India's Strategy to Reduce Import Dependence
India is considering increasing customs duties and providing targeted incentives for certain goods to reduce its import dependence and narrow the merchandise trade gap. This initiative may be introduced in the upcoming budget.
Background
- Current import levels remain high despite local production capabilities.
- There is a strategic interest in reducing dependence on single-source supply chains.
Proposed Measures
- The government is identifying around 100 goods, including:
- Engineering goods
- Steel products and machinery
- Consumer items like suitcases and flooring materials
- Import duties on many of these items are between 7.5% and 10% currently.
- Potential introduction of fiscal incentives and duty increases as strategies.
Trade Gap Concerns
- India's merchandise trade gap is widening:
- Exports: $292 billion (April-November FY26)
- Imports: $515.2 billion (same period)
- Need to develop local supply chains due to dependency on single-source imports.
China's Dominance
- China is a major supplier in multiple sectors:
- Umbrellas: $20.85 million imported in FY25, with $17.7 million from China.
- Spectacles and goggles: $114 million in imports for 2024-25, with a significant portion from China.
- Agricultural machinery: China accounts for 90% of imports.
- India's exports to China were $12.2 billion, while imports were $84.2 billion (April-November FY26).
- Resulting in a trade deficit of approximately $72 billion.
