The Government of India has also taken various measures to extend support to exporters by facilitating Buyers – Sellers meets between potential Chinese importers and Indian exporters to increase exports of sugar, oil meals, Indian rice and grapes. In addition, Indian exporters are encouraged to participate in major trade fairs in China, to showcase Indian products. The government has been implementing various schemes and programmes to help the domestic industries compete effectively with imports. To promote domestic manufacturing, schemes like ‘Make in India, ‘Digital India’, Software Technology Parks, Electronics Hardware Technology Park Scheme/ Export Oriented Unit Scheme and Special Economic Zone Scheme provides support for promoting domestic The Foreign Trade Policy 2015-20 has mechanisms such as Merchandise Exports from India Schemes, Advance Authorisation Scheme, Export Promotion Capital Goods Scheme, Interest Equalization Scheme to provide an enabling framework for the businesses to make their exports competitive. Active interventions, in terms of policy and procedural changes, are regularly undertaken by the Government so that the businesses can cope up with the dynamic international trade scenario manufacturing in the country.India-China relations dates back to more than 2000 years ago, but the modern relationship between the two countries began in 19501 when India formally became one of the first countries to end formal ties with the Republic of China (Taiwan) and recognize the PRC as the legitimate government of mainland China. China and India are two of the most populous countries of the world and fastest-growing economies of the world. Cultural and trade exchange between India and china dates back to ancient times. The Silk Road not only served as an important trade route between India and China, but silk-road is also credited for people to people and cultural exchange and also for the spread of BUDDHISM from India to East Asia. During WORLD WAR 2 both India and China played a crucial role in halting the march of Imperial Japan. Relations between India and China have been plagued by border disputes and mutual distrust of each other including border disputes. However, since the late 1980s both countries have successfully rebuilt diplomatic and economic ties and more people to people and cultural exchanges. Since 2008 China has become one of the largest trade partners of India. In 1993 an agreement was signed between both the countries at a bilateral level for the maintenance of peace and tranquillity along the line of actual control (LAC) during prime minister’s Narasimha Rao visit to china and it reflected the growing stability and substance in bilateral ties. India-China relations though occasionally showing signs of peace and cooperation have often been afflicted by tension and mistrust. With the potential to make big contributions to regional and world development, these two Asian powers by design or accident themselves have become sources of regional tensions and insecurity to some extent. Besides their internal dynamics, the interplay of interests and moves of their neighbours and several third party vested interests would have significant bearings on the equations and relations between them. Both the nation have witnessed their fair shares of ups and downs over the years. India and China today represent hopes and aspirations of billion people combined together and both of the countries also represent Asia’s two largest and most dynamic economies which are emerging as new trendsetters in international relations. The bilateral relation between both of the countries began mainly in mid-1980s. The process of dialogue initiated by both of the countries at the inter-governmental level was quite helpful in identifying the common trade interest. Efforts were made at the bilateral and intergovernmental level to make the most of the economic interests of both the countries so as to further the economic relation between India and China. In the year 1984, India and China entered into a trade agreement under which both of them provided each other with the status of the most favored nation (MFN) status. It was in the year 1992 that India and China got involved in full-fledged bilateral trade relations. The year 1994 was a watershed moment in the trade relation between India and China, in this year a double taxation agreement was signed between the two nations. The government of both countries also took the initiative of joining as the dialogue partner in the association of the Southeast Asian Nations. In 2003, the Bangkok agreement was signed between the two countries, under this agreement both India and China offered some trade preferences to each other. India provided preferences on tariff for 217 products export from India. In 2003, India and China entered into an agreement to initiate open border trade via the silk route. The two countries have also shown interest to take part in a multilateral trade system as per the WTO commitments. China already has been the top trading partner for India in recent times. The economic relations between India and China are considered to be one of the most significant bilateral relations in the contemporary global economic scenario and this is going to stay for the years to come.
