India's chemical imports to China surge while API drops slightly

The Hindustan Times reported on September 25 that although India’s total imports from China fell by 29% year-on-year to $16.6 billion from April to July 2020, imports in key industries have increased. Since April, India has imported more refined oil, handicrafts, medical and scientific instruments, agrochemicals and other chemicals from China. The import volume of APIs and intermediates (compounds for the synthesis of APIs) declined slightly.

According to the Bureau of Commercial Statistics and Statistics of India (DGCI&S), India’s recent commitment to replacing Chinese products with local products and efforts to diversify its sources of imports have resulted in India’s 50 major products imported from China from April to July. The number of 45 kinds of products has dropped significantly, but the import volume of the other 5 kinds of products has increased.

After the conflict broke out on the border between China and India, India banned 59 mobile apps with Chinese background, including TikTok, UC Browser and WeChat, on June 29, citing national security, and banned them again on September 2 118 apps have been created. In addition, India also restricts the import of TV sets and other goods from China, and prohibits Chinese companies from participating in bidding for Indian government projects.

Despite the "retaliatory" measures taken against China in the economic and trade field, India's imports of agrochemicals from China increased by 17.49% from April to July this year, reaching 376.5 million U.S. dollars, compared with 321.4 million U.S. dollars in the same period last year. DGCI&S data shows that the import value of other chemicals has also increased by 13.46% to $240,096 million.

China's imports of refined oil increased by 13.61% to US$68.83 million. India’s imports of handicrafts (excluding carpets) from China increased by 7.55% to reach US$160.8 million; medical and scientific equipment increased by 2.55%, valued at US$20564 million.

Although imports of raw materials and intermediates from China have declined slightly, data shows that India still relies on China for key pharmaceutical raw materials. From April to July this year, China's imports of APIs and intermediates fell from US$86085 million in the same period last year to US$859.6 million, a decrease of only 0.13% year-on-year.

"Hindustan" stated that the Indian Ministry of Commerce and Industry has not yet responded to this.

Two Indian officials familiar with the matter said that imports from China have been declining, which will be more obvious in the September data. According to these officials, in the first three weeks of this month, imports from China fell by 320 million U.S. dollars, to about 1.2 billion U.S. dollars.

One of the officials said that in the first three weeks of September 2020, two key categories of purchases have fallen sharply: Among them, the purchase of chemical fertilizers (including raw materials and finished products) from China has dropped by 70%, and mechanical equipment (including electrical machinery) And non-electric machinery) dropped by 30%. The official said that this is the result of India's efforts to expand domestic manufacturing capacity and diversify its sources of imports of goods and services to reduce its dependence on China.

"The government is also aware of the needs of domestic consumers and the industry. Certain basic products, such as APIs and active pharmaceutical ingredients, are supplied by China on a global scale. Therefore, although local products are encouraged to replace Chinese imports, they are not prohibited. Import such products from China.” Another official said.

Although India is the world's largest producer and exporter of generic drugs, it is heavily dependent on China's imports for key pharmaceutical compounds such as intermediates and APIs. According to data from the Confederation of Indian Industries (CII), India’s imports of APIs in fiscal year 2019 were worth about 249 billion rupees (approximately RMB 24.9 billion), of which about 70% were imported from China. Almost 100% of the raw materials for some important antibiotics and antipyretics in India are imported from China.

“It’s time to revive India’s domestic API industry. The industry has been deeply affected by factors such as stricter pollution control standards, the 2013 Drug Price Control Standard (DPCO), the reduction of import tariffs, and the total collapse of the local fermentation industry. Are affected," said a report from PricewaterhouseCoopers' "Renaissance of the Indian API Industry".

Currently, the Indian government is taking measures to reduce its dependence on Chinese APIs. Short-term measures include importing APIs from alternative sources such as the United States, Italy, Singapore and Hong Kong, and increasing domestic production capacity. In the long run, the Indian government has decided to establish three API industrial parks with a total value of Rs 30 billion. It has also approved a production incentive plan (PLI) valued at Rs 69.4 billion to promote domestic demand for important pharmaceutical intermediates and raw materials. Production of medicine.

Divakar Vijayasarathy, the founder of consulting firm DVS Advisors LLP, said that in the case of a severely tilted trade deficit to China, a 100% boycott of Chinese products or imported substitutes is impossible to achieve immediately.

"Replacement of Chinese imports is a long-term process, and there is no measure that takes effect as quickly as banning applications. The government has realized this and is setting up a park for the production of domestic APIs, but the results will only appear in one or two years... …Banning or restricting imports of these vital products from China will only hurt India. Import substitution is a long-term vision and strategy that the government needs to work hard to achieve. I think there is still a long way to go," he said.