To hold strategic economic dialogue in New Delhi on November 26

With India and China set to hold their annual Strategic Economic Dialogue (SED) in New Delhi in the last week of November, both countries this week launched a renewed push to address a ballooning trade deficit which, officials say, is beginning to increasingly strain the trade relationship.

China indicated its willingness to provide better market access by promoting India as a partner-country at a major automobile components’ fair held here on Friday. Indian officials said they would, on their part, do more to support investments in China and help equip companies, which are often unaware of the specific challenges of the China market, to make more robust entries.

Bilateral trade

While bilateral trade has soared from a few billion dollars to $74 billion last year — when China became India’s biggest trade partner — the trade imbalance has widened rapidly, reaching $27 billion in 2011. Trade has been dominated by Indian exports of iron ore and imports of Chinese machinery, particularly in the power and telecom sectors.

Against the backdrop of a rising trade deficit, trade tensions have risen, with India filing an increasing number of anti-dumping investigations against China, and recently considering enforcing 21 per cent import duty on power equipment.

India has identified information technology, pharmaceuticals and the engineering industry as sectors where it will push exports. On Friday, the Indian Government and the Confederation of Indian Industry held a first-ever “India Show” to promote Indian companies at China’s biggest auto expo.

The $27 billion deficit, Indian Ambassador to China S. Jaishankar told the meeting, was becoming “difficult to sustain or to defend”. Both countries had realised this, he said, pointing to the September meeting between trade ministers that saw an agreement to develop a joint strategy to bridge the deficit.

Pushing investments

Asit Tripathy, Joint Secretary, Ministry of Commerce, said India was also looking beyond the trade imbalance to push investments. Chinese companies, he said, were involved in projects worth $60 billion in India. “We hope to have similar Indian investment in China, and we will provide impetus for that kind of engagement,” he said.

While India has expressed concerns on market access, China, on its part, has expressed worries about barriers to investment in India, on account of security concerns, and a spate of anti-dumping investigations filed by India. Chinese officials say India has filed more cases than any other country. Next month’s SED, scheduled to be held on November 26, will grapple with some of these issues.

“We need a very positive, favourable trade environment… and to guard against protectionism,” said Wang Guiqing, Vice-President of the China Chamber of Commerce for Import and Export of Machinery and Electronic Products.

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