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India’s Trade with China

  • 18 Jan 2022
  • 6 min read

For Prelims: India-China Trade, Active Pharmaceutical Ingredients (APIs), ASEAN, European Union, Pangong lake, New Border Law.

For Mains: India's Economic Dependence on China and way ahead.

Why in News

India’s trade with China in 2021 crossed USD125 billion with imports from China nearing a record USD100 billion, underlining continued demand for a range of Chinese goods, particularly machinery.

Key Points

  • India’s Biggest Exports to China:
    • India’s biggest exports to China in recent years were iron ore, cotton and other raw material-based commodities, which have seen a recovery in demand in China last year (2021).
  • India’s Biggest Imports from China:
    • India has imported large quantities of electrical and mechanical machinery, Active Pharmaceutical Ingredients (APIs), auto components and, over the past two years, a range of medical supplies from oxygen concentrators to Personal Protective Equipments (PPEs).
  • Growth in Bilateral Trade:
    • The 43% year-on-year growth in bilateral trade with India was among the highest among China’s major trading partners.
    • Trade figures with China’s top three trading partners showed growth of 28.1% with ASEAN (to USD 878.2 billion), 27.5% with the European Union (to USD 828.1 billion), and 28.7% with the United States, to USD 755.6 billion.
  • Trade Deficit with China:
    • The trade deficit for India grew to USD 69.38 billion in 2021.
    • India has been highlighting its concerns over the growing trade deficit with China for over a decade and calling on China to open its markets for India's IT and pharmaceutical products.
      • Trade deficit refers to a situation where the country's import dues exceed the receipts from the exports.
  • Steps taken to Counter Dependence on China:
    • Ban on Chinese apps.
    • Increasing scrutiny of Chinese investments in many sectors, and a decision to keep Chinese companies out of 5G trials.
    • The government has also made its prior approval mandatory for foreign investments from countries that share land border with India to curb "opportunistic takeovers" of domestic firms - a move which will restrict FDI from China.
    • To cut import dependency on China for APIs (Active Pharmaceutical Ingredients), the government in March, 2020 approved a package comprising four schemes with a total outlay of Rs. 13,760 crore to boost domestic production of bulk drugs and medical devices in the country along with their exports.
    • In 2020, the Ministry of Commerce and Industry identified 12 sectors - to make India a global supplier and cut import bills.
      • These sectors are food processing, organic farming, iron, aluminium and copper, agro chemicals, electronics, industrial machinery, furniture, leather and shoes, auto parts, textiles, and coveralls, masks, sanitisers and ventilators.

Current Issues in India-China Relations

  • Military Standoff in Eastern Ladakh:
    • The border standoff between India's and China's armies began in May 2020 after a violent confrontation in the Pangong lake areas, and both sides have gradually increased their deployment by pouring in tens of thousands of soldiers and heavy weaponry.
    • On 12th January, 2022 the two sides met for the 14th round of Corps Commander-level discussions to end the standoff in the remaining territories, and they promised to meet again shortly.
  • New Border Law:
    • China's new law on land borders has come into effect from the new year (2022).
    • The law states among other things that China abides by treaties concluded with or jointly acceded to by foreign countries on land boundary affairs.
  • Renaming of several places in Arunachal Pradesh:
    • Several places in Arunachal Pradesh have been renamed recently by China as part of its claim on the Indian state.
    • India condemned the move on a global scale and the country has responded with a clear statement that assigning invented names would do no good and would not alter the facts that the places are a part of Arunachal Pradesh.
  • Bridge across Pangong Lake:
    • Recently, it was found that China is building a new bridge on Pangong Tso which will provide an additional axis to deploy troops faster between the north and south banks of the lake, and closer to the LAC (Line of Actual Control).
      • The bridge is in their territory, and the Indian Army will have to factor this in its operational plans.

Way Forward

  • To reduce the dependence of Chinese products, India needs to analyze imports from China, and develop the way forward.
  • Further, based on the economic complexity model, the Indian government can formulate proper road maps through compartmentalizing them as per technology and innovation capabilities.

Source: TH

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