Supply-chain disruptions in China may impact India, says report

New Delhi, May 23 (UNI) Supply chain disruptions due to lockdowns imposed by China as part of its zero-Covid-19 policy may impact India more directly given the country’s large import dependence on China in several segments, research and rating firm CRISIL said in a report on Monday.
As per the latest data, India’s goods exports to China in the financial year 2021-22 were $21.2 billion while imports from China surged to $94.2 billion from $65.3 billion the year before.
“While India’s significant import dependence and large trade deficit with China have been contentious issues, a gradual improvement was witnessed just before the pandemic years. But the wheel seems to have reversed again,” CRISIL said.
The report said imports from China cut across wide-ranging product lines.
India imports both intermediate goods (such as electronic components, computer hardware peripherals, and organic chemicals) as well as finished goods (consumer electronics, fertilisers, etc).
The report noted that 15 commodities make two-thirds of all imports from China compared with just three from the United Arab Emirates (UAE) — India’s second largest import partner.
“Import dependence on China is visible not only in absolute terms, but also vis-à-vis the share in import of that good, with China accounting for more than 20 per cent of imports for key industrial/ consumption goods,” it said.
The report stated that in many top imports from China, India’s overall import dependence has increased over the years suggesting that in the event of a slowdown of imports from China, it will be difficult to fill the gap either by ramping up domestic production or via imports from other countries.
“Moreover, this can cause supply disruptions for the Indian manufacturing industry and impact consumers directly in imports of finished goods such as consumer electronics. This also underlines the criticality of success in realising India’s target of reducing import dependence via Make in India or the Production-linked incentive scheme,” CRISIL said.
The rating agency noted that restrictions in China have eased somewhat since late April with daily Covid-19 cases declining but this is expected to be a gradual process.
CRISIL doesn’t see the Chinese government’s Covid-19 stance changing substantially any time soon and therefore supply-chain disruptions in China are likely to persist through the rest of the year.
“India’s import dependence on China remains large and has gone up since the pandemic. In such a scenario, further slowdown in imports from China could potentially affect manufacturing activity domestically,” CRISIL concluded.
As a result of stringent lockdowns across major cities, manufacturing activity in China has slowed. The manufacturing Purchasing Managers’ Index (PMI) for China fell to 47.4 in April (from 49.5 in March).
A reading below 50 shows contraction while print above 50 reflects expansion.