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India-China’s growing trade ties, improved power use, and GST on COVID-19 equipment: Three things Teji Mandi investors should know on June 09, 2021

05:10 PM Jun 09, 2021 | Teji Mandi

Trade Keeps Us Together

India’s two-way trade with China kept blooming during the pandemic and lockdowns across the globe.

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In 2020-21, India's imports stood at $65.21 billion from China, flat in comparison to the previous year. Exports, on the other hand, surged 27.5% from a year ago to $21.19 billion.

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Telecom devices, electronic and electric goods were the most imported merchandise from China. It was followed by computer hardware and industrial machinery.

Iron ore, steel, and organic chemicals were the major items that India exported to China during the year.

With a massive surge in exports, China has now replaced UAE as India’s second-largest export destination.

However, India's trade deficit - the imbalance between imports and exports - continues to remain very high with China. India would need to reduce this gap to maintain a healthy trade balance between both countries.

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Improved Power Consumption

In the first week of June, India's power consumption increased by 12.6%. It was at 25.36 billion units (BU) as compared to 22.53 BU in the same period last year. However, power consumption has slowed down on an MoM basis by 3.35% in comparison to the same period in May 2021.

The double-digit growth in the first week of June has come on the back of the low base of last year, where power demand had declined drastically due to lockdowns.

Despite the resurgence in power demand, it can still be considered modest. It continues to remain below pre-COVID levels as industrial demand continues to remain low.

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GST on COVID-19 Materials

The group of ministers (GoM) was formed last week to deliberate on what GST rates to be levied on COVID-19 relief material. The committee has suggested reducing GST rates on COVID-19 materials to 5%. It includes items like medical-grade oxygen, oxygen concentrators, pulse oximeters, and COVID-19 testing kits.

With GoM submitting its report, the matter is back to the council. And, a decision is likely to be taken in the GST council's next meeting.

The GoM was constituted to examine the demand of several states where they asked for a complete tax waiver on COVID-related equipment. But, the GoM has favoured maintaining a 5% tax slab on these items. This could well turn out to be another tussle between the government and non-BJP ruling states.

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