BILATERAL TRADE: DIRECTIONThe bilateral trade between India and China has grown by four folds in past decade. But the trade benefits were tilted more in the favour of China. India has a huge trade deficit with China at the present moment which is currently one of the biggest challenges in the bilateral trade relation between the two countries. While China continues to enjoy a huge trade surplus with countries all over the world including United States of America which currently under President Donald Trump has engaged itself in a bitter trade war with China. Over the past year, both the world largest economies have imposed tariffs on billions of dollars’ worth of one another goods. U.S.A President Donald Trump has long accused China of unfair trade practices and also of intellectual property theft. Recently C.E.O of one of the biggest telecom giant of China HUAWEI was arrested in U.S.A on the charges of spying for the Chinese government in the name of 5G trials and also spying on citizens of U.S.A through HUAWEI electronic equipment. While in China there is a growing perception that the U.S.A is trying to curb the growth of China. So as far as the U.S.A has imposed tariffs on more than 360 billion dollars of Chinese goods; China has retaliated by imposing tariffs on more than 110 billion dollars of goods. This trade war will also have consequences on the Indian economy with a significant change in the manufacturing sector which is awaited in India and this could be a golden opportunity for India, especially if India is properly positioned. Although if the tension persists for a longer period of time then there can be slow-down in the Indian economy too. The United Nations in one of its report has also mentioned that India is one of the few countries which is going to benefit from the U.S.A and CHINA trade war. The trade war could also see that more and more Chinese and U.S.A Company’s investments and manufacturing being directed towards India. Recently, Foxconn which manufactures apple i-phones in china has opened its manufacturing and assembling plants in Bengaluru. Amazon recently opened its biggest campus in Hyderabad which can house up to 13000 employees at a time. Earlier all these big ticket investments were made in China but due to the trade war and rising tariffs these companies in order to avoid the high tariffs are making their investments in India. India like China also offer’s cheap and skilled labour at a very minimal wage. As Chinese goods are being taxed at a higher rate than U.S.A, this implies that the Indian exporters can explore this opportunity to fill the gap. But the currency factor will be an important thing to watch.
INDIA-CHINA TRADE AT A GLANCE: In 2013, China overtook UAE to become India’s biggest trading partner. Presently, China is India’s 4th biggest export destination whereas the biggest source of import. The Trade figure between India and China grew by leaps and bounds afterward 2000, from a mere 2.7 billion trade in 2001 it had grown to around 70 billion dollars in 2016 and the trade figure is hugely tilted in the favour of China. China exported goods worth 60 billion to India and imported goods worth a meager 9 billion dollars. China’s share in India’s trade stands at a total of 11% which mainly consists of the raw materials.Further5 its share in India’s export stood at 3.7%whereas China’s share in overall imports of India stood at 16% during the same period. The trend in the trade deficit gap for India also exponentially widened over the years. Despite the staggering increase in the presence of Chinese product’s in India breakdown of the trade figure’s between the two countries in 4 periods reveals a completely different story, During 2001-2006 imports from China grew at a pace of 53.6% which were reduced to 28% during 2006-2011 and further diminished to 1.6% between 2011-2016. Although the trend in exports from India also remained lackluster during the same period with the growth rate in export to China entering into the negative trajectory of minus 11.8% during 2011-2016. Astoundingly India’s share in China’s imports stood at a menial 0.6% during 2016 revealing an insignificant presence of made in India products in china and also highlight’s the need for some drastic change that the Indian government must bring at the policy level to address this huge gap.
INDIA’S export to China: The principal items of Indian exports to China are ore, slag, iron, ash, steel, plastic, organic chemicals, cotton. In order to increase the export of Indian good’s to China however, there should be a special emphasis on investment and trade in IT services and knowledge-based sectors. The other potential items of trade between India and China are marine products, oilseeds, salt, inorganic chemicals, plastic, rubber, chemicals, optical and medical equipment, dairy products, soya bean, IT services, and a number of other finished and unfinished goods. Great potential also exists in sectors like biotechnology, IT, health, education, tourism, and the financial sector. Regarding the Indian IT exports to China, the recent laws of China restricting the foreign software companies selling software and IT services in China have been a setback for Indian IT giants. The cordial bilateral relations, however, will soon ease out such tensions and there is a great possibility that Indian IT giants will be allowed to sell software and IT services to Chinese companies. Indian IT Exports to china has become a new bridge of hope for the Indian government to reduce the huge trade deficit. Not only the software product’s Indian IT companies also based IT-based know-how on the Chinese software firms. Chinese officials and executives of all the big Chinese companies travel to Bengaluru and Hyderabad the silicon valley of India in order to learn about the essence of the success of the Indian IT companies. Many Indian software companies under the umbrella of CONFEDERATION OF INDIAN INDUSTRIES signed a memorandum of understanding with the Shanghai Pudong software park of china to promote collaboration between Indian and Chinese companies regarding software products. Some of the major Indian software companies have already begun their operations in China through outsourcing like NIIT, TCS, and SATYAM COMPUTERS, etc. The Indian IT companies are in an advantageous position due to the superior traditional skills in management and also due to starting out early in comparison to the Chinese developers. Moreover, with the help of local and language-specific expertise of Chinese professionals, Indian IT companies can easily capture the Chinese software market as well as the software markets of other far-east Asian countries.
