Topic: India-China trade imbalance

Trade between the countries has expanded in last year. However, it remains heavily skewed in favour of China, as India continues to import merchandise for its manufacturing sector.

When the gains from global integration can be captured within a limited zone such as Hainan, governments may find it more efficient to confine liberalisation than extend it nationally.

With the US effectively shutting its doors, the fear is that a cornered China will dump even more aggressively and flood other markets. India must brace for impact.

The World Bank has urged India to reconsider its position on RCEP. Worries about China’s overcapacity and India’s struggles with previous FTAs had led to its withdrawal in 2019.

PM Modi has sought to incentivise manufacturing in India through PLI schemes, but the components have come mainly from China, with Indian companies only engaged in assembling.

India has reasons to achieve pragmatic economic exchanges, as articulated in the Economic Survey—the inescapability of Chinese supply chains, the ineffectiveness of tariffs, and India’s dependence on Chinese imports for its manufacturing sector.

Over past 3 years, commerce ministry data on bilateral trade with China has hovered around $95 bn. Data from Chinese govt over last 3 fiscals shows figures steadily above $110 bn.

In his article, Zhang Jiadong, director of the Center for South Asian Studies at Fudan University, discusses India’s shift towards a ‘great power strategy’ under Modi.

Veteran investor says government’s swift actions to ease doing business in India will ensure that manufacturing remains in the country and does not shift back.

Commerce ministry data shows that in April and May, India’s exports to China declined by 31% while imports grew by 12.75%. Overall trade grew by just 2% compared to previous year.