India working on China strategy paper to balance basket of goods
November 9, 2011

India Drafting China Strategy Paper to Balance Trade in GoodsIf you are in the Information technology, drugs and pharmaceuticals, textiles, chemicals, carpets, woven fabrics and leather product industries in India, there’s good news for you! New Delhi is working on a special strategy paper to aggressively boost trade with China in an effort to tame the ballooning trade deficit, that touched US$20 billion in 2010-2011.

According to the The Ministry of Commerce and Industry, its working on a China-specific strategy paper to identify the areas in which it can leverage Indian shipments to China. Currently the basket of goods are heavily weighed in favor of China who exports finished goods such as telecom and power equipment to India while Indian shipments to China remain lower valued raw materials. The Indian government, spurred by Ambassador Jaishankar who is posted in Beijing has been lobbying hard for a more balanced trade, however Chinese exports to India continue to dominate.

As India’s largest trading partner, Delhi has tried every trick in the book to persuade its gentle giant to the north to balance trade better – from coaxing China to revalue its currency to taking trade delegations to China in the hope that they will push open the doors for investment, from high-level bilateral talks to policy papers on the benefits of  increased India-China trade, nonetheless, the dragon has done little to budge. Whats even worse now is that China’s new social security tax to hurt Indian businesses and because of its strong focus on boosting the domestic economy, many Indian IT firms which have pumped billions into the Middle Kingdom aren’t able to get the golden ticket to domestic contracts which would seal their deal in China.

Through this strategy paper, the Indian government is now trying to understand Chinese trade practices and policies and adapt itself accordingly. Until now Delhi has tried to push to China industries that it wants to expand internationally, having seen that this technique doesn’t work it is now trying to cater to the Chinese depending on what they demand. Bolstering such a move, India has already planned to expand ports on East coast to cater to trade with China. Additionally, The strategy paper would also deal with measures on how to gain more access to the Chinese market in terms of services trade with a liberal visa regime, officials said.

“We are working on a strategy paper to increase our trade with China. This will be done by focusing on certain key areas where we can increase our exports. But that does not mean we will have any restrictions on imports. There is no proposal on curbing imports from China or raising tariffs on Chinese goods,” a senior official told Business Standard, refusing to divulge anymore details on the issue.

Total export to China reached US$19.61 billion in 2010-2011 from US$8.32 billion in 2006-07, while cumulative imports from China topped US$43.47 billion last year from US$17.47 billion, according to data by the Ministry of Commerce and Industry. Bilateral trade between the two countries would reach US$100 billion by 2015. The total trade volume has gone up from US$2.3 billion in 2000-01 to US$63.09 billion in 2010-11. According to a study done by Assocham, India and China would become the world’s largest trading partners by 2030.

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