India became large marketplace for substandard Chinese goods, PLIs strengthen manufacturing: Piyush Goyal

The government on Friday said that it has taken a series of measures to reduce dependency on Chinese goods and increase the manufacturing capacity of domestic industries and their competitiveness. Replying to supplementaries on India-China trade relationship in the Rajya Sabha commerce and industry minister Piyush Goyal said India’s trade deficit, which was $1 billion with China in 2003-04, rose to $36 billion in 2013-14.
“The entire country, in a way, became a large marketplace inviting substandard, opaquely priced, non-transparent valued goods into the country in a big measure because of which our imports increased from $4 billion in 2003-04 to $51 billion in 2013-14…we opened ourselves to a large number of dependencies on China which we have suffered over the years as the economy grew and the country prospered,” he said.

Highlighting that the government has introduced Rs 1.97 lakh crore Production Linked Incentive schemes for semi-conductors and 24 other sectors to promote manufacturing, make it competitive and start reducing imports from China, he said: “It is important that we realise that our country has become depend on a country which has inimical interest and how this government, has through a number of initiatives today, focussed its attention on promoting Make in India”.

He said India used to import almost 100% of its mobile phones with only two plants making mobile phones in this country.

“Thanks to the PLI scheme, we have over 200 companies in the mobile phone ecosystem and we are now not only producing for India but we are a large exporter of mobile phones,” Goyal said.

Citing the example of APIs, he said India which, at one of time used to export them to the world from plants which manufactured high quality APIs, became dependent on China and over 10-12 years, India lost its competitive strength in very critical areas.

“Sadly, we gave up that entire industry to China…when I was discussing at the RCEP (Regional Comprehensive Economic Partnership) negotiations and attacking the Chinese side on why are you allowing such substandard goods and how you can make goods lower than the raw material cost in India. He (Chinese official) says your industry is dependent on us. If I don’t give you this $2-3 billion of APIs, your $10 billion pharma industry will collapse,” Goyal said.

He said a lot of capital goods industry got killed in that 10 year period because of which, today for a lot of capital goods and electronics goods became dependent on Chinese imports.

Replying to a question on companies relocating from China to India, Goyal said that no one relocates or shuts companies overnight and the PLI schemes were devised after consultations with the private sector.

“America has also not stopped buying from them (China),” he said.

On being asked about the trade deficit expected to touch $100 billion this year, Goyal said: “The fact that India became so helpless and manufacturing sector became so weak, we have reined in the deficit and not allowed the runaway increase that was allowed by the earlier government”.

He said the fact that the current year trade deficit is going to be high, is a sign of growing economic activity. India’s imports from China largely emanate from intermediate products on which the country processes and adds value for further re-export or consumption in the country and India is importing a lot of machinery shows that the country has now started investing and the gross fixed capital formation in the country is increasing, Goyal said.

“The fact that we are increasingly consuming more goods, will give confidence to investors to invest in manufacturing. This is a cycle. Investors keep watching the demand and consumption pattern. We are now seeing revival of manufacturing industry,” he said.