New Delhi: China has emerged as the largest market for  primary products  like ores, minerals and the agri products accounting for about 45 per cent of India’s total exports  to the neighbouring country clearly throwing a warning  that the country’s basic wealth is being shipped to the Chinese manufactures, who are rather aggressive in value addition, data analysis by ASSOCHAM reveals.

As much as about one-third of India’s total exports to China comprised the ores and minerals in the fiscal 2011-12.  While it looks quite high, the figure was alarmingly high in the previous years. In 2010-11, 55 per cent of China’s total shipments from India comprised ores and minerals, mainly the iron ores.  Needless to say, the domestic industry engaged in sectors like steel has been raising the issue rather seriously.

 “After all, export of mineral resources sucks our natural resources leaving little for value-added manufactured products in the country, “ASSOCHAM Secretary General D.S. Rawat said.

Though the US and Europe are also the major importers of India’s primary items, the shipments to these developed markets mainly include agricultural products and not much of the ores and minerals. Typically, the ores and minerals are the bulky items and it makes business sense for the exporters to send these goods to the nearby destinations and China suits the bill for such exports.  Even though there is a global slowdown, the Chinese importers of ores and minerals would not reduce the off take   as they would like to build strategic reserves of such critical raw material.

In the current fiscal of 2012-13 when the going is difficult in the global markets, the primary products could again account for the lion’s share of India’s shipments to China. While some measures like export duty on iron ores have been taken, India must push for increased exports of manufactured goods to the Chinese markets.

There are three categories of products, other than minerals and ores, which show promise in terms of grabbing bigger market in China. These are engineering products, chemical and related products and the petroleum products.

In 2011-12, the engineering goods were the second biggest item of exports to China, followed by petroleum products. The Chemical and related products also accounted for sizeable portion of India’s shipments to China, the data analytical study found.
 
Engineering goods exports accounted for about 22 per cent of India’s total shipments to China in the previous financial year, while petroleum products claimed about 13-14 per cent of India’s outward shipments to the neighbouring country.

Chemicals and the related product’s share in India’s total exports to China was about 7-8 per cent. Interestingly, the share of petroleum exports to the Chinese market for India’s total exports has leapfrogged from negligible 1-3 per cent a year ago to 13-14 per cent in the last fiscal.

India suffers a big trade deficit with China and these three-four items, other than minerals and ores, can be used for bridging this gap. “A conscious effort must be made to decrease share of ores and minerals to China, “Mr Rawat said.  Though it is a difficult task, given lack of markets for other Indian products in rest of the world, the country must take steps in this regard for the interest of long–term security of these natural resources, said the ASSOCHAM secretary general.  

The main trouble with India’s economic engagement  with China is a huge trade imbalance . Between April-January, 2011-12 (disaggregate official data for which is available),India’s trade gap with China was a big USD 33 billion. Against imports of USD 48 billion, exports were mere USD 15 billion.

But for minerals and ores, India’s exports to China would have been quite dismal, underscoring the need for shipments of the value-added products to the neighbouring country.

While the industry, on its part, should be aggressive in finding market for the manufactured products to China, the government should step in ensuring that Chinese non-trade barriers are removed in products like chemicals and pharmaceuticals.

For restricting exports of raw material, exports duty can be raised so that it makes better sense for value addition within India, rather than shipping the ores and minerals to the Chinese markets.