According to an SBI research paper released on Tuesday, India can add USD 20 billion to its GDP if it can cut its reliance on Chinese imports by 50% by utilising production-linked incentive schemes.
In terms of imports, India's trade deficit with China decreased in FY21. According to the report Ecowrap, China's proportion of India's total item imports has consistently increased to 16.5 percent now.
Around USD 39.5 billion of the USD 65 billion in imports from China in FY21 were commodities and goods for which the PLI plan had been announced (textile, agri, electronics goods, pharmaceuticals & chemicals).
“If, because of the PLI scheme, we can reduce our dependence on China even to the extent of 20 per cent, then we can add around USD 8 billion to our GDP. Over time, if our dependence is further reduced by 50 per cent, we can add USD 20 billion to GDP,” the report said.
India imported 6,367 articles from China worth a total of USD 68 billion (or 15.3% of total imports) in FY22 April-December.
According to the research, it calculated each product's import dependency on China by looking at the share of Chinese imports in India's overall imports in these categories.
“The maximum aggregate value (USD 9.7 billion) is of the products in which our import dependence on China is between 50-60 per cent, although the number of products is lower.
“Although number wise the imports were highest in the category where our dependence was lowest (0-10 per cent), the value is not that high at around USD 1,894 million,” the report said.
Personal computers and parts of telephonic and telegraphic equipment, electronic integrated circuits, solar cells, urea, and lithium-ion and diammonium phosphate micro-assemblies are among the most important imports for FY22, according to the report. Other commodities fall under the category of electrical and electronic imports.
The low-value products include a mix of finished goods and intermediate inputs, and India has a clear comparative advantage in the majority of these imports, according to the report.
“If India wants to wean itself off its dependence on China, capabilities have to be developed in these areas, especially chemicals, textiles, footwear, so that both inputs and final consumer goods in these low-value imports can be manufactured domestically,” the report said.
It went on to say that India should become more integrated into global value chains (GVCs).