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Topic : India-China Trade Relations

GS-2 Mains : IR

Revision Notes

China: India’s Largest Trading Partner (GTRI data, FY24)

  • Trade Value: $118.4 billion (China’s lead over US is narrow)

Key Points:

  • Export Growth: 8.7% (Iron ore, textiles, spices)
  • Import Growth: 3.24% (Heavy reliance on China for Telecom & EV parts)

Trade Deficit:

  • Widened 45.6% YoY to $101.28 billion in 2022


  • Uneven growth: China’s investment in India declining, while India’s investment in China is minimal.

Mechanisms for Dialogue:

  • Joint Economic Group (JEG) – 1988 (Trade cooperation)
  • Strategic Economic Dialogue (SED) – 2010 (Macro-economic cooperation)
  • NITI Aayog-DRC Dialogue – 2015 (Global economic cooperation)

Banking Sector:

  • SBI: Only Indian bank authorized for local currency business in China.

Multilateral Development Banks:

  • AIIB: India is 2nd largest shareholder (8%).
  • NDB: India is biggest borrower with approved projects worth $6.92 billion.

Other Issues:

  • Cooperation in petroleum sector.
  • Revised Double Taxation Avoidance Agreement (DTAA) in 2018.
  • India’s concerns: Heavy import reliance on China, leading to measures like PLI schemes and anti-dumping duties.

China’s Advantage:

  • Strong Manufacturing Base: Economies of scale, efficient supply chains, and subsidies lead to lower production costs.
  • Product Diversification: Offers a wider variety of goods, including high-tech products India imports heavily.

India’s Challenges:

  • Limited Manufacturing Capacity: Infrastructure bottlenecks, complex regulations, and skilled labor gaps hinder competitiveness.
  • Focus on Primary Goods: Exports concentrated on low-value-added products like raw materials and textiles.
  • Non-Tariff Barriers (NTBs): Stricter Chinese regulations may restrict Indian market access.
  • Currency Fluctuations: Can impact relative export competitiveness.
  • Lower FDI: Compared to China, limiting growth in India’s manufacturing sector.

Way Forward for India:

  • “Make in India” Initiative: Improve ease of doing business, attract investments, and upgrade manufacturing.
  • Promote Innovation: Encourage R&D to create new exportable products and technologies.
  • Diversify Trade Partners: Negotiate trade agreements with other countries to reduce reliance on China.

Source : https://www.livemint.com/news/india/china-surpasses-us-becomes-indias-top-trading-partner-with-118-4-billion-business-11715579207133.html


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