Guru Gyan
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Guru Gyan

India’s Trade Dependence On China

Even after the escalating border tensions between the two nations & India’s move to boycott Chinese products, China is back as India’s top trading partner.

#1 trading partner

The U.S. had surpassed China to become India’s top trading partner in 2019, and now China has emerged back as India’s top trading partner in 2020, as it was in the previous years.

As per provisional data from the Ministry of Commerce, the two-way trade between India and China stood at $77.7 billion in 2020, lower than the previous year’s mark of $85.5 billion, still making China the largest commercial partner of the country displacing the U.S.

The bilateral trade with the U.S. came in at $75.9 billion, lower from the previous year’s trade of around $90 billion, which made the U.S. the top trading partner of India in 2019. UAE remained the third biggest trading partner of the country.

Dominance & Dependence

India’s dependence on China as a trading partner has grown over the years and looks like the escalating tensions along the Line of Actual Control (LAC) and the rising anti-China sentiment hasn’t reduced trade dependence.

The Indian government had banned hundreds of Chinese apps, increased scrutiny on Chinese investments in India, and increased duty on certain products. In order to promote self-reliance, the government introduced various incentive programs along with the Make In India and Atmanirbhar Push. However, India’s long-standing reliance on Chinese heavy machinery, telecom equipment, and home appliances have led to the trade deficit with China at $40 billion.

Total imports from China at $58.7 billion were more than India’s combined purchases from the U.S. and the U.A.E. Heavy machinery imports accounted for 51% of India’s purchases from China, reported Bloomberg. There has also been a strong demand for medical equipment and supplies from China amid the pandemic.

A long way

A report by Bloomberg last week had stated that India has been slow to issue visas to Chinese engineers needed to help Taiwanese companies set up factories under production-linked incentive program (PLI) to promote local manufacturing, which may hinder or delay India’s plan to bolster its manufacturing capacity.

Seems like the reliance on China may continue for a few more years as the execution and effectiveness of PLI schemes and the whole shift to self-reliance may take time to create opportunities as well as reduce dependency on its neighboring nation.

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