trade-insights

India Import-Export Weekly Roundup: June 17, 2024

John

— 2 min read

This week's trade data reveals a significant shift in India's bilateral relations with China and tightening regulatory standards in the European market. New government reports highlight a narrowing trade gap and robust performance in export incentive programs for domestic manufacturers.

1. India-China Trade Gap Narrows as Export Growth Outpaces Import Volumes

Data presented to Parliament indicates that India's trade relationship with China is reaching a turning point, with exports growing at more than double the rate of imports this year. While imports are increasingly restricted to essential industrial components, Indian products are finding greater traction in Chinese markets.

  • Exports to China surged by 38.31% year-on-year during the April-January period, significantly higher than the 13.82% growth in imports.
  • Long-term trends show import growth from China has decelerated from a massive 618% in the previous decade to roughly 88% in the current period.
  • Current imports are heavily concentrated in capital goods and raw materials, such as active pharmaceutical ingredients (APIs) and electronic assemblies used for domestic manufacturing.

2. Domestic Manufacturing Surge Triggers Massive Drop in Mobile Phone Import Dependency

India has successfully transformed from a major importer of telecommunications hardware into a global export hub for mobile devices. Strategic policy shifts have encouraged local assembly, leading to a dramatic reduction in finished handset shipments from overseas suppliers.

  • Annual mobile phone imports plummeted to just ₹3,710 crore in the current fiscal year, down from over ₹48,600 crore a decade ago.
  • The sector has achieved record-breaking export performance, with mobile phone shipments overseas now exceeding ₹2.05 lakh crore.
  • Government focus is shifting toward deepening the domestic value chain by encouraging the production of complex electronic parts and assemblies.

3. Indian Exporters Face New Compliance Hurdles Under EU Non-Tariff Regulations

Procurement managers and exporters targeting the European Union must prepare for a more complex regulatory environment involving technical and environmental standards. Several new non-tariff measures are now being actively monitored as they impact market access for various commodities.

  • New barriers include the REACH chemical requirements, European Conformity (CE) marking, and the Ecodesign for Sustainable Products Regulation (ESPR).
  • Exporters of agricultural and marine products are facing delays in facility approvals and much more stringent residue limits for tea and spices.
  • Sampling checks for aquaculture shrimp consignments have become more frequent, requiring Indian exporters to enhance quality control protocols.

4. Export Incentive Disbursements Reach New Highs for Labour-Intensive Industry Sectors

The Remission of Duties and Taxes on Exported Products (RoDTEP) scheme continues to be a critical support mechanism for Indian businesses navigating global price pressures. The program has scaled significantly, providing much-needed tax neutrality for manufacturers in traditional sectors.

  • The government disbursed ₹15,756.96 crore in remissions during the current fiscal year up to late December, supporting over 1.1 lakh unique exporters.
  • Total annual disbursements under the scheme have grown consistently, rising from approximately ₹14,800 crore in FY22 to over ₹18,700 crore in the most recent full year.
  • The primary beneficiaries include companies in the textiles, marine, chemicals, and engineering sectors, which are vital for national employment.

5. Strategic Import Substitution Lowers Reliance on Chinese Industrial and Chemical Goods

India is successfully diversifying its sourcing for critical industrial inputs, leading to a sharp decline in the volume of specific commodities imported from China. This shift suggests an increasing maturity in domestic chemical and metallurgical production capabilities.

  • Fertilizer imports from Chinese suppliers saw the most dramatic reduction, falling by over 61% compared to the previous year.
  • Double-digit declines were also recorded in the import of residual chemicals and allied products, which dropped by nearly 20%.
  • The iron, steel, and man-made yarn sectors also reported reduced dependency on Chinese materials, with imports falling between 9% and 10% across the board.

Businesses should monitor upcoming bilateral discussions on non-tariff barriers as India seeks to streamline market access for its agricultural exports.

Source: Economic Times

Read more