India-China Bilateral Trade

India-China Bilateral Trade

News: Recent data suggests that India and China trade reached record levels in 2023.

Background:
• In 2022, the overall trade with China increased by 8.47% year on year to reach USD 136.26 billion, crossing the USD 100 billion mark for a second time in a row.
• The trade deficit came at USD 101.28 billion as India’s imports from China witnessed an increase by 118.77%.
• As of 2022-23, China was India’s third-largest trading partner.

What are the major concerns involving India-China Trade relations?
• Trade deficit: India has a large and persistent trade deficit with China, which reached a record high of over USD 100 billion in 2022. This reflects the imbalance in the trade structure, where India mainly exports raw materials and intermediate goods, while China mainly exports finished products and high-tech goods.
• Non-tariff barriers: India faces various nontariff barriers in the Chinese market, such as sanitary and phytosanitary measures, technical regulations, standards, and certification requirements, which restrict the export potential of Indian product.
• Lack of Transparency: India has also raised concerns over the lack of transparency and predictability in China’s trade policies and practices, such as subsidies, dumping, and intellectual property rights protection.
• Quality and Safety of Chinese Goods: There have been concerns in India about the quality and safety of some Chinese goods, particularly in sectors such as electronics and consumer products.
• Geopolitical tensions: The bilateral trade relations between India and China are influenced by the geopolitical tensions and strategic rivalry between the two countries, especially over the border dispute in eastern Ladakh.

How does India plan to reduce its trade deficit with China?
• Launching production-linked incentive schemes to promote domestic manufacturing in sectors like electronics, pharmaceuticals, textiles, and automobiles.
• Mandating local content in public procurement and restricting or prohibiting certain imports from China on quality, security, or environmental grounds.
• Launching a series of anti-dumping probes against Chinese products that are sold below their fair market value and harm the domestic industry.
• Seeking greater market access and tariff concessions from China for its products, especially in sectors where it has a comparative advantage or a sizeable market.