India’s Trade Deficit With China

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External Affairs Minister S Jaishankar, speaking during a panel discussion at the inaugural session of India Singapore Business & Innovation Summit here, said – India remained concerned over the unfair market access to Indian products and the “protectionist policies” of Beijing that have created a significant trade deficit between the two nations.

INDIA CHINA TRADE FACT

Since China joined the WTO in December 2001, Indian-China trade has grown from $1.49 billion to $84.4 billion in 2017.
Today, China is India’s one of the largest trading partner.
While we are China’s 11th largest trading partner.

Most of India’s exports to China are goods and raw materials.
But it imports intermediate and finished goods.
In 2016-17, the imports comprised of 16% capital goods, 21% consumption goods, and 63% intermediate goods.
The main exports to China are petroleum products, cotton, organic chemicals, iron ore and plastic raw materials.
Commodities India imports from China are
machines for reception, conversion-transmission, bulk drugs and drug intermediates, consumer electronics, and telecom instruments.

Overall, India’s trade deficit with China did fall by a few billions but there is a catch.
India’s import of mobile phone spare parts from China fell by as much as 34.1% in 2018.
But the import of those very parts from Hong Kong saw a 728% increase during that period.

The import of microchips, from China did rise a bit.
But the import from Hong Kong went through the roof, going up 6,000%.
This new situation has led to speculation, China might be using Hong Kong to camouflage the actual size of its exports to India.
Trade deficit with Hong Kong has risen to $5 billion.

China is a big importer of farm products which feed its massive population.
India is the world’s largest producer of rice, whereas China is the biggest importer of this commodity.
China imports 3.4 million tonnes of raw sugar per year.
India’s sugar industry should be able to negotiate a way into this sector.

There is an opportunity in the ongoing US-China Trade War.
Recent SBI research shows, the trade conflict has actually helped India.
Indian exports to China in animal products, vegetable products, and plastic & rubber has grew by 335%, 134%, and 93.7% respectively in FY19 as compared to FY18.