CHINA’S export to INDIA:The main items that China export’s to India are electrical machinery, equipment, cement, organic chemicals, nuclear reactors, boilers, machinery, silk, mineral fuels, oil. Value-added items like high-end electrical equipment dominate the Chinese exports to India. All these are indices of the fact that the chines export’s to India is much diversified in comparison to India which is limited only to the exports of raw materials. The Chinese export’s8 to India includes resource-based products, manufactured items, low and medium technology products. It is said that if India is to capture the markets of China and reduce the huge trade deficit’s then India needs to discover new avenues of business, new merchandise for export’s and India need’s to branch out its exports to China. In the beginning, Chinese firms were keen only on exporting cheap electronic goods, garments, toys, to the Indian markets. But recently Chinese exporters have begun starting to explore new avenues for their exports in the Indian markets, recently there has been an upward surge in the export of cement to India. Two Chinese cement companies have been recently given the authorization to sell the cement in India. The reason behind the sudden interest of Chinese cement companies in India is fuelled by the fact that China is the largest producer of cement in the world and there is a boom in the real estate sector of India and to capitalize on this boom. The prospects for the Chinese exports to India have been enhanced from 2006 with the reopening of Nathu la pass for cross border trade passing through Tibet autonomous region after a gap of 44 years.
POTENTIAL OF INDIA CHINA BORDER TRADE: India china border trade started in 2006 through Tibet an autonomous region of china and through NATHU LA PASS in India which was reopened for trade after a gestation period of 44 years. It was decided that the potential of India-China border trade would facilitate the export of 29 commodities from India and import of 15 commodities from China to India. The interactions between the two nations are to be seen in various levels like the political, military, academic, media sports, and culture and economy. The potential of India China border trade was initiated in the year 2003, with the Chinese and Indian governments signing the memorandum of understanding on the expansion of border trade. Under this MoU, it was agreed upon by both of the countries that the border markets through NATHU LA pass would be opened for trading. The delegation from the Indian ministry of commerce and industry visited Tibet an autonomous region of China to discuss the specific details of the deal. The NATHU LA border trade markets would be beneficial to the border inhabitants of both the countries, India and China along with promoting local receptiveness and development. Moreover, the potential of India china’s border trade also enhances to motivate and pioneer a new channel for the upcoming India china trade relations. It is believed on both sides that with the passage of time the NATHU LA border trade markets will grow and boost the bilateral trade relations between India and china increasing the cooperation and common prosperity on both the sides of border. Not only this in the future it will in fact serve the interests of people of both the nations and earmarks an important step.
RECENT TREND’S: Based on the level of processing, India’s export to china shifted from raw materials to intermediate goods over the past decade. Around 60% of the exports to china were focussed on raw materials in 2006. However, during 2016 share of raw materials fell to 25% which compensated for the rise in the share of intermediate goods 34% in 2006 to 50% in 2016. Conversely, based on the category front, India’s industrial export share to china fell from 95% to 84% during 2001-16. The fall in share was compensated with a rise in the share of petroleum and agricultural products. The share of petroleum exports to China from India grew by 7% during 2001-16. Based on the level of processing, India’s import pattern from china witnessed a dramatic shift. The share of capital goods grew from 22% in 2001 to 56% in 2016. This huge jump in the share of capital goods was compensated for the loss in the share of intermediate goods and raw materials. The import share of intermediate goods from china fell from 47% to 29% whereas share of raw materials fell from 20% to 1% during the same period. Conversely based on category around 99% of import by India from China are industrial products and 1% is agricultural products indicating a higher level of reliance on industrial products from China. Of the total imports, it has been analyzed that around 70% of imports from china including electrical equipment, sound recorders and parts thereof, mechanical appliances and parts therefor, optical and photographic instruments and parts thereof and other items are of very cheap quality, majority of these products fall in the category of one-time usage. Less than 150 products in India have mandatory technical standards whereas developed countries have a high standard for their product range. The Bureau of Indian Standards, the body that lays down quality standards for most of the goods in the country has laid down 18000 standards but they are all voluntary. This provides easy access to low-cost Chinese products into the Indian markets