India’s import-export landscape has remained stable in recent years despite major changes in the domestic and international economies. In recent years, India’s main import and export commodities have mostly not changed, while its largest trading partners have also remained the same. This stable import-export structure bodes well for businesses that trade with India, as well as those that would like to expand their operations to the country.
India’s Imports in 2015
During the current Financial Year (FY), China exported products worth US$60.4 billion to India, making China its biggest exporter. India is an important market for China; the East Asian country’s manufacturing capacity complements India’s under-performing manufacturing sector. India’s importance to China is reflected in the over US$22 billion in investments from China that Prime Minister Narendra Modi helped secure during his trip there in May, which was partly designed to help redress India’s trade imbalance with China. Indonesia and South Korea are the only other East Asian economies in India’s top ten import sources in the current FY.
The second largest exporter to India was Saudi Arabia, which exported goods worth US$28.2 billion. The United Arab Emirates (UAE), Qatar, Iraq and Nigeria are also major exporters to India, reflecting India’s high demand for petroleum.
India’s largest import is crude petroleum, with around US$116.4 billion worth being imported in FY 2015. In the current FY, India became the third largest importer of crude oil, after the U.S.
and China. Oil imports for India have been steadily rising in tandem with its growing economy over the past few years.
India’s demand for crude petroleum is expected to keep rising in 2015, and may surpass the Chinese demand for oil. Iran’s oil production in April 2015 jumped to its highest level in three years as India imports grew, highlighting how Indian oil demand shapes oil production for major exporters.
Major exporters such as Saudi Arabia, who are trying to consolidate their share of the India market, recognize India’s importance as an oil importer. Industry experts note that Saudi Arabia, for example, is exploring ways to become more price competitive, such as by providing their own tankers in order to make Saudi crude a more attractive option for Indian refiners.
Gold, Pearls, Precious and Semi-precious Stone
India’s second largest import is gold, while its third is precious and semi-precious stones. Together, they account for nearly US$57 billion worth of imported goods in FY 2015.
Domestic consumer demand for gold is driven by cultural and economic factors. Many Indians purchase gold for major occasions, such as festivals or marriage ceremonies, because it’s considered auspicious. Meanwhile, many Indians consider gold as one of the safest investment options. Gold is also required to sustain jewelry production; jewelry remains one of India’s top exports.
These factors make India the largest consumer and importer of gold in the world. India needs to import gold from China, Australia, South Africa, Russia and the U.S. in order to fulfil its demand. Meanwhile, importing gold has become easier as the Reserve Bank of India (RBI) has liberalized gold import norms.
India imports a high level of pearls, precious and semi-precious stones for the same reasons that make it a major gold importer. Indian consumers see pearls, precious and semi-precious stones as culturally auspicious and a safe investment option. Meanwhile, pearls, precious and semi-precious stones are an important resource for Indian jewelry production.
In 2014, India was the largest importer of rough diamonds in the world. India is considered as one of the global centers of diamond cutting and the Indian government is now planning to establish
tax-free economic zones for diamond import and trading in Mumbai.
Learn more about how Skoda Minotti’s International Tax group can grow your business.
Originally published by Dezan Shira & Associates, a fellow LEA Global member.