The devaluation of the Chinese currency is expected to hurt the domestic industry as it will make Indian exports expensive in the global market, a monthly newsletter of the DIPP said.
"The impact of yuan devaluation on Indian industry is expected to be threefold," it said.
It said that loss in currency competitiveness against Yuan will hurt already ailing exports from India to China by making them costlier .
India's exports contracted for the eighth straight month by 10.3 per cent in July to USD 23.13 billion, pushing the trade deficit to USD 12.81 billion.
"Commodities such as organic chemicals, plastics, mineral oils, copper, and cotton, etc. Are likely to face greater brunt," it said adding adverse impact will also be seen on producers competing with China in the global export market.
Domestic industry will have to compete with cheaper imports from China and are likely to suffer as China's share in India's total imports is around 13.48 per cent which has almost doubled in span of ten years, the Department of Industrial Policy and Promotion's (DIPP) said.
Principal commodities of imports from China to India during 2014-15 included electrical machinery and equipment (27.7 per cent); machinery and mechanical appliances (16.8 per cent); Organic chemicals (10.5 per cent); fertilizers (5.2 per cent) and Iron & Steel (4.5 per cent).
"Already domestic industry viz. Steel (China was the largest exporter of steel to India in 2014-15), tyres (some estimates show that share of Chinese tyre imports in overall tyre imports was more than 80 per cent in April-July 2015), etc. Are suffering from cheaper imports from China and have made submissions regarding dumping by China," it added.
Devaluation is likely to further hurt these industries, it said.
Chinese government has devalued Yuan by around 4 per cent against US dollar in August first half 2015.
