High dependence on imports hurting India's economy

It is rather depressing to note that the unemployment rate in the country reached 8.30 percent in December, the highest over the last 16 months. In urban areas, the unemployment rate exceeded 10 percent. The number of people looking for jobs last month increased to 40.48 percent, the largest in 2022, reported the Centre for Monitoring Indian Economy.

The demand for jobs far exceeds its supply. The unemployment situation is alarming, especially during the current peak season (October-March) of the Indian economy.

This is despite a projected seven percent economic growth for the fiscal 2022-23. The growing unemployment level suggests that the economic growth is not reflecting on the employment growth.

A key reason may be that India’s increasing imports are eating into local jobs. The country has never witnessed such an import surge as it is being seen during this financial year. Imports help jobs flourish in exporting countries at the cost of importing nations. This fiscal, India’s export growth has been extremely sluggish despite the falling value of the Rupee.

The government’s traditional explanation that India’s high import bill is on account of petroleum is unacceptable. It is true that the country is 86 per cent import dependent on crude oil. Yet, in 2021-22, crude oil accounted for less than 20 percent of the total import bill. Over 70 percent of India’s imports are in the non-oil group.

Going by a Union commerce ministry report, India’s merchandise imports in FY22 hit a record $610.2 billion, an increase of 54.7 percent over the previous year. The imports during April-November this year were $494 billion as against $381 billion for the same period last year.

The merchandise trade deficit for April-November 2022 was estimated at US$198.35 billion as against $115.39 billion in the corresponding period in 2021. During 2022-23, the gross import bill may come close to $700 billion.

Incidentally, the country’s single largest import source is China, which does not feature in India’s oil import basket. The total import from China this fiscal year is expected to be well over $100 billion.

Record imports are taking place almost every month since the beginning of 2022-23. Excessive imports are leading to falling capacity utilisation of Indian industry and lowering the demand for employment.

At a time when the world trade growth is downward and almost every country is struggling to raise exports to keep its labour force employed, India is going gung-ho about imports with little concern if they are being actually dumped by exporting countries.

There have been a lot of serious studies across the world about the impact of imports on employment in importing countries. Not long ago, a similar study found significant negative labour-market effects on the US economy of international trade between the USA and China and concluded: “Rising imports cause higher unemployment, lower labour force participation, and reduced wages in local labour markets that house import-competing manufacturing industries”.

It should be much worse in countries such as India having a large reservoir of unskilled and semi-skilled workforce. Most agree that trade creates new jobs in exporting industries and destroys jobs when imports replace the output of domestic firms. Considering the fact that India’s trade deficits have vastly increased in recent years, more local jobs seem to have been displaced by imports than created by exports.

With the country’s manufacturing sector witnessing almost a 30 percent capacity underutilisation, fresh investments in this field barring a few select areas are unlikely to take place soon. The growth of consumption of home-made goods alone can push up domestic investment and employment.

It is painful to note that the government and its commerce ministry have failed to appreciate this aspect and work together to help boost domestic production and consumption of locally manufactured products and employment. Lack

of enough domestic employment is pushing lakhs of India’s enterprising young job hunters to go to West Asia, the US and other countries to secure employment, often at personal health cost. They send billions of dollars in remittances. Many of them are construction workers. And, life is not easy for most of them.

Responding to a parliamentary question in November 2019, Minister of State for External Affairs V Muraleedhan disclosed that a total of 33,988 Indian migrant workers died in the West Asian Gulf region alone since 2014.

According to the World Bank, India — the largest receiver of foreign remittances — received $100 billion dollars by way of remittances in 2022. In the last four years, the number of migrant workers has risen annually by around eight percent, barring the pandemic-hit 2020.  China used to be the second largest recipient of remittances. It is now down to third. Mexico is second and the Philippines is fourth. None of the developed countries figure in the list of remittance receivers.

Nearly a million migrant Indians work abroad, mostly under stressful circumstances, as there are not enough opportunities in this country.

India’s import trend certainly belies the country’s oft repeated official commitment to self-reliance on industrial production. Although the country’s main items of import can be categorised into five parts, accounting for 63 percent of the total import, others include a host of ordinary and non-essential items for which there is more than adequate domestic capacities.

The five main groups of imports are: mineral fuels, oils and waxes and bituminous substances (27 percent of total imports); pearls, precious and semi-precious stones and jewellery (14 percent); electrical machinery and equipment (10 percent); nuclear reactors, boilers, machinery and mechanical appliances (eight percent); and organic chemicals (four percent).

Nearly 20 percent of the imports, which include consumer electronics, a number of luxury items, furniture, household decors, branded garments, farm products, toys, kite flying string and even toothbrushes, can be produced in the country.

Unfortunately, that is not happening.

India’s major import partners are: China (16 percent of total imports), the United States (six percent), United Arab Emirates (six percent), Saudi Arabia (five percent) and Switzerland (five percent).

So strong is the country’s import lobby that even the Rashtriya Swayamsevak Sangh (RSS) affiliated Swadeshi Jagaran Manch, a rightist political and cultural pan-India movement that deals with economic issues, appears to have failed to prevail upon the ruling regime on the issue of self-reliance and import control.

What is pushing India to become so heavily import reliant remains a mystery. The current import trend is clearly hampering the incumbent government’s avowed bid to improve the country’s education system focusing on skills for want of jobs. In fact, thousands of jobless skilled workers are going offshore to get employed.

The country seems to be happy to export its hapless skilled and semi-skilled workers to pay for import of luxuries by the rich.

(IPA Service)

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