Amid India’s move to decrease its reliance on Chinese products and investment, top government officials have said that India will have to lean on China till it is capable enough to manufacture not only electronic components, but also those of other industries.
Even though the country’s reliance has diminished, the difference is marginal. For instance, the Ministry of Electronics and Information Technology (MeitY) scrutinised import data of personal computers, laptops and tablets, and found that shipments of seven IT hardware items have declined by 3.4 per cent in 2023-24, to $8.4 billion, compared to $8.7 billion the previous fiscal. But, China’s share remains high at about 60 per cent. Similarly, a lot of components like camera modules for smartphones are still imported from Chinese vendors.
In the electric vehicle (EV) industry, the Ministry of Heavy Industries (MHI) was looking at easing visa norms for select Chinese nationals on the request of Indian EV manufacturers, as the mother equipment for EVs is from China. These companies required ‘thousands’ of Chinese engineers to help them manufacture low cost and powerful batteries, especially for the electric two/three-wheelers.
Although the official states that everyone, including major players like HP and Dell, is manufacturing in China, the real question lies in the quantum of products being manufactured in the neighbouring country.
India’s plan
This is where, the Centre’s measures, aimed at turning the domestic manufacturing sector into a robust mechanism, come in. Schemes like production linked incentive (PLI) and higher duties on certain components, the official said, can wane the influence of Chinese products. Not to mention the assembling of certain products in India, if not their manufacture, is also a welcome change.
“Today, labour is cheap in India, but tomorrow if labour becomes cheaper somewhere else, in Africa or some other part, it (manufacturing) may shift there. Therefore, to preserve industries in India, we have to become competitive, not just in terms of labour cost but also technology and produce more of the components,” the official told businessline, adding that once manufacturing components in India will catapult it to the hub of manufacturing in the world.
Rules in place
Given India’s reliance on China, stringent rules are in place, which require an inter-ministerial committee to clear Chinese products. “It is a routine process. Whenever there are investments from countries that share their borders with India, effectively from China, those have to be cleared by a committee. Many investments are scrutinised because they are from Taiwanese companies, but some shareholders are from China or they are listed in the Hong Kong stock exchange,” a senior government official told businessline.
The inter-ministerial committee gives its approval on what the Ministry concerned says, and it is then forwarded to the Ministry of Home Affairs (MHA) and Ministry of External Affairs (MEA), whose final nods decide if these companies are allowed to export products to India.
Press Note 3 mentions that imported products from any other country can enter India through an automatic route, but in case of products coming from a country that shares its land border with India, the consignment will have to go through government approval. (The Press Note 3 norms were issued in 2020. It stipulated that a company based in a country that shares a land border with India (such as China) can invest only after government clearance and that the automatic route was thereby withdrawn). Also, if any company proposed for a joint venture with a Chinese firm, the Indian arm should be the majority shareholder.
“That has been the requirement post Galwan (attack by Chinese troops in 2020). It’s a government approval route, which means that you have to clear on a case-by-case basis and that’s what we are doing. So nothing is disallowed, but it has to go through government,” the official said.