India should re-cast its commerce with Beijing
Given that the growing trade partnership between India and China is about the only heartening feature in their bilateral relations