India will push for greater market access for Indian pharmaceutical and Information Technology companies in China when trade talks resume this week in Beijing, against the backdrop of a fast-widening trade gap between the two countries.
Resuming after an almost four-year hiatus, the eighth Joint Economic Group between India and China will be held here on January 19. Since the last dialogue in New Delhi in March 2006, bilateral trade has grown by more than 50 per cent — up from $25 billion in 2006 to $38 billion in eleven months of last year, in spite of the unexpected slowdown.
However, a fast-growing trade imbalance which has alarmed Indian officials — exceeding $14 billion last year up from $4 billion in 2006 — is expected to set the agenda at this week’s talks.
The trade relationship between the two countries has come to be regarded by officials on both sides as an increasingly important driver of the overall bilateral relationship, particularly in the context of recent tensions over the long-running border dispute. Trade reached a historic high of $51.8 billion in 2008, and the two countries have set a target of $60 billion for 2010.
Source of concern
But the widening trade gap has become a source of concern and has led to frictions in recent months with persisting market access issues and a number of anti-dumping disputes.
“Instead of being a source of complacency, economic cooperation has actually emerged as something of a challenge for the relationship in recent years,” Ambassador to China S. Jaishankar said while addressing a meeting of Indian and Chinese companies here last month.
Addressing how to diversify exports, Indian officials say, is their biggest challenge. Chinese officials are expected to press for easing visa regulations for their workers on infrastructure projects in India.
At present, Indian exports to China are largely made up of raw materials such as iron ore and organic chemicals. Exports fell by 38 per cent last year, as of November, on account of the falling Chinese demand for iron ore as a result of the slowdown. Overall trade fell by 21 per cent, although Chinese exports to India were less impacted, falling by 9 per cent.
According to Indian officials and executives at Indian companies based here, India’s inability to diversify exports has been driven by two factors: market access problems in some sectors, and difficulties in competing with local companies in terms of pricing and on account of some domestic policies.
On Tuesday, the Indian trade delegation, led by Minister of Commerce and Industry Anand Sharma, will push for greater access in two particular areas — pharmaceuticals and IT.
Mr. Sharma, who arrived in Shanghai on Sunday, will hold talks with Chinese Commerce Minister Chen Deming on Tuesday. He will also meet with a number of Indian companies based here on Monday to hear their concerns.
While pharmaceutical companies have pointed to difficulties in getting their drugs registered in China, manufacturing firms have called on Indian officials to address what they say are high import tariffs.
A number of Indian IT companies — including Tata Consultancy Services, Wipro, Infosys and NIIT — have established a presence in China. They have, however, had mixed results in securing larger contracts.
“Unlike with outsourcing from the U.S. or Europe, a big cost difference is not a great advantage for us here,” said Prakash Menon, the head of NIIT China, which trains 50,000 Chinese every year in its 180 centres here. “It is more about capabilities than cost. Indian companies have that, but that needs to get demonstrated more.”