India's already skewed trade imbalance with China is set to continue to widen, with China increasingly looking elsewhere to source India's biggest export to the country — iron ore.

In the past 12 months, China has steadily diversified its imports of iron ore, seeking out new markets such as South Africa and Canada which have more than doubled their imports of the commodity last year, largely at India's expense.

China is the world's biggest importer of iron ore, as well as the biggest iron and steel producing country. Chinese imports of iron ore grew by 41.6 per cent last year despite the downturn, on the back of demand spurred by the government's $586 billion stimulus spending largely directed at infrastructure projects.

Australia, Brazil and India are China's three biggest suppliers. But Indian exports grew the least last year, falling behind Brazil and losing ground to newer markets.

Statistics released by China's General Administration of Customs (GAC) show Indian exports of the commodity grew by 18 per cent. Australian and Brazilian exports grew by 42.9 per cent and 41.5 per cent, respectively. The figures also show a significant increase in exports from newer markets such as South Africa, Canada and the Ukraine. Imports from South Africa more than doubled, to 34.13 million tonnes.

The figures will concern Indian officials, who have expressed alarm in recent months at the fast-widening imbalance in trade with China. Iron ore is, by far, India's biggest export to the country. India's trade deficit grew to a record $16 billion last year, out of two-way trade of $43 billion.

Trade between the two countries took a hit on account of the downturn, down from a record high of $51.8 billion in 2008 when China became India's largest trading partner.

Indian exports suffered the brunt of the decline. India has had little success in diversifying exports to China, leading to a growing gap that has increasingly soured the trade relationship between the two countries, with a spate of anti-dumping disputes last year. Commerce Minister Anand Sharma last month called on China to improve market access for Indian firms in information technology and pharmaceutical companies, which have struggled to penetrate the Chinese market.

Chinese Commerce Minister Chen Deming has assured India that concerns would be addressed, although the two countries could not agree on any specific measures at last month's economic dialogue in Beijing.

Sujay Mehdudia writes from New Delhi:

Back in New Delhi, the Federation of Indian Mineral Industries (FIMI) has sought removal of up to 10 per cent export duty on iron ore even as the Ministry of Steel is pushing for doubling the present levy ahead of the upcoming Budget.

FIMI Secretary General R. K. Sharma in a letter to Mines Secretary, Santha Sheela Nair stated that any imposition or increase of export duty would have unsettling effect on the smooth running of trade of iron ore. FIMI would, therefore, submit kindly to withdraw export duty.

Mr. Sharma said the country was exporting only fines, in which the domestic steel industry was not interested because of the technology being used by them. It said mineral-rich countries like Brazil, Australia and South Africa would continue to reap the benefit of the prevailing duty structure if it is not changed soon.

In 2008-09, of the total production of 215.44 million tonnes, 140-150 million tonnes were fines, FIMI said. The export of fines in 2008-09 stood at 92.17 million tonnes. On December 24 last year, the government increased the export duty on iron ore lumps to 10 per cent from five per cent and on iron ore fines to five per cent from nil.