In­dia’s auto, pharma sec­tors not ready to wean off China

Iran Daily - - Global Economy -

Days af­ter a bor­der clash with China this month in which 20 In­dian sol­diers were killed, New Delhi told firms to find ways to cut im­ports from China. But two big in­dus­tries, au­to­mo­biles and phar­ma­ceu­ti­cals, say this is eas­ier said than done.

Like many coun­tries, In­dia re­lies on China for prod­ucts such as electronic com­po­nents and drug in­gre­di­ents be­cause it can­not make them or source them else­where as cheaply, com­pany and in­dus­try fig­ures say, re­ported.

Thus any moves to curb im­ports or make them costlier with­out de­vel­op­ing al­ter­na­tives will hurt lo­cal busi­nesses.

“We don’t im­port be­cause we like to, but be­cause we have no choice,” said R.C. Bhar­gava, chair­man of Maruti Suzuki In­dia Ltd, the coun­try’s big­gest car­maker.

“To at­tract com­pa­nies to pro­duce lo­cally, we need to be more com­pet­i­tive and lower our costs com­pared with other coun­tries.”

In­dia im­ported around $70.3 bil­lion of goods from China in the fis­cal year to March 2019, and ex­ported just $16.7 bil­lion — its widest trade deficit with any coun­try.

The govern­ment is now con­sult­ing with com­pa­nies on tight­en­ing curbs on 1,173 non-es­sen­tial prod­ucts, a trade body of­fi­cial said on con­di­tion of anonymity. They in­clude toys, plas­tics, steel items, elec­tron­ics and spe­cific auto com­po­nents — which feed ve­hi­cle manufactur­ing.

This is on top of plans to raise trade bar­ri­ers and im­port du­ties on around 300 prod­ucts from China and else­where, as part of Prime Min­is­ter Naren­dra Modi’s self-re­liance cam­paign.

In April, In­dia also tight­ened rules for in­vest­ments from neigh­bor­ing coun­tries, in­clud­ing China, to pre­vent op­por­tunis­tic takeovers af­ter the pan­demic.

“If things do es­ca­late, then In­dia stands to lose a lot more than China,” said the chief of cor­po­rate strat­egy at one of In­dia’s top 10 drug­mak­ers. “We can­not af­ford this.”

Over a quar­ter of In­dia’s auto part im­ports — $4.2 bil­lion — came from China in 2019, in­clud­ing en­gine and trans­mis­sion parts, ac­cord­ing to data from the Auto Com­po­nent Man­u­fac­tur­ers’ As­so­ci­a­tion of In­dia (ACMA).

Some of these com­po­nents are crit­i­cal and hard to source else­where im­me­di­ately, said Vin­nie Me­hta, di­rec­tor gen­eral at ACMA, whose mem­bers in­clude com­pa­nies such as Bosch, Va­leo and Minda In­dus­tries.

“We can­not have a knee-jerk re­ac­tion, es­pe­cially when we are emerg­ing from the dis­rup­tion caused by the pan­demic,” he said.

Chi­nese sup­plies have also been a key fac­tor in In­dia’s boom­ing drug in­dus­try, which ex­ports cheap generic medicines.

Some of In­dia’s largest drug com­pa­nies, such as Sun Phar­ma­ceu­ti­cal In­dus­tries, Lupin and IPCA Labs, rely on China, and In­dia over­all gets about 70 per­cent of its sup­ply of ac­tive phar­ma­ceu­ti­cal in­gre­di­ents (APIS) from there, in­dus­try of­fi­cials said.

“In the im­me­di­ate fu­ture, we are go­ing to con­tinue to be re­liant on China,” said Sudarshan Jain, sec­re­tary gen­eral of the In­dian Phar­ma­ceu­ti­cal Al­liance, which rep­re­sents ma­jor drug mak­ers, al­though he be­lieved there was only “a very low like­li­hood” of API sup­plies be­ing cut off.

How­ever, this still leaves man­u­fac­tur­ers de­pen­dent on low Chi­nese prices to be able to meet price con­trols on the home mar­ket and stay com­pet­i­tive abroad.

This month, China in­creased prices of the com­mon pain re­liever parac­eta­mol and of ciprofloxa­cin, an an­tibi­otic used to fight res­pi­ra­tory in­fec­tions, by 25 per­cent-27 per­cent, one senior in­dus­try ex­ec­u­tive said.

“This is an im­por­tant an­tibac­te­rial drug. If we don’t buy from the Chi­nese, there will be short­ages,” the ex­ec­u­tive said. “Ramp­ing up ca­pac­ity in In­dia is a grad­ual, long-drawn process.”

REUTERS Work­ers as­sem­ble a Tata Tigor car in­side the Tata Mo­tors car plant in Sanand, on the out­skirts of Ahmed­abad, In­dia.

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