Indian officials have urged China to improve market access for Indian companies in the face of persisting problems in a number of sectors, ranging from agro-processing to information technology, and a fast-widening trade deficit.
The trade gap, already skewed in China’s favour, has continued to grow this year, with falling demand from China’s recession-hit industries for raw materials from India. India’s exports to China fell by 50 per cent in the first six months of 2009. During this period, Chinese exports fell by 16 per cent, doubling the value of Indian exports. The trade deficit in the first half of this year was $6.14 billion and looked set to surpass last year’s deficit of $11.2 billion.
Raw materials such as iron ore and other low-end commodities make up the bulk of India’s exports. New Delhi’s attempts in recent years at diversifying the trade basket to bridge the gap have yielded little.
Indian officials say Beijing’s reluctance to improve market access in the higher-value sectors is a large part of the problem.
A Federation of Indian Chambers of Commerce and Industry (FICCI) delegation, with representatives of more than 20 companies, is in Beijing this week in the latest effort yet to help Indian companies penetrate the Chinese market.
Nand Khemka, Chairman of Sun Group and head of the delegation, said the aim was to promote Indian companies in sectors such as financial services, information technology and agro-processing, which enjoyed little success in China so far. “Improving market access will help bridge the trade deficit,” he said.
During the visit, Indian concerns about long-pending market access issues in a number of sectors will be conveyed to Chinese authorities, officials said.
“It cannot be that Indian industry is competitive everywhere in the world except in China,” Indian Ambassador to China S. Jaishankar said.
“While trade volumes have been impressive, from the Indian perspective, the prospect of large and recurring trade deficits is a natural source of concern.”
A number of Indian IT companies, from Infosys to Tata Consultancy Services, have opened offices in China, but have found it difficult to establish a foothold and have only enjoyed infrequent success, such as the $100-million contract TCS secured from the Bank of China.
Another sector in which India has had little success in improving market access is agricultural products. Under a bilateral agreement in 2000, the two countries agreed to facilitate trade in agricultural products. India has so far sought market access for 17 varieties of fruits and vegetables. But after a decade of discussions, access has been given to only three varieties.
Trade between the two countries has taken a hit after the financial crisis. In the first seven months of this year, bilateral trade was down by 30 per cent from last year. It grew by 34 per cent in 2008, reaching $51.8 million.