Enumerate the reasons that have led to a lopsided trade between India and China. Do you agree with the view that a face-off between the two countries has more economic ramifications than security? Discuss.
The trade relationship between India and China the most important aspect of the bilateral relationship. The total trade between both the countries is around 70 billion dollar. However, India has a nearly 50 billion-dollar trade deficit. Imbalance in trade is evident from the fact that import from China are nearly 5 times than exports from Indian side.
Various reasons for the trade imbalance
- Major issues is: India’s export competitiveness: China despite currency appreciation maintained competitiveness because of better productivity then of its trading partner.
- India’s poor manufacturing base and unskilled population.
- India exports raw materials and import finished products. Therefore what China Exports to India is of higher value as compared to what India exports to China
- Market access is also important reason of trade imbalance. Government regulations in China hinder Indian companies from penetrating the Chinese market.
- There is a lack of government industry coordination as compared to China which do have better coordination between Government and industry as a whole.
- Another issue is lack of diversity in our export basket
India and China are two rising powers. Tension between them will have ramifications in every aspect. Since in present time economic relations-ship shape the overall relationship. For example US & China, despite having confrontation on various aspects there relationship is bound by economic calculations. Same is the case with India and China. Neither India nor China can afford disturbance in economic relationship.
Indian need to have a comprehensive study to deal with the trade deficit by involving both public and private sector. Along with it we need to emphasize on our competitiveness, exchange rate, skill development, taxation policy and better infrastructure.
Anti dumping measures on products such a solar cell which can harm domestic market should be initiated in multilateral forums such as WTO. India needs to diversify its export basket to bridge the deficit.