India may only be able to shift $3.5-5 billion worth of trade away from China
NEW DELHI : India will only be able to shift $3.5-5 billion of trade away from its largest trading partner – China – and replace it with goods imported from United States, still running a huge trade deficit with Beijing, according to an analysis.
The Ministry of Commerce and Industry had asked businesses to identify areas were imports from China and other countries can be substituted with American products. Commerce and Industry Minister Shri Piyush Goyal had also asked exporters to move out of a protectionist mindset.
Analysis shows that the value of trade in India that can be substituted with American goods is likely to be limited, as the cost of US products is higher across most categories. Out of the 4,251 goods imported by both countries where comparable data was available from the Ministry of Commerce, US had a price advantage in only 650 items while China’s price advantage extended to 3,601 goods.
Moreover, in 92 percent of such products, American commodities were priced 50 percent higher than their Chinese counterparts. The analysis has considered a scenario where US exports at least $10 million worth of goods to India and the price difference between the two is at least 10 percent.
Only if India can bear a 20 percent premium for importing products from the US, then it can replace $5 billion worth of goods.
India’s fertiliser imports from China are worth $1.4 billion while just $51 million from America. The price difference between the two in this category is 15.7 percent. India imported $700 million worth of PVC resin from China compared with $196 million from the US, with a 4 percent cost difference, while the difference in organic chemicals was nearly 30 times, with India importing $300 million worth of products from China.
During 2023, India ran a trade deficit of $84 billion with China, which rose to $94 billion in 2024, whereas its trade surplus with the US extended from $31 billion to $36 billion in 2024. Even as India tries to placate Trump over high tariffs, it would still not be able to bridge the trade deficit by substituting Chinese imports with those from American goods, as it would come at a higher cost. In fertilisers alone, the cost build up for India could be a high $223.8 million if it buys the same product from the US.
US President Trump’s reciprocal tariffs on trade partners that are expected to kick in from April 2 could end up hurting India as well, however, the Centre is focusing on the proposed trade deal with the United States rather than engaging in talks over reciprocal tariffs.
Source : Moneycontrol