October 5, 2022

Trade with the United States and China: the PHDCCI calls for the mass production of raw materials

India should focus on mass production of raw materials in which it has a comparative advantage over its two main trading partners – the United States and China – says the PHD Chamber of Commerce and Industry (PHDCCI) in a report.

According to the industry body, India has a lot of potential to export pharmaceuticals, electrical machinery and equipment, nuclear reactors and boilers and plastic items to the two countries during the pandemic.

“As a result, the United States and China would have to import most of these products from India rather than other countries. This would require more support and guidance from the government, focusing on reducing the cost business in the country. These costs are capital costs, compliance costs, logistics costs, land costs and availability as well as labor costs,” the report states.

In FY 2021-22, the United States was India’s largest trading partner, followed by China.

The United States was also India’s largest export market in the last fiscal year, while China was India’s top import destination.

India can increase its exports to the United States in sectors such as nuclear reactors and broilers, electrical machinery, vehicles and iron and steel components, according to the report.

“India exports less than one percent of total US imports of these products, while China, Mexico and Canada are the main exporters to the United States. On the other hand, India can tap into grain, electrical machinery and pharmaceutical exports to China,” he said.

The share of India’s top 10 export products to the United States and China’s import basket is not very large. Thus, India should take necessary measures such as commodity-specific trade agreements to enhance its export potential in these countries, according to the report.

He further suggested that India holds the potential to reduce imports, worth about $35 billion, from China by 40%.

India has significant scope to produce more import substitutes in sectors such as chemicals, auto components, bicycle parts and agro-industrial items. Items also include handicrafts, drug formulations, cosmetics, consumer electronics and leather goods, among others, said industry association president Pradeep Multani.

Improving production in these sectors will not only reduce imports from China but also boost exports from India, Multani said.

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