December 15, 2022 [FORTUNE India] – MoS commerce & industry Anupriya Patel tells Parliament that India’s dependence on imports of intermediate goods and raw materials is largely due to the gap between domestic supply and demand.
India’s merchandise trade, including exports and imports, with Russia was $16.46 billion from April-August 2022. Russia, which invaded Ukraine in February this year, became the 3rd largest exporter of crude petroleum to India during the April-August period, minister of state in the commerce & industry ministry, Anupriya Patel, said today.
Iraq and Saudi Arabia remain the top two exporters of crude oil to India.
India’s imports from Russia range from petroleum and other fuels, fertilisers, coffee, tea and spices. In 2022 so far, fertilisers and fuel accounted for most (over 90%) of these imports. The data shows India’s oil imports from Russia rose to 16% in April-August 2022 from 2% in FY 2021-22. It is expected to grow further.
On India’s exports in October, the minister said India’s merchandise exports stood at $31.40 billion in October 2022. “In spite of global headwinds, India’s merchandise exports grew by 12.52% during April-October 2022-23 vis-à-vis corresponding period of the previous year.”
Sectors like electronic goods (54.2%), readymade garments (6.7%), petroleum products (69%), rice (16.4%), etc. have grown in October 2022. However, the reasons for the decline in merchandise exports in some sectors included a slowdown in some developed economies due to COVID, the Russia-Ukraine conflict and the consequential slowdown in demands.
India’s merchandise trade deficit expanded by 54.06% from $17.91 billion in October 2021 to $27.59 billion in October 2022. The minister said to boost exports and reduce the trade deficit, the government has extended foreign trade policy up to March 31, 2023.
The interest equalisation scheme on pre and post-shipment rupee export credit has also been extended up to March 31, 2024. Other initiatives taken to boost trade are banking and financial sector relief measures for MSMEs, trade promotion via Indian missions abroad, promotion of districts as export hubs, promotion of 12 champion services sectors, remission of duties and taxes on exported products, rebate on state and central levies and taxes.
On whether the government is planning to lift the ban imposed on private traders to export wheat, the minister said the “policy decision regarding restriction imposed on the export of an item is periodically reviewed based on its domestic production and availability”.
In her reply on India’s largest trade partner, Patel said the US remains the largest merchandise trading partner of India in 2021-22. On the trade deficit with neighbouring China, which is India’s second biggest trade partner, Patel said it has grown from $48.48 billion in FY15 to $73.31 in FY22 and $51.50 in April-October of FY23. “The trade deficit with China in 2004-05 was USD 1.48 billion, which increased to USD 36.21 billion in 2013-14, an increase of 2,346%. Against this massive increase, the trade deficit with China has since increased by only about 100% to USD 73.31 billion in 2021-22from USD 36.21 billion in 2013-14.”
Russia, which until last year was in 25th position when it comes to trade, has now become the 7th largest partner in 2022.
Mentioning the reasons for India’s increasing reliance on Chinese imports for capital and intermediate goods, Patel said most goods imported from China are capital goods, intermediate goods and raw materials used for meeting the demand of fast-expanding sectors like electronics, telecom and power in India. “The rise in import of electronic components, computer hardware and peripherals, telephone components, etc. can be attributed to transforming of India into a digitally empowered society and a knowledge economy. India’s dependence on imports in these categories is largely due to the gap between domestic supply and demand,” said the minister.
She said the raw materials in the form of Active Pharmaceutical Ingredients (APIs) and drug formulations imported from China are used for making finished products (generic medicines), which are also exported out of India. Similarly, electronic components such as mobile phone parts, integrated circuits, video recording or reproducing apparatus, etc., are used for making finished products (e.g. mobile handsets), which are also exported to other countries.
She said PLI schemes in different sectors have been launched recently to reduce dependency on imports and make India a competitive destination for manufacturing.