List of Items that are Mostly Imported from China, but can be Profitably Manufactured in India Itself. Business Opportunities for Indian Entrepreneurs.
When the economical gap between India and China is narrowed, the country, prompted by emotions of nationalism amid the standoff between the two countries, can boycott Chinese products and carve out a path for ‘Atma Nirbhar Bharat.’ ‘Made in China’ label has over the years catapulted into every possible industry operating in India. This includes the well-known consumer durables comprising electronic goods, textile and garment industry, toys, medicines, car components but also encompass the Indian digital sector consisting of applications, OTT platforms, e-commerce companies and consumer fashion accessories etc.
India should take steps forward to diversify productions, domestic manufacturing will help businesses to secure raw materials, and it can also make a global impact if everything is processed here, instead of outsourcing from China. India undoubtedly has the potential to become the next manufacturing destination for global companies.
Top Products which India Imports from China are;
- Electronics products
- Organic Chemicals
- Nuclear Machinery
- Parts of computers
- Cars and motorcycles parts
- Milk products
- Optical and medical instruments
- Iron and steel
Value of the Indian import from China:-
|Products||2018-19 (Rs.cr)||2017-18 (Rs.cr)|
|Iron and steel items||12165||9497|
|optical ad medical instruments||11108||10718|
|Vehicle and accessories||10636||9371|
|Iron and steel||9950||10445|
|Other chemical products||8994||8692|
The main goods imported from China include clocks and watches, musical instruments, toys, sports goods, furniture, mattresses, plastics, electrical machinery, electronic equipment, chemicals, iron and steel items, fertilisers, mineral fuel and metals.
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According to government data, from March 2019 to February 2020, India imported $12.78 billion of capital goods from China, the second biggest category after electronics, televisions and electrical appliances ($18.12 billion). India’s total commodity import bill from China over the same period was $49 billion, according to the ministry of commerce.
Industry was asked to send comments and suggestions on certain number of goods and raw materials imported from China, which include wrist watches, wall clocks, ampoules, glass rods and tubes, hair cream, hair shampoos, face powder, eye and lip make up preparations, printing ink, paints and varnishes, and some tobacco items, The government has recently put import restrictions on tyres, while also making its prior approval mandatory for foreign investments from countries that share land border with India to curb “opportunistic takeovers” of domestic firms, following Covid-19 pandemic, a move which will restrict FDI from China.
India imported goods worth $62.4 billion, while exports to the neighboring country stood at $15.5 billion in the same period. The main goods imported from China include clocks and watches, musical instruments, toys, sports goods, furniture, mattresses, plastics, electrical machinery, electronic equipment, chemicals, iron and steel items, fertilizers, mineral fuel and metals. India has time and again raised concerns over widening trade deficit with China which stood at about $47 billion .Promote Atma Nirbhar Bharat (self-reliant India), including cut in import dependence from China.
Export Opportunity: Supply Chain Shift Away from China
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 is to emphasise 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.
Look at countries beyond the US, China’s wallet share in the imports of countries such as Japan, Australia and European Union ranges from 22-25 percent. The gap between India and China in these markets is a bit higher. And so notwithstanding competition from Korea and Taiwan (high value-added products), and Vietnam, Bangladesh and Thailand (lower-end products), opportunity is huge.
This would have a positive cascading effect on the economy as equivalent quantum of revenues would not only be added to the turnover of domestic enterprises including MSMEs but is also likely to translate to benefits through forward and backward linkages, better economies of scale along with cost competitiveness and importantly, enhancing the scope of employment generation.
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India’s trade engagement is the fact that for a variety of reasons, India’s dependence on imports is getting to be localised, in the sense that there is not a wide diversification of countries from which India is sourcing its imports. For example, if you look at critical medical supplies which India has been importing for frontline healthcare workers in the COVID-19 battle, most of these come from China. China is one of the top sources but on the other hand, there isn’t a very widely diversified source of countries from which India can actually import these. This essentially means that aside from China, there are probably three or four countries of the world on which India’s dependence is increasing. China is by and large widespread across different concentrations. To that extent, it’s going to be a difficult choice for India to get out of this dependence and search for alternative partners.
Recently, the government announced an economic stimulus package of Rs 20 lakh crore and big-bang systemic reforms under the Atma Nirbhar Bharat Abhiyan (self-reliant India).
The intended objective of this plan is two-fold. First, interim measures such as liquidity infusion and direct cash transfers for the poor will work as shock absorbers for those in acute stress.
The second, long-term reforms in growth-critical sectors to make them globally competitive and attractive.
Together, these steps may revive the economic activity, impacted by Covid-19 pandemic and create new opportunities for growth in sectors like agriculture, micro, small and medium enterprises (MSMEs), power, coal and mining, defence and aviation, etc.
Measures for Businesses including MSME’s
The Government along with the benefits to the business institutions and MSME have, have decided to revise the definition of MSME by changing the investment limits and introduced additional criteria of turnover. The revised definition would allow a broad coverage and benefits to more number of industries. Some of the benefits are as follows:-
- Collateral free automatic loans of INR 3 lakh Crores will be provided for Business, including MSME’s which are badly hit by the pandemic and requires new funding to meet operational liabilities, buy raw materials and restart business. Following benefits are provided under the collateral free loan scheme:
- Emergency Credit Line to Businesses/MSMEs from Banks and NBFCs up to 20 of entire outstanding credit as on February 29, 2020
- Borrowers with up to INR 25 Crores outstanding and INR 100 Crores turnover eligible Measures for Businesses including MSME’s
- Loans to have 4 year tenor with moratorium of 12 months on principal repayment
- Interest to be capped
- 100 % credit guarantee cover to Banks and NBFC’s on principal and interest; and
- This scheme can be availed till October 2020.
