New DelhiThere is some bad news about the trade imbalance between India and China: it is likely to get worse this year.
Not only is the trade deficit expected to widen again, India’s exports to China may also fall for the first time in years if the figures for the first two months of this financial year are any indication. Ministry of Commerce information It shows that India’s exports to China declined by 31 per cent in April and May, while imports increased by 12.75 per cent.
According to data from the ministry’s website, in the last seven years, India’s exports to China have never contracted – except in 2019-20, when the pandemic hit global trade.
A senior government official told ThePrint, “One of the main reasons for the decline in exports is the fall in global commodity prices due to concerns of a slowdown in the global economy.”
In 2021-22, the trade deficit between India and China widened to $72.9 billion from $44 billion in the previous year. Overall, India’s trade trade deficit in the same year stood at $192.24 billion, an increase of 87 percent over the previous year.
A trade deficit occurs when a country’s imports of goods and services exceed its exports in a given time period. In the current year till May, the deficit with China is $ 12.32 billion.
Overall, trade between the two countries grew by just 2 percent in April and May compared to the previous year. The region wise data for June has not been uploaded by the commerce ministry yet.
Speaking to ThePrint, Biswajit Dhar, Professor, Center for Economic Studies and Planning, Jawaharlal Nehru University, said the hurdles China is currently facing with respect to its domestic lockdown to contain the spread of COVID Now the business is getting reflected in the numbers.
However, Dhar said he expects the trade deficit with China to widen “only because India’s exports are not expanding”.
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‘India needs export-competitive industries’
Some of the top items India exports to China include petroleum products, iron ore, marine products, organic chemicals, non-basmati rice, spices, castor oil and copper products.
On the other hand, India’s imports from China have been largely driven by capital and intermediate goods, said the government official cited above. These include electronic components, computer hardware, telecommunications equipment, industrial machinery and consumer electronics.
The slowdown in China’s manufacturing in the wake of the Kovid lockdown has led to a sharp decline in the value of iron ore and copper exports. Commerce ministry data shows that meat and cotton exports from India have also declined.
Meanwhile, India has been dependent on China for a lot of chemicals used in many industrial products. The government official said India also had a “large dependence” on China for pharmaceutical products, which are eventually used as raw materials for goods to be exported.
Dhar said he didn’t expect the imbalance to be corrected anytime soon.
“Even after the Chinese economy opens up, I don’t think this trend will change because according to the 2021 data, China was not as affected by Covid. If you look at all the macro indicators, and then if you extrapolate those figures to trade data, you will find that the trade deficit with China has reached record levels,” he said.
Dhar said the only way India can reduce its trade deficit with China is by setting up export-competitive industries.
“It is not about Make in India but to make Make in India globally competitive. And that only comes from scale. I don’t think India has internalized it yet,” he said.
According to the State Bank of India (SBI) research report from February, India can add If it can reduce its dependence on imports from China by 50 percent by taking advantage of production-linked stimulus schemes, it could increase its gross domestic product (GDP) by up to $20 billion. The report further said that the share of China in India’s total merchandise imports has steadily increased to 16.5 percent by 2021-22.
switch partners
In the past decade, except for a year or two, China has been India’s largest trading partner. In the last fiscal year, that gap went up in the United States, a lot. China’s restlessness,
According to commerce ministry data, bilateral trade between the US and India stood at $119.42 billion in 2021-22, up from $80.51 billion last year. Bilateral trade with China stood at $115.42 billion during the same period.
This comes in the wake of an economic face-off or ‘trade war’ between the US and China post-Covid slowing down the Chinese economy and a favorable geopolitical environment for India.
Experts also believe that the supply disruptions due to the lockdown in China made many countries realize the need to diversify their import sources.
(Edited by Asawari Singh)
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