by our special correspondent:
hercules had taken the task to clean the cattleshade where garbe heaped over the ages. Our China or foreign import depedence was cultivated through decades mostly by Congress government and hence we are paying price of it.
hina-India bilateral trade is a much debated topic in recent times due to multitude of factors ranging from challenges due to import dependency in some sectors to the business opportunities as the global supply chain potentially shifts from China to the rest of the world including India.In short India exports around 15 billion to China and imports around 60 billion from them , a volume four times of the export volume.
To put it in perspective, China is India’s one of the leading trade partners and constitutes 9 percent of India’s total export and 18 percent of total merchandise imports. Import dependency on China for a range of raw materials (APIs, basic chemicals, agro-intermediates) and critical components (Auto, Durables, Capital goods) is skewed. To give a flavour, out of the respective imports, 20 percent of the auto components and 70 percent of electronic components come from China. Similarly, 45 percent of consumer durables, 70 percent of APIs and 40 percent of leather goods imported are from China.
For some of the sectors, the impending supply risk and the policy shift towards self-reliance is likely to translate into what is commonly referred to as “make in India” or import substitution.
Even before current crises, various companies have been working towards import substitution as a key business case to succeed. In Chemicals, Amine players (Balaji Amines & Alkyl Amines), rubber chemicals (NOCIL), Carbon black (Himadri Speciality & Phillips Carbon), Engineering plastics (Bhansali Engineering) are the areas to look at as they remain beneficiary of government’s steps to curtail import dependence.
Further, basic chemicals can gain traction because of the imperative to minimize supply chain risk. Companies to look at are Deepak Nitrite and GNFC as China factor has brought focus on key raw materials such as Acetone, Phenol, Aniline, Acetic Acid and Nitric Acid which are heavily imported.
In case of Pharma, import dependency for key starting materials/APIs means companies such as Aarti Drugs, Granules India, JB Chemicals, IOL Chemicals would also be worth tracking. Some of them are key manufactures for drugs/APIs such as Paracetamol, Metronidazole and Ibuprofen and are increasingly attempting backward integration.
In the consumer durable space, the trend of in-house manufacturing is as well been evident for domestic players such as Havells and Voltas which have recently set-up in-house manufacturing facilities to reduce import dependencies. In the Auto equipment segment, Lumax Industries is setting up of an electronics facility for localising component manufacturing. Further, Maruti is focused towards manufacturing various imported electronics parts, locally after witnessing recent supply disruptions.
To find a way out first reform is to be made to do away reservation in department of industry and commerce. The officers will be given a target to set up industry and their monthly payment will be depndent on it. Now the officers hardly bothers to think about the industry and more on their speedmoney as they have hardly any target to meed. When their take home will be directly linked with their remuneration they will forget their speedmoney and will try to meet their target instead.
On the export front, we think opportunity for Indian manufacturers are humongous if there is a sizeable shift in opportunities from China to India. A look at the India-USA trade gives some clue. A good portion of India’s current exports to the USA consist of apparel, pharma, chemicals, vehicles and furniture. However, except for a few sectors such as pharma, fish/sea creatures and carpets, exports from China are several times more than that of India.
As per estimates, out of 1200-odd categories (HS-4 digit commodity classification) in which India exports to the US, there are 720 items where China caters to at least 10 percent of US imports. The point we want to emphasise is that the breadth of opportunity for India is huge. Even if 5 percent of US imports shift from China to India in these categories, the opportunity size is $140 billion.Under this situation India has to set up first their atmanirvor mentality before to take over China , which is definitely possible if we seriously venture on it and get serious government support.
