Issue expected to figure prominently during PM’s visit next week

India’s trade deficit with China this year is likely to surpass even last year’s record $28 billion, according to new trade data released this week.

After nine months of this year, the trade imbalance in China’s favour has reached $24.7 billion, with India’s exports to China down by as much as 22.5 per cent last month. Overall bilateral trade reached $48.5 billion, down by 4.5 per cent in September.

The new figures, released only a week before Prime Minister Manmohan Singh’s scheduled arrival in China on October 22 on a two-day visit, have underlined the increasingly skewed trade relationship, which has alarmed officials and cast a shadow on once-prospering ties that propelled China to become India’s biggest trading partner.

Booming trade — largely driven by Indian imports of machinery, and power and telecom equipment, and Chinese appetite for iron ore — reached $73 billion in 2011, before falling to $66 billion last year. Both sides have set a target of $100 billion by 2015.

The slump in trade has been triggered primarily by mining bans in Karnataka. With India struggling to diversify exports in other sectors, and power and telecom imports from China under a cloud following moves to impose duties and security concerns, the future of the trade relationship has appeared increasingly uncertain.

Both sides are consequently exploring new avenues to revive flagging ties. One proposal, made during May’s visit to India by Premier Li Keqiang, suggests setting up dedicated industrial parks — an issue expected to figure during next week’s talks between Dr. Singh and Chinese leaders.

“We have agreed to engage in cooperation to build industrial parks,” Chinese Foreign Ministry spokesperson Hua Chunying said on Tuesday.

“The aim,” she said, “is to develop clustered development platforms for the businesses of the two countries. China stands ready to strengthen cooperation with the Indian side to expand the market for our respective businesses and to facilitate investments.”

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