Context:

India’s trade with China in the first half of 2021 rose by a record 62.7%.

Relevance:

GS-III: Indian Economy (International trade), GS-II: International Relations (India and its Neighbors)

Dimensions of the Article:

  1. Highlights of the latest data on India-China trade
  2. Understanding what we import and what we export to China
  3. India’s Dependence on Chinese Imports

Highlights of the latest data on India-China trade

  • India’s increase of trade with China by more than 60% in the first half of 2021 is the highest increase among China’s major trade partners — with total two-way trade surpassing the pre-pandemic levels.
  • India’s imports, driven by record purchases of medical supplies increased by more than 60% and higher than the first-half 2019 figure.
  • India’s exports to China climbed by almost 70% which is also the highest figure on record for the first half of any year.
  • The trade deficit for India with China after the first six months stood at $28.04 billion.

Understanding what we import and what we export to China

  • India’s exports to China have risen and imports have fallen over the last few years and a closer look at the items traded between the two countries shows the unequal bilateral trade.
  • Trade numbers between 2014-15 and 2019-20 show that export of low-value raw materials and import of high-value manufactured goods has characterised India’s trade relationship with China, akin to the ties the country had with its colonial ruler Britain in the years before Independence, said trade experts.
  • This “colonial pattern” of trade has meant that India’s exports to China over the last six years have been only fifth in value of India’s imports from China.
  • While average exports from China have been around $13 billion in the six years 2014-20, the average value of imports from China has been $66 billion in the period.
  • India’s exports have ranged from food items like fish and spices to essential inputs like iron ores, granite stones, and petroleum products.
  • India’s major exports to China in the last six years were iron ore, petroleum fuels, organic chemicals, refined copper and cotton yarn. Among food items, some of the other major items exported were fish and seafood, pepper and vegetable oils and fats. Blocks of granite and other building stones and raw cotton were also among exports.
  • Its imports from China have been dominated by electrical machinery and equipment, and other mechanical appliances. India’s major imports from China have been of items like automatic data processing machines and units, telephone equipment and video phones, electronic circuits, transistors and semiconductor devices, antibiotics, heterocyclic compounds including nitrogen, fertilisers, sound recording devices and TV cameras, automobile components and accessories and project goods.

India’s Dependence on Chinese Imports

  • India must remember that even though its widening trade deficit with China remains an eyesore for policymakers, dependence on Chinese products has only grown year after year.
  • In 2019, Chinese imports alone accounted for 34% of all the foreign value-added in India’s exports, data from the United Nations Conference on Trade and Development shows. In 2009, this figure was just 1.8%.
  • Over the last decade, India’s dependence on China for inputs for the manufacture of drugs and consumer goods has shown a marked increase. All this will matter even more in this time of crisis after the coronavirus.
  • A strengthening anti-China sentiment and louder calls for self-reliance could actually go against India’s interests and economic logic.

-Source: The Hindu

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