China-India bilateral trade is a much-debated topic in recent times due to multitude of factors ranging from challenges due to import dependency in some sectors to the business opportunities as the global supply chain potentially shifts from China to the rest of the world including India.
To put it in perspective, China is India’s one of the leading trade partners and constitutes 9% of India’s total export and 18% of total merchandise imports.
Import dependency on China for a range of raw materials (APIs, basic chemicals, agricultural intermediates) and critical components (Auto, Durables, Capital goods) is skewed. To give a flavour, out of the respective imports, 20% of the auto components and 70% of electronic components come from China. Similarly, 45% of consumer durables, 70% of APIs and 40% of leather goods imported are from China.
Since the COVID 19 outbreak, there have been nation-wide protests to suspend trade form China or completely ban Chinese products, however are we in the position and power to do that? The answer is `No’, because as per World Trade Organisation (WTO) rules, it is not possible to impose a full ban on imports from any country even if there are no diplomatic, regional and trade relations with that country, but still India has banned some Chinese products based on health and security issues.
Trade figures suggest that India is the biggest importer of Chinese consumer goods. India imports almost seven times more from China than it exports to it. India has huge trade deficit with China – its largest with any country. In 2018-19, India’s exports to China were mere $16.7 billion, while imports were $70.3 billion, leaving a trade deficit of $53.6 billion.
It needs to be acknowledged that China’s exports to India account for only 2% of its total exports, so even if Indians boycott all the goods imported from China, it will not make as big an impact on China. Data also suggests that China is India’s largest trading partner, but the trade is heavily skewed in favour of China.
Thus, initiating a trade war when Indian manufacturing ability is limited is not going to favour India.
– SAHEJ KAPOOR