India needs a calibrated approach to reduce imports from China as the neighbouring country has slowly and steadily built a solid base in both high and low-value imports into the country, a report by SBI said.
The report also said that the decision of the government to ban 59 Chinese apps will provide space to the domestic IT sector to develop its own capabilities.
"Clearly, China has slowly and steadily built a solid base in both high and low-value imports into India. We thus have to clearly take a calibrated call in reducing our import dependence from China and not through sudden stops!" said the SBI research report - Ecowrap.
China, it added, has spread out in all other categories, including low value manufacturing to high-value capital and electrical goods imports to India.
The data on services and merchandise trade exports shows that India can definitely compete with China on the services front, the report said, adding "India exports a far greater amount of telecommunications, computer, and information services than China. However, China is rapidly catching up and India needs to buckle up".
The report further said there is now a huge clamour about banning imports from China, after the border standoff. "Ideally, India must go for imposing restrictions on certain products in which it has a Revealed Comparative Advantage over China, and which will provide support to MSMEs.
"However, demanding to curtail all imports at one go from a country which is so entrenched in our economic system is unreasonable and might disrupt the local supply chain when looked at, either from the producers' side or consumers' side," it said.
As per the report, India is dependent on China for a lot of products at the lower end of manufacturing.
For example, at two-digit classification, in 1996-97 there were 22 categories in which India did not import anything from China, whose value of imports in 2019-20 is around USD 500 million.
At an eight-digit level, there were 6,844 products imported by India from China in FY2020.
On the ban of 59 Chinese apps by the government for security reasons, the report said, "It does provide the local tech companies the space to develop apps which can compete with them."
With its huge IT base, India can focus more on services while building capabilities in goods exports to improve its overall trade balance with China, the report said.
China is already coming under fire due to its aggressive stance and it gives other Asian nations an opportunity to look at the share that China has captured in services exports of telecommunications, computer, and information services, it added.