Daily Hot Topic
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
Investment:
- 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.
हिन्दी