Trade Deficit between India and China has increased enormously in recent times and is more than $50 billion. India exported goods worth $10 billion to China in 2005. India had a trade surplus with China during 2003-05.
In 2016 Indian exports are still about $10 billion.
India’s trade surplus has turned into a deficit of more than $50 billion.
During 2005-16 India emerged as a competent global supplier of polished diamonds, small cars, generic medicines, buffalo meat, etc. China imports these products in large quantities for domestic consumption, but not Indian products.
How does China reject Indian products?
1.Quality cannot be a problem as India exports these products to over a 100 countries, including the US and EU. China uses a complex set of inspection, product testing and quality certification requirements to stifle imports from India.
2. Chinese experts inspect Indian factories. Cost is borne by the Indian side and clearance seldom comes.
3. Only Chinese labs do the product testing, and no appeal is allowed on their decisions.
4. China doesn’t accepts Indian basmati rice, while Pakistan’s rice is welcome.
5. Indian IT firms cannot take part if the tender size is more than $100 million.
6. Such measures ensured that India’s exports to China in 2016 stayed at the 2005 level, even as India allowed almost unrestricted access to Chinese goods during 2005-17.
China’s exports to India
Of Indian imports of mobile phones, telecom equipment, and bulk drugs, 70% come from China.
More than 95% of Indian imports of everyday use items also come from China.
Suggestions for decreasing India – China Trade Gap
1.India must push for large scale manufacturing in 30 product groups from electronics, engineering and chemical sectors.
2.Provide 20 years direct tax holiday for investments in these sectors.
3. Create a hundred design studios for new product development.
4. Increase industry-research-academia collaboration. This will help innovation-driven small firms and reduce dependence on import
of daily use goods.
5. Diversify India’s export basket with emphasis on manufactured goods,services, resolution of market access issues and other non-tariff barriers.