Last Saturday the Prime Minister unveiled the golden statue of Ramanujacharya's "Statue of Equality" near Hyderabad. At 216 feet high, it is the second tallest statue in a sitting position after the Great Buddha of Thailand. Ironically, this statue was made in China and assembled in India – in the midst of the 'Make in India' push and 'AatmaNirbhar Bharat Abhiyaan'.

This is not the first such instance. The ₹3,000 crore Sardar Patel "Statue of Unity" in Gujarat in 2018 -- the tallest statue in standing position in the world at 182 m (about 600 ft) -- too was made in China and assembled in India, evoking strong reactions then, unlike now. Then, in response to the criticism, the official agencies involved, Sardar Sarovar Narmada Nigam Ltd (SSNNL) and Larsen & Tourbo (L&T), had said that only the statue's surface was created using 553 bronze panels made in China.

The reliance on China is not limited to building statues. China is still the go-to country for manufactured goods in a wide array of areas in spite India's unease and call for banning Chinese products – from RSS chief Mohan Bhagawat's call in 2014 to the Indian government's ban on Chinese apps in 2020 following the border dispute.

Dependence on China growing

In spite of the call for 'Make in India', 'AatmaNirbhar Bharat' and a pitch for banning Chinese products – which the government acknowledged and assured the Lok Sabha in December 2021 that it was trying its best to reduce such dependence – dependence on China is growing fast.

The RBI data shows, from about 1.5 times in the early years of this millennium, in FY21 India's imports over exports to China rose to 3.1 times. In FY21, the imports were worth $65.2 billion against the exports of $21.2 billion. In the past 15 years of FY07-FY21, imports from China have grown at annual average of 14.8%, while exports have grown at 10.1%. As a consequence of the sluggish growth in exports, trade deficits with China have grown from $9.2 billion in FY07 to $44 billion in FY21 – although it is declining since FY18 ($63 billion).

The dependence on China can also be seen in total trade. India's imports from China, as percentage of the total imports, have risen from 9.4% in FY07 to 16.6% in FY21. At the same time, its exports to China, as percentage of the total exports, have seen a sluggish growth, from 6.6% of the total exports in FY07 to 7.3% in FY21.

India's total trade deficits fell to 2.3% of the GDP in FY21, from 3.5% in FY20, due to lower trade (both imports and exports fell). Of this, trade deficit with China alone accounted for 0.8% in FY21. Total trade deficit is expected to grow to 3.9% in FY22, as per advance estimates.

What does India import from and export to China?

On February 4, 2022, the Rajya Sabha was told that the major products imported from China are telecom instruments, computer hardware and peripherals, fertilisers, electronic components/instruments, project goods, organic chemicals, drug intermediates, consumer electronics, electrical machinery etc. It was also said that some of the imports from China, like the Active Pharmaceutical Ingredients (APIs) and drug formulations, provide the Indian pharma industry with raw material for producing finished goods which are also exported out of India.

Not long ago, India was self-sufficient in pharmaceuticals but the negligence of its PSUs and promotion of private businesses since 1990 pushed India to importing as much as two-thirds of its of its active pharmaceutical ingredients (API) and formulations from China.

The major items India exports to China are engineering goods, electronic goods, marine products, spices, organic and inorganic chemicals, petroleum products, etc.

What India is doing to reverse the trend

The government is making sustained efforts to achieve a more balanced trade with China, its February 4, 2022 reply to the Rajya Sabha said, which included bilateral engagements to address the non-tariff barriers on Indian exports to China. Besides, India has imposed anti-dumping, countervailing duty etc.; sourcing critical supplies from alternate sources; sensitising concerned ministries/departments to ramp up domestic capacities and also launched schemes such as Production Linked Incentive schemes (PLIs) to promote domestic manufacturing capacities in critical sectors like drug intermediaries, API, medical devices, electronic components and mobiles, white goods (ACs and LEDs), specialty steel, food processing industry, high efficiency solar PV modules, drones and drone components etc.

Make in India faltering

None of the measures have, however, translated into growth in manufacturing, which is nowhere close to contributing 25% to the GDP as the 'Make in India', launched way back in September 2014, promised.

As a percentage of gross value added (constant prices), the share of manufacturing has been falling since FY18 – from 18.4% in FY18 to 17.8% in FY21 and is expected to fall further to 17.5% in FY22 (RE). In FY21, at a share of 17.5% of the total GVA, the manufacturing is close to 17.4% in FY12, as per the revised estimates of the national accounts released on January 31, 2022 (which reduced the GDP growth for FY20 to 3.7% from 4%).

Thus, the mission mode project of 'Make in India', import substitutions and PLIs to grow domestic manufacturing and contribute more to the economic pie has yet to materialise, except for a marginal improvement during FY16-FY19, when its share crossed 18%.

Revised estimates also show that the annual average growth in manufacturing GVA during FY13-FY21 was 5.4% – marginally more than the average GDP growth of 5.1% (both at constant prices).

Within manufacturing, subsectors of food, beverages and tobacco registered a lower annual average growth of 5.2% and metal, machinery and equipment 4.7% during the same period (FY13-FY21). It was the 'other manufacturing goods' like stationaries and articles of household use, including decorative items and miscellaneous products which saw a robust growth of 6.4% while textile grew 5.8%.

Unless the trend changes dramatically, the dependence on China will continue to grow.

India's imports from China

Why India's manufacturing dependence on China continues to grow