Can India end business with China? | Disaster in China, shock in India, who will manage it now?

 

Can India end business with China?

 

The increasing havoc of covid in China is troubling the whole world. The trouble for India is twofold. One is covid and the other rising dispute on the border with China. In this connection, it is being demanded again and again that India should stop doing business with China. But will doing so be beneficial for India? This question arises again and again and there are many different views on it.

 

But now a veteran economist has given a big statement on this issue. Arvind Panagariya, the former vice-chairman of NITI Aayog, clearly said that reducing trade with China at this juncture would be like compromising India's potential economic growth. Arvind Panagariya has even suggested that India should enter into free trade agreements with countries like the UK and European Union to increase trade.

Panagariya said that it would not be right to take steps to reduce business in response to China entering the Indian border. Panagariya also said that both countries can start playing trade sections against each other, but the $3,00,000 crore Indian economy will suffer more than the $17,00,000 crore Chinese economy.

 

After Panagariya statement, the debate may again intensify on whether it is practical to stop trade with China and whether is it going to be of any benefit. If not, then the trade deficit between India and China on the import-export law has reached $ 51.5 billion from April to October of the current fiscal year. India's trade deficit during the fiscal year 2021-22 was $ 73.1 billion, which was only $ 44.03 billion in 2020-21.

 

According to the data, from April to October of the current fiscal, India's imports stood at $7.27 billion, while the country's exports stood at $8.77 billion. Trade deficit figures also show in a way how China is important for India for the supply chain. China's participation in India's total imports in the financial year 2021-22 was 15.4%. 

During this period India imported goods worth $613.2 billion from all over the world. Of this, $ 94.2 billion worth of goods came from China alone. Now it has to be seen which products India buys from China. So according to 2021-22 figures, out of $94.2 billion in imports from China, $35.4 billion in electronic goods, $24.9 billion in engineering goods, $19.6 billion in chemicals and related products $8.3 billion, and textile imports $2.8 billion.  

Electronic products include gadgets, mobile phones, laptops, TV panel chips, and similar devices. With China turning into a manufacturing hub, it has become difficult for other countries to find an alternative to China. When China gave goods to the world at a low price, then everyone handed over the entire work of manufacturing on a large scale to China. 

India is also included in such countries. This is the reason why trade between India and China is increasing continuously despite increasing tension on the border. In the last 5 years, the total trade between India and China has increased by 29% to reach $ 115.44 billion in the financial year 2021-22. In the financial year 2017-18, this figure was $ 89.72 billion. 

Let us also know what goods India sends to China. In the financial year 2021-22, India exported goods worth $ 422.2 billion worldwide. China's share in this is a little more than 5%. India's exports to China increased by 59% to $21.2 billion in the financial year 2021-22. Five years ago, in 2017-18, exports to China stood at $13.3 billion. 

Goods sent from India to China included engineering goods worth $5.4 billion, agricultural and allied products worth $3.8 billion, ore and minerals worth $2.9 billion, chemicals worth $2.9 billion, and petroleum and crude products worth $1.9 billion. Overall, the risks associated with breaking or reducing India's trade relations with China, which Arvind Panagariya is talking about, seem to be a reality in the present times. 

India will have to strengthen manufacturing before reducing business from China. It has to gain the ability to mass-produce cheap goods and at the same time strengthen itself in technology and innovation. Only then the country will be able to give a tough challenge to China in trade.

Disaster in China, shock in India, who will manage it now? 

The increasing corona infection in China is beginning to affect India's pharma industry. India's pharma industry is dependent on China for active pharmaceutical ingredients (APIs) and bulk drugs. Due to increasing cases of a new variant of covid-19 in China, a huge increase in the prices of pharmaceutical ingredients is being recorded. 

The core CPI has become costlier by 12 to 25% in the last few days. The business world fears that this may put a brake in the supply chain, which will reduce margins and increase the price of medicines. It is feared that this may also lead to a shortage of medicines. In fact, due to the latest wave of Corona epidemic, there has been a spurt in domestic demand and consumption of APIs in China. 

Because of this, China has reduced the export of API to other countries. According to the pharma industry, there has been a jump in the API prices of Azithromycin, Paracetamol, Oral, and Injectable Biotics. Supplies coming from China in January become erratic due to Corona as well as the Chinese New Year. Let us see how the API prices have increased in the last two weeks. 

The API price of paracetamol has increased from ₹450 to ₹550 per kg in the last two weeks. The price of Azithromycin has increased from ₹8,700 to ₹10,000 per kg with an increase of 15% in 15 days. The API for antibiotic amoxicillin has increased by 13% from ₹2850 to ₹3200 per kg. The price of API Potassium Club Bullet has been increased from ₹17,000 to ₹19,500 per kg. 

India's import of organic chemicals, including APIs, is set to increase by 39% to $12 billion in 2021-22. This is proof of our dependence on China for the raw materials used to make medicines. Domestic companies like Lupin, Sun Pharma, Glenmark, Mankind, Doctor Reddy's, and Torrent depend on imports from China for manufacturing. 

The main reason for the worsening of the situation is that earlier there was a decline in production in China under the zero covid policy and now it is decreasing due to the new wave of the corona. It is feared that if the same situation persists in China, then the next few months may prove to be extremely difficult for the Indian pharma world.

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