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India’s trade with China set to dip

Sandeep Dikshit
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The sluggish trend in India-China trade continued in November, making it certain that bilateral trade was set to dip in 2012 by up to 9 per cent as compared to the previous year.

Despite the lower trade figures, India’s trade deficit will widen to record levels because its exports have fallen more sharply than imports from China. In November, the trade deficit stood at $26 billion out of total trade of $61 billion. Last month, the trade imbalance was $23 billions.

Official said the top Chinese leadership was aware of India’s concerns in this regard, and the Chinese Development Bank had stepped in to invest in corporates to off-set some of the deficit.

The decline in bilateral trade reverses the general trend in India-China relations. In recent years, China and India grappled and occasionally traded barbs on political issues, mainly sovereignty-related but trade went on rising smoothly though the high deficit does trouble India’s policy makers.

Last year, bilateral trade stuttered and more so India’s exports to China — falling by 16 per cent till November as compared to the previous year — because of the Supreme Court’s clampdown on iron ore exports and a fall in slag and ash exports. Iron ore exports fell by more than half. Iron and steel exports also took a major hit, declining by 23 per cent.

But 2012 was considered a ‘good year’ from the point of view of political exchanges although both sides did differ on the status of Arunachal Pradesh and sovereignty issues in South China Sea. Trade, the success story of previous years, is now likely to dip to $70 billion in 2012 from nearly $74 billions in the previous calendar year.

Officials are sanguine about India and China achieving the $100-billion trade target by 2015 because of the course corrections being attempted by the strategic economic dialogue initiated with China. The issue is also regularly discussed at summit meetings. In fact, at the last high-level meeting in Phnom Penh, Chinese Premier Wen Jiabao surprised Prime Minister Manmohan Singh by acknowledging the need to do something about the trade deficit even before the Indian delegation could underline its concerns on the issue.

India’s exports to China after 11 months of 2012 amounted to $17.50 billions, declining by 16 per cent, according to figures available with the government. Overall bilateral trade reached $61billion, down by more than 9 per cent as compared to the first 11 months of 2011.

Chinese exports to India have fallen by more than 6 per cent after 11 months of 2012. While the precipitous decline in power and telecom equipment has been arrested, fall in exports of fertilizers and articles of iron as well as steel continued to decline by 23 per cent each.


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