- Global tender to be disallowed up to INR 200 Crores to benefit the MSME’s and other small institutions.
- Registration and completion date of Real Estate Projects under RERA shall be extended.
- INR 50,000 Crores liquidity to be given through reduction in TDS/TCS deductions.
- The government will facilitate provision of INR 20,000 Crores as subordinate debt for functioning MSMEs which are NPA or are stressed.
- Equity infusion of INR 50,000 Crores through Fund of Funds (FoF). The FOF with corpus of INR 10,000 Crores will be set up. The FoF will be operated through a Mother Fund and few daughter funds. The fund structure will help leverage INR 50,000 crore of funds at daughter funds level. It will help to expand MSME’s size as well as capacity.
- Fintech will be used to enhance transaction based lending using the data generated by the e-marketplace.
- MSME receivables from Government and CPSEs shall be released in 45 days.
Atmanirbhar Bharat: With a special package
PM has announced a special economic package and gave a clarion call for Self-reliant India.
The package will provide a much-needed boost towards achieving self-reliance.
This package, taken together with earlier announcements by the government during COVID crisis and decisions taken by RBI, is to the tune of Rs 20 lakh crore, which is equivalent to almost 10% of India’s GDP.
The package will also focus on land, labour, liquidity and laws. It will cater to various sections including cottage industry, MSMEs, labourers, middle class, and industries, among others.
Five Pillars of a Self-Reliant India
PM iterated that a self-reliant India will stand on five pillars viz.
1) Economy, which brings in quantum jump and not incremental change
2) Infrastructure, which should become the identity of India
3) System, based on 21st-century technology-driven arrangements
4) Vibrant Demography, which is our source of energy for a self-reliant India and
5) Demand, whereby the strength of our demand and supply chain should be utilized to full capacity.
What Did the RBI Provide Earlier?
- A rough estimate suggests that the RBI’s decisions have provided additional liquidity of Rs 5-6 lakh crore since the start of the Covid-19
- Add this to the Rs 1.7 lakh crore of the first fiscal relief package announced by the Centre on March 26. Together, the two already account for 40 per cent of the Rs 20-lakh crore package.
- That leaves an effective amount of Rs 12 lakh crore.
- However, if the government is including RBI’s liquidity decisions in the calculation, then the actual fresh spending by the government could be considerably lower than Rs 12 lakh crore.
- That’s because RBI has been coming out with long term bond-buying operations (long term repo operation or LTRO, to infuse liquidity into the banking system) worth Rs 1 lakh crore at a time.
- If for argument’s sake, RBI comes out with another LTRO of Rs 1 lakh crore, then the overall fiscal help falls by the same amount.
All MSME Benefits Announced in Atmanirbhar Bharat Abhiyan
The growing clamour for fiscal support has led the government to introduce measures for MSMEs that have been hit by the lockdown. With a series of encouraging announcements, the Finance Minister outlined the government’s plan to raise the morale of the industry and the MSME sector in particular. Under the Atmanirbhar Bharat Abhiyan, the minister announced several measures for MSMEs that are expected to help 45 lakh business units resume their operations. Here are the key announcements for MSMEs.
Credit guarantee of Rs 3 lakh crore: The massive increase in credit guarantees to MSMEs is the key highlight of the government’s relief package. The credit guarantee of 3 lakh crore by the government is intended to help MSMEs that have a 25 crore outstanding loan or less than 100 crore turnover. This provision will rescue MSMEs that need additional funding to meet operational liabilities and restart operations. The loans, which should be taken before October 31, 2020, will have a four year tenure and moratorium of 12 months. There is a 100% credit guarantee cover on principal and interest. The credit guarantee scheme is expected to help MSMEs survive the economic slowdown. Credit guarantees help banks meet the credit demand of MSMEs and provide an assurance that loans will be repaid by the government.
Subordinate debt for NPA/stressed MSMEs: The government has set aside 20,000 crore as subordinate debt to help about two lakh MSMEs with stressed accounts or non-performing assets (NPA). Under this scheme, promoters of the MSME will be given debt, which will then be infused as equity in the unit. However, unlike credit guarantees, government support in this scheme is not full but partial.
Revised definition: The government has changed the MSME definition to enable more businesses to benefit from incentives offered in the Atmanirbhar Bharat Abhiyan. The new definition of MSME, which had been on the government’s priority list for long, takes investment and annual turnover into consideration and does not differentiate between manufacturing and services. The ‘turnover’ based definition is seen as a better means of identifying MSMEs, particularly in services such as mid-sized hospitals and diagnostic centres. These will now be able to qualify for benefits offered to MSMEs. Experts suggest that the new definition would drive the growth of the MSME sector and help to make it self-reliant.
Clearing of dues: While announcing the credit guarantee for MSMEs, the Finance Minister assured that the Centre would clear pending MSME dues in 45 days. As on March 31, 2020, the total outstanding payments to MSME units were estimated over 4.95 lakh crore. The Central Government ministries and departments, state governments and public sector units owe MSMEs more than half of this amount.
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