India’s auto and pharma sectors not ready to wean off China

Economy Forex

By Administrator_India

Capital Sands

 

Days after a border clash with China this month in which 20 Indian soldiers were killed, New Delhi told firms to find ways to cut imports from China. But two big industries, automobiles and pharmaceuticals, say this is easier said than done.

Like many countries, India relies on China for products such as electronic components and drug ingredients because it cannot make them or source them elsewhere as cheaply, company and industry figures say.

Thus any moves to curb imports or make them costlier without developing alternatives will hurt local businesses.

“We don’t import because we like to, but because we have no choice,” said R.C. Bhargava, chairman of Maruti Suzuki India Ltd, the country’s biggest carmaker.

“To attract companies to produce locally, we need to be more competitive and lower our costs compared with other countries.”

India imported around $70.3 billion of goods from China in the fiscal year to March 2019, and exported just $16.7 billion – its widest trade deficit with any country.

The government is now consulting with companies on tightening curbs on 1,173 non-essential products, a trade body official said on condition of anonymity. They include toys, plastics, steel items, electronics and specific auto components – which feed vehicle manufacturing.

This is on top of plans to raise trade barriers and import duties on around 300 products from China and elsewhere, as part of Prime Minister Narendra Modi’s self-reliance campaign.

In April, India also tightened rules for investments from neighbouring countries, including China, to prevent opportunistic takeovers after the pandemic.

“If things do escalate, then India stands to lose a lot more than China,” said the chief of corporate strategy at one of India’s top 10 drugmakers. “We cannot afford this.”

Over a quarter of India’s auto part imports – $4.2 billion – came from China in 2019, including engine and transmission parts, according to data from the Auto Component Manufacturers’ Association of India.

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