As India’s July export-import data shows a worrying trend with the trade deficit surging to over 5-year high, renowned investment advisor Sandip Sabharwal points out to the failure of Narendra Modi’s flagship ‘Make in India’ to take off as the reason behind a sharp rise in imports.
A sharp rise in imports resulted in worsening of trade deficit to $18.02 billion in the month of July as against a deficit of $11.45 billion during July 2017, latest Commerce Ministry data showed. According to the latest trade data, exports climbed 14.32 percent to $25.77 billion in July. Last year, merchandise exports totalled $22.54 billion in July.
This was due to ‘Make in India’ initiative not taking wings completely, and coal and oil imports not remaining high, independent investment advisor Sandip Sabharwal said. “The Government had announced the Make in India initiative with great fanfare a few years back. However this has not taken off,” Sandip Sabharwal of AskSandipSabharwal.com told FE Online.
“Most of the consumption growth of non durables like cell phones, high end TV’s, refrigerators etc are still met by imports and no significant capacity has come up nor announced in this segment,” Sandip Sabharwal said, adding that coal imports of $2 billion a month, and vegetable oil imports of $1 billion a month are easily replaceable.
“Vegetable oil and coal imports also continue to be very high and the ethanol blending programme which could have reduced the import bill by a few billion dollars has also been a very slow starter,” he said.
Further, India is still importing a large quantities of solar power equipment from China, which is adding to our trade deficit. “Even though solar initiative has been a success but there is a little value addition in the country with most of the equipment being imported from China,” he said.
A Parliamentary Committee on Commerce constituted to examine the impact of Chinese imports on the Indian economy last month observed that 84 percent of solar equipment need of country is met through imports from China. Solar cells and modules worth Rs 15,523 crore were imported during 2015-16. Out of this, Rs 12,987 crore worth of solar cells and modules were imported from China alone.
The trend has remained unaltered in 2016-17 and 2017-18. Chinese solar cells and modules dominated the imports to nearly Rs 17,000 crore in the given period, the Committee noted.
“Hence overall Make In India as an initiative has not been successful till date,” Sandip Sabharwal said.
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