The devaluation of Chinese currency is a “worrying” thing as it will make India’s exports to that country costlier, but coupled with China’s excess capacity, the development will render imports cheaper, in what could potentially widen the merchandise trade deficit with the neighbour, commerce and industry minister Nirmala Sitharaman said.
“The depreciation of the yuan is definitely going to make imported goods (from China) cheaper… the fact is deficit with China will (also) grow,” Sitharaman told reporters here after the first meeting of the Council for Trade, Development and Promotion.
India’s trade deficit with China stood at about $27 billion between April-September last year compared with nearly $49 billion in the FY15. The bilateral trade between the countries stood at $72.3 billion last fiscal.
China let its currency fall the most on Thursday since March 2011 sending global stock markets tumbling. Even as exports have been in the negative territory for over a year, thanks to lower commodity prices, India’s overall merchandise trade deficit was recorded at $88 billion during the April-November period of the current fiscal, down 14.6% over the corresponding period last fiscal.
“It is going to make imports from China even more cheaper (to India). Our products are going to be more expensive. So, that is an immediate black-and-white kind of a situation which is developing,” she said.
Sitharaman said the commerce and industry ministry will hold a discussion with Chief Economic Advisor Arvind Subramanian and Niti Aayog vice-chairman Arvind Panagariya to get the big picture on China in the context of rising steel imports as well as overall cheap imports.
Asked if India is preparing any kind of action plan to deal with Chinese imports, the minister said issues would be tackled on a case-to-case basis. There is a mechanism to ascertain whether Chinese imports were causing injury to the Indian industry and if such injury was established based on ground facts, then barriers could be erected in the form of anti-dumping duty or other measures.
Asked if there was a need for some intervention in the rupee market, Sitharaman said, “If you look at one school of thought which prevails, yes, if my currency is devalued, my exports would do better. But there is also another section, which will say why should India’s currency be devalued? If it is holding out against other currencies, let it hold out.”
Stating that Indian exporters are facing tough competition globally during the meeting, Federation of Indian Export Organisation (FIEO) said devising proper exports strategies needed accurate supporting trade data to understand the trends which was lacking. States should sensitise exporters and other stake holders to correctly put the states code for which drop down menu has been provided by the Customs.