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Rising trade, and rising tensions: India China

Context:

India’s trade with China is rising to record levels in 2021 and set to cross the $100-billion mark for the first time. Hence, New Delhi faces a new challenge as it looks to recalibrate relations amid a more than year-long border crisis while remaining locked in a deep commercial embrace.

On the investment front, India has imposed certain curbs on Chinese companies and Chinese firms have been kept out of 5G trials – yet, Trade ties have boomed to record levels during 2020-21: Therefore, two seemingly contradictory trends in the bilateral relations between India and China.

Relevance:

GS-II: International Relations (India’s Neighbors, India’s Foreign Policy, Foreign Trade, Foreign Policies affecting India’s Interests)

Dimensions of the Article:

  1. Recent data on trade between India and China
  2. Significance and Concerns regarding trade with China for India
  3. Understanding what we import and what we export to China

Recent data on trade between India and China

  • 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 of 2021 stood at $28.04 billion.

Significance and Concerns regarding trade with China for India

  • Given the huge economic market by China, the India-China relationship has a huge potential for trade ties for Indian companies. The pharmaceutical sector in particular has huge potential yet to be realised.
  • However, there is a risk of India becoming increasingly dependent on China: India imports up to 70% of Active Pharmaceutical Ingredients (APIs) from China, more than 90% of solar components and a large share of auto components as well. India’s trade deficit in bilateral trade relations has only increased over the years.
  • Trade ties booming to record levels amid persistent border crisis with China does not augur well for India’s strategic interests. The deepening commercial relations pose challenges for India which is looking to recalibrate relations with China amid the border crisis.
  • India’s goods and services also face a number of market access impediments in China, including non-tariff barriers in critical segments like agricultural products, pharmaceuticals, IT/ITES, etc.

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.
  • India’s 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.

-Source: The Hindu

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October 2022
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