Strategy in the works to woo companies looking to exit China
The core of the idea was increasing exports to China & reducing imports by local manufacturing.
The commerce department’s strategy paper, aimed at reducing India’s trade deficit with its neighbour, proposes a detailed sector-wise strategy for import substitution in electronics, telecom, electrical equipment and pharmaceuticals, which form the bulk of the country’s purchases from China. India’s trade deficit with China stood at a record $63.04 billion in FY18.
The strategy paper, prepared by the department, was submitted to commerce and industry minister Suresh Prabhu.
After taking charge as minister in September 2017, Prabhu has personally guided strategies to reduce the trade deficit with China. The core of the idea was increasing exports to China and reducing imports by substituting inbound shipments with local manufacturing.
Citing the views of the telecom industry, the department said China has a host of discriminatory and restrictive practices that bar Indian companies from participating in their procurement process. The industry has suggested steps such as local manufacturing of products like printed circuit boards and camera modules and the creation of a research and development fund for the sector.
In the case of solar power, the department said India needs to “ringfence government procurement” through competitive bids and set up plans in public-private partnership mode here.
For auto components, the paper said introduction of standards and common testing facilities to match EU and US standards will strengthen local production. It suggested excluding artificial fibre textiles from the proposed Regional Comprehensive Economic Partnership free-trade agreement and simpler goods and services tax norms for the sector.
“India, with its vast working population, and large consumer market is an attractive destination for companies moving their manufacturing bases out of China, and also for Chinese manufacturers for collaborating for setting up production bases in India,” it said.
The companies likely to relocate to India are from sectors like electronics, consumer appliances, consumer electronics, textiles, healthcare equipment and heavy industry.
TARIFF, NON-TARIFF BARRIERS
The paper favours extending support to exporters by pursuing tariff reduction in the Asia-Pacific Trade Agreement (an accord among seven Asian countries) and the proposed RCEP. It talks of export incentives to adequately substitute the existing Merchandise Exports from India Scheme and the need to pursue greater market access for agriculture and dairy products and pharmaceuticals.
As per the department, Indian pharmaceutical firms face regulatory hurdles and prolonged and unpredictable timelines for drug registration.
They are asked to submit detailed clinical trial data and reveal the drug formulation process at the time of registration.
On this, the ministry would look at establishing an interface between the Food and Drug Administrations of India and China for conduct of regular training programmes on regulatory standards and processes of filling dossiers in China and relaxing the product registration time to one year from 3-5 years.
It would also look at pursuing export orders where market access has been obtained from China for commodities including rice, sugar and sesame seeds.