Indian Govt Bans IMEI-less Chinese Mobiles, Milk & Steel Products; Is Rising Trade Deficit the Reason?

Showing strict intolerance towards import of sub-standard products, India Govt. has placed a blanket ban of all Chinese mobile which doesn’t have International Mobile Station Equipment Identity or IMEI number; all types of milk and milk products and some products made from steel.

Commerce Minister Nirmala Sitharaman informed the Lok Sabha about this decision to ban Chinese products, as she said, “Complete ban of import from any country is not possible now due to WTO rules even if we have problems diplomatically, territorially or militarily,”

After coming to power, this can be described as one of the most powerful decisions by Modi Govt., as banning imports from a country like China will definitely affect India’s foreign policy and future trade relations.

We have already described how Chinese products are notorious for being fake; infact, 40% of all products sold online in China are fake.

But, besides controlling the quality of products, what else prompted Indian Govt. to take such strict action against China?

Rising Trade Deficit Is Concerning India?

Trade deficit is an economic condition, wherein a country’s imports are more than its exports. Hence, in case trade deficit rises, it means that there is an outflow of domestic currency to other countries, markets and institutions.

Not necessarily a bad situation, but continuous trade deficit means that Indian exporters are getting a raw deal, and Indian currency is being held by foreign markets who can manipulate Indian markets at will.

With China, trade deficits currently stands at $48.68 billion during 2015-16 (April-February), and total trade stood at $65.16 billion. This means, that India is importing more from China, while exports are down substantially.

In other words, we are now more dependent on China, compared to Chinese being dependent on us for bilateral trade.

Explaining the reason behind rising trade deficit with China, Minister said, “Increasing trade deficit with China can be attributed primarily to the fact that Chinese exports to India rely strongly on manufactured items to meet the demand of fast expanding sectors like telecom and power, while India’s exports to China are characterized by primarily and intermediate products,”

As per reports, India is negotiating with China to open up their IT and Pharma industries, so that India can increase exports in these markets, and trade deficit is balanced between the two countries.

It would be interesting to observe how China responds to this ban.