnessing an increase of 4 percent every year.  On the other hand, this figure is also very surprising that in the last financial year, there has been an increase of 37 percent in the import of various electronic and electricals products and it is clear that under the consumption of smartphones in the Indian market, China imported raw materials and spare parts are  the only contributor . This fact is also definitely a big hindrance towards the self-reliance that India gets through “Make in India”, “Digital India” and “Startup India”.  Heavy machinery, chemicals are major contributors to other major imports from China.  In the midst of all this, the question also arises whether India’s imports from China are comparatively cheaper than other countries?

Now it is absolutely crystal clear that India’s dependence on China is very high and it is also increasing continuously.  The relative economic performance of the two economies proves that China is at a much better position in the international division of labor than India.  And obviously, China is in a very good position in the manufacturing sector.  The contribution of the Indian manufacturing sector to the economy is not increasing beyond  15-16 per cent, while the National Manufacturing Competitiveness Council (NMCC) was set up by the government in the year 2006 with the sole objective of increasing the contribution of the manufacturing sector to around 25 percent in the Indian economy.  Similarly, in 2014, when “Make in India” was launched with much excitement, the objective was to increase the contribution of the manufacturing sector to the economy.  In this regard, it can only be regretted that economic policies have not made desired changes at the ground level to encourage India’s manufacturing sector, as a result of which today, on one hand, this sector is facing the ever-increasing unemployment problem in India and ,on the other hand, the demand related to this sector in the country has to be imported because domestic production is available in very limited quantity.  In the field of telecommunication and electronic equipment, even a common Indian believes  that India is not capable of producing all these items and they are imported in abundance from China only.Over the years, it has also been seen that India has tried to increase its export sector comparatively more with other small countries in order to establish a global reputation.  This approach definitely has its own significance, but it is not helping to get out of the weak situation of India’s increasing global trade deficit with China, but only presents a weak situation.  The crisis of Corona is still not over in China and due to the lockdown there, if the supply chain management is interrupted once again like in 2020, then definitely its crisis will be huge on India, which is a matter of great concern .  In the midst of all this, due to the international border dispute, there has been a lot of tension with China in the recent past, so would it be justified that India’s dependence on China should remain ever increasing?

Dr. P.S. Vohra , Academician, Financial Thinker & Newspaper Columnist , Views are personal