Electrical machinery, parts boost India’s imports from Vietnam by 17% in Jan-Jul

Contact Counsellor

Last Updated27/08/2024

The Economic Survey 2023-24 noted that the rise in trade through countries such as Mexico and Vietnam is a “result of Chinese firms re-routing their supply through these countries.”

India’s trade relations with Vietnam have seen significant growth, particularly in the import of electrical machinery and parts.
According to data from the Ministry of Commerce and Industry, India's imports from Vietnam increased by 17% to $5.8 billion between January and July 2024, compared to the same period in the previous year.
Notably, imports of electrical machinery and parts surged by 43% between January and May 2024, marking Vietnam as a key player in India’s trade dynamics.

The increasing trade with Vietnam is partly driven by a shift in global supply chains, influenced by geopolitical tensions and trade policies.
The Economic Survey 2023-24 highlights that Chinese firms are re-routing their supply chains through countries like Vietnam to circumvent tariffs and trade barriers imposed by the US and the EU.
This strategic relocation has bolstered Vietnam’s export capacity, enabling it to capitalize on the "China Plus One" strategy adopted by many global manufacturers looking to diversify their supply chains away from China.
Vietnam has also emerged as a significant beneficiary of Chinese Foreign Direct Investment (FDI).
By focusing on attracting Chinese FDI, Vietnam has enhanced its manufacturing capabilities, particularly in sectors such as electronics and machinery, which are now integral to its export portfolio. The country's exports surged by 14% to $190 billion in the first half of 2024, reinforcing its position as a rising trade hub in Southeast Asia.

However, the growing imports from Vietnam have raised concerns within India. The Indian Steel Association (ISA) has called for an investigation into imports of hot-rolled flat products from Vietnam, citing their negative impact on domestic steel prices.
This concern has led to the Ministry of Commerce and Industry initiating an anti-dumping investigation into these imports.
Further complicating the trade scenario is the potential misuse of Free Trade Agreements (FTAs).
Indian Customs have flagged instances where ASEAN firms, including those from Vietnam, made minor modifications to Chinese-made products and exported them as "Made in ASEAN" to India, benefiting from zero-duty access under FTAs.
This practice undermines the intent of FTAs and raises issues of compliance and monitoring.

The surge in imports from Vietnam underscores the challenges India faces in decoupling from China, as noted in the Economic Survey.
China's dominance in global supply chains, particularly in critical minerals and manufacturing, makes it difficult for countries to reduce their dependence on Chinese inputs.
Despite efforts to diversify, including the imposition of Quality Control Orders (QCOs) on various products, India's imports from China continue to rise, exceeding $60 billion in the first seven months of 2024.
Vietnam’s growing trade relationship with China and the US further complicates the global trade landscape.
With Vietnam’s imports from China and exports to the US both witnessing substantial increases, the country is strategically positioning itself as a key player in global trade, benefiting from Chinese investments and reconfigured supply chains.