Graphic by Prajakta Patil
Graphic by Prajakta Patil

Your fascination for smartphones is driving India’s trade deficit

India imported $31 billion worth of electronic items in 2013-14; $10.9 billion of this was accounted for by phones

New Delhi: India’s trade deficit in November jumped to an 18-month high of $16.86 billion and the geek in you, Constant Reader, needs to partly share the blame.

India imported $31 billion worth of electronic items in 2013-14; $10.9 billion of this was accounted for by phones.

India imports 65% of its current demand for electronic products. If the situation is left unchanged, the country’s electronics import bill may well surpass its oil import expenses by 2020.

While the demand for electronics hardware in India is projected to increase to $400 billion by 2020, the estimated domestic production could rise to $104 billion only, creating a gap of $296 billion, which has to be met through imports, according to a report by Deloitte Touche Tohmatsu India Pvt. Ltd.

Electronic items are the third most valued category of imports after petroleum products and gold. While India’s fascination for the yellow metal is well-established and the government, from time to time, imposes restrictions on it, at least part of this gold is re-exported in the form of jewellery. For example, gold imports in November was at $5.6 billion, while gems and jewellery exports during the same month was $3.7 billion. That is not the case with electronic items.

India imports most of its electronic equipment, including smartphones, from China. According to the commerce ministry data, import of phones has grown from $665.47 million in 2003-04 to $10.9 billion in 2013-14. And most of it comes from China. Import of phones from China has grown from a paltry $64.61 million to $7 billion during the same period.

India’s trade deficit with its northern neighbour was $36 billion in 2013-14, and just telephone sets contribute one-fifth of it.

The real jump in import of phones from China started in 2008-09 when import of phones almost tripled to $4.9 billion from $1.8 billion the previous year.

What happened that year?

Google’s Open Handset Alliance launched its Android phones.