A resurgent demand from China's fast-rebounding economy for Indian iron ore and raw materials has helped revive trade between the two countries in the first half of 2010 after a poor performance last year caused by the financial crisis.

With an 80 per cent rise in Indian exports, two-way trade hit $ 25 billion in the first five months of this year, officials said on Tuesday. The two countries now expect to beat their $ 60 billion target for the year.

But beyond the statistics, recently-released data from China's Ministry of Commerce show India has made little headway in diversifying its export basket, which is still dominated by low-end raw materials.

Iron ore, slag and ash accounted for $6.4 billion — 63 per cent of India's net exports to China. Chinese imports rose 82 per cent in the first five months of this year, largely driven by rising iron ore prices and a revival of Chinese industry following last year's slump. The only other significant contribution to India's export basket was cotton yarn and fabrics, which grew several fold year-on-year, accounting for $1.07 billion.

China's exports to India, in contrast, are driven by high-end machinery and electrical equipment. India's efforts to diversify exports to include more value-added goods have yielded little results so far. In recent months, Indian officials have called on the Chinese government to improve market access for manufacturing, pharmaceutical and information technology companies, which say high import-tariffs and policies that favour domestic companies have posed barriers to entry.

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