Biswajit Dhar, KS Chalapati Rao: India’s Economic Dependence on China
India cannot afford
to cut its economic links with China since imports from its northern neighbour
dominate sections of the economy, especially in electronics and pharmaceutical
intermediates. This is the result of the neglect of domestic industry for
decades.
Since May 2020, India
and China have been in their worst face-off in decades along
the Himalayas, yet another stark reminder that the world’s two most
populous nations have a fragile relationship. When 20 Indian jawans lost
their lives in clashes with China’s People’s Liberation Army, the fault lines
in India’s economic relationship with its northern neighbour were out in the
open. Passions are running high in India; shrill demands have been made for
boycotting Chinese products and prohibiting investments.
There are two issues
here. First, how feasible or practical is it to boycott Chinese products
altogether, given that India has developed a significant level of dependence on
imports from China? Second, we need to understand the circumstances
leading to a level of dependence that has not developed over a short
period of time. It took China a good part of the past decade and a
half to slowly but surely capture the Indian market in a very broad range of
products. The question then is if the Indian economy can reduce its dependence
on China, at least in the medium term.
1. Patterns of
India-China trade since the early 2000s
Imports from China
began expanding quite rapidly from 2003–04 (Chart 1). In 2019–20
(April-March), China accounted for nearly 14% of India’s imports and was by far
its largest source of goods imports....
https://www.theindiaforum.in/article/india-s-dependence-china
