Increased integration and interdependence among countries is a fact of modern economies. This has undoubted strengths. Its pitfalls were evident when the tremors caused in one region of Asia were felt globally. India was no exception — its dependence on imports is well known, and it is not just in oil and gas but a whole host of raw materials, intermediates and capital goods.The monthly GST data is a stark indicator of the extent of dependence; it is the IGST revenue which is the major contributor to the overall GST kitty. Thus, for instance, for the month of May 2026 India’s gross GST revenue was ₹1,94,184 crore out of which the CGST revenue was ₹37,397 crore, SGST was ₹45,143 crore, while IGST was ₹1,11,644 crore. The IGST revenue includes domestic transactions of ₹51,990 crore-the import component of IGST at ₹59,654 crore being the single highest contributor. Import-linked GST revenue grew by 19.1% on year-on-year basis.In this regard Bank of Baroda (BoB) have made an interesting study of import dependency of India Inc from the balance sheet and P&L statement of 1372 companies (other than banks & financial companies). The ratio of imports, cost, insurance, freight (CIF) to net sales has been taken as the proxy for import intensity of output. This is a fair assumption for it signifies the percentage of revenue which a company spends on importing raw materials/intermediate goods as an indicator of import dependence.
The Study suggest that the West Asian crisis has obviously triggered a sharp increase in crude oil prices by as much as 31%. Metal prices from aluminium to zinc, copper, nickel, lead have also spiked up; gold, silver and palladium prices have been very volatile. So obviously the impact on industries which are reliant on oil or metal has been high.The analysis shows that for sectors such as industrial gases and fuels, non-ferrous metals and crude oil, the import to net sales ratio is above 50%. In the case of capital-intensive sectors such as iron & steel and ferro-manganese the import intensity is estimated above 20%; electronics at above 32%; chemicals at 35%; fertilisers at 30%; and pesticides and agrochemicals at above 27% are also high.This has in turn meant that growth in imports have outpaced the growth in net sales. Thus, in the electrical, capital goods, infrastructure, automobiles & ancillaries and non-ferrous metal sectors the import growth was higher than average. Having said that, the government’s sustained efforts at building domestic capabilities (Make in India, PLI, chemical parks) have borne some results. Sectors like carbon black, cables, consumer durables had a marginal reduction in import dependency.What the BoB study does suggest is that the import intensity of India Inc is not broad based. It some obviously concentrated in some industries like refineries, petrochemicals. What the study also throws up is the suggestion that sectors like consumer durables have been impacted lesser. And finally, of course that fact that import dependency is reducing albeit very slowly is a welcome sign.We would need to juxtapose this Study with the rupee’s fall-down by at least 10% from ₹86 to a dollar to ₹95 + in lesser than a year. The West Asian crisis more specifically the consequent wild fluctuation in oil prices and the outflow of FII have contributed to this situation. We are assured that 100 is just a number-but this number makes imports costlier, leads to further outflow of foreign exchange which we are trying to preserve.LPG price has been hiked by ₹29 making this the second hike in three months-the cumulative increase being ₹89 per cylinder. All these factors have led to inflation. The IMD has already predicted a lesser than normal rainfall season -below normal rainfall will add to the food inflation. The RBI has projected CPI inflation to average at 5.1% for FY 27 up from the earlier forecast of 4.6%. The RBI has also revised its FY27 GDP growth forecast downward to 6.6% from 6.9%.The Central Bank has announced several measures to attract foreign inflows- including opening long-tenure bonds to foreign investors and the facility to pay for hedging costs of banks fetching dollar deposits. The government has also chipped in-taxes on capital gains and interests for foreign investors in government securities has been removed. We should keep in mind that manufacturing growth has moderated sharply to 7.3% in Q4 from 12.8% in Q3. The service sector has shown resilience. Very many of the FTAs will become operational-and hopefully provide export opportunities.Shankkar Aiyar has written that India Inc is sitting on around ₹15 lakh crore in cash. This is huge-but there still seems to be hesitation in investing within the country. The corporate bond market, which SEBI Chief Tuhin Kanta Pandey called as the economy’s second engine of growth, which helps reduce over-reliance on banks, remains untapped.As pointed out by the SEBI Chairman, out of the 6000 odd companies listed in NSE and BSE only 776 have listed debt. R&D continues to be neglected; India Inc needs to invest more in the country, focus on R&D, on localisation over imports wherever possible, hedge against input costs, harness free trade agreements. While the government is doing what it can, the corporate sector must step forward. —The author, Najib Shah, is former Chairman, Central Board of Indirect Taxes & Customs (CBIC). The views are personal.
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