Notwithstanding the various PLI schemes announced for local manufacture of electronic products, China added $7.13 billion to its total contribution to India’s electronic trade deficit in 2021. According to data released by the Ministry of Commerce, China’s contribution to India’s electronic trade deficit has been rising since 2019.

As of November 2021, China contributes 59.11 per cent to the electronic trade deficit compared to 51.88 per cent in 2020. This comes even as India’s overall electronic trade deficit hits a three-year high at $44.3 billion.

Covid impact on expansion plans

Experts believe this trend is a result of Covid-19 hampering Indian manufacturing and Make-in-India expansion plans of consumer electronic brands. 

In 2017, China contributed 67.61 per cent to India’s electronic trade deficit. This was down to 51.03 per cent in 2018. However, the trend has seen a reversal since then, especially during 2020-2021.

He said, “From 2017-2019, during Make-in-India’s heyday, China dependency reduced as consumer electronics brands such as Samsung, Xiaomi, smart TV makers, etc set up facilities in India. As the pandemic hit, their expansion plans to manufacture more components in India were stopped. More importantly, however, China was able to recover from lockdowns faster than India, which was facing major lockdowns during 2020-2021. This means that brands would have decided to source components directly from China, instead of waiting for their manufacture in India, especially as demand for consumer electronics surged.”

According to Singh, higher container costs due to the Chinese port closure and the Suez Canal issue could also be contributing to the rising trade deficit with China. 

‘Incentivise manufacture’

Experts worry that even as Covid wanes, the electronic trade deficit will continue to rise.

 According to Navekendar Singh, Research Director at IDC India, pandemic lockdowns could have had a major role to play here.

“While India jacks up import duties to disincentivise component import, more needs to be done on the infrastructure side to incentivise manufacture of components here. Otherwise, the contribution will rise with or without Covid,” said Singh.

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