despite India imposing anti-dumping duties. The cost price of low- quality Chinese products is so low that despite imposing anti-dumping duties and countervailing duties, the cost price of Chinese goods is still very cheap in comparison to their Indian counterparts. Less than 150 products in India have mandatory technical standards, whereas developed countries have such standards for most of their product ranges. The Bureau of Indian Standards, the body that lays down quality standards for most goods in the country, has laid down 18,000 standards, but they are all voluntary. This provides easy passage to low-quality Chinese products to enter into Indian markets despite imposing anti-dumping duties and countervailing duties. The cost price of low-quality Chinese products is so low that despite imposing Anti-dumping duties and countervailing duties, the unit price remains lower than Indian products. Around 90 products from China are under the anti-dumping duty ambit. However, merely putting anti-dumping duties won’t help to curb imports as the unit value of certain products are so low that despite anti-dumping duty the final value remains lower than the unit value of the same product from different countries. It is imperative for us to assess whether the Chinese imports are substituting or complementing the domestic production in India with specific emphasis on sectors like Steel, Urea and other chemicals, Electronics, Telecom and consumer products of mass consumption. Additional duties on imports of intermediate and capital goods from China might become counterproductive in case those products are utilized to propel the domestic production in India. India is one of the largest manufacturers of generic drugs. But it has not been able to export to China because of China’s protectionist policies. While Indian pharmaceutical companies exporting generic drugs to the United States and Europe, as most of the drugs have received FDA and EU approval, it is quite striking that China does not allow imports of drugs from India.
Conclusion: In the first decade of the 21st century, the presence of Chinese products in the Indian market has grown profoundly and exponentially. During 2001-2016, India’s imports from China jumped to a whopping 33 times, from USD 1.83 billion to USD 60.48 billion. Astoundingly, India’s trade deficit with China expanded 57 times during the same period. India’s trade deficit with China narrowed. In 2016, India was the 7th largest export destination for Chinese products and the 27th largest exporter to China. India – China trade in the first four months of 2017 increased by 19.92% year-on-year to USD 26.02 billion. India’s exports to China increased by 45.29% year-on-year to USD 5.57 billion while India’s imports from China saw year-on-year growth of 14.48% to USD 20.45 billion. The Indian trade deficit with China has further increased by 6.07% year-on-year to USD 14.883 billion during the same period. With industrialization gaining pace, India’s import pattern with China has shifted dramatically from intermediate goods to capital goods. India’s import share of capital goods from China jumped from 47% in 2011 to 57% in 2016 whereas the share of intermediate goods fell from 37% to 29% during the same period. China has been able to enhance its footprint in India to a greater extent. The intensity of Chinese products in the Indian market has been continuously rising since 2009. Conversely, Indian products have a weak intensity in China’s market and have been consistently falling over the years. On the diversification front, China’s basket of exports to India is highly concentrated and intensive towards fewer selected products. This enhances the situation of high volatility due to higher reliance on fewer products. Total FDI inflows from China to India between April 2000 and September 2017 stood at USD 1.738 billion wherein China’s share was roughly 0.49% which rightfully indicates that China is not a significant and substantial investor in India as compared to Singapore, Mauritius, and Switzerland. Conversely, in recent years, China has invested heavily in billions of dollars in various countries. Unlike trade, levels of investment between China and India remain relatively low. Though an estimated 100 companies from each country have offices on the other, cumulative bilateral FDI is less than USD 500 million. Cross-border investment remains low because Chinese and Indian companies are still in the early stages of learning how to operate and succeed in each other’s due to cheap labour and economies of scale, china offers low-priced imports such as textiles and clothing, electronic devices, machinery, etc. Further, exploiting the huge Indian market to dump their products and indirectly killing Indian units. Chinese products are affecting our manufacturing units and many of them have had to shut their shops. There are so many Chinese toys in the market that Indian toy industry is finding very hard to survive. In the last 5 years, many of the Indian toy companies have been shut down. Going ahead, with the shift in taste and preferences for Chinese products coupled with growing and competitive Indian production capabilities and a shift in the consumption patterns of Indian consumers, the fame of Chinese products in the Indian market will further witness a decline in the coming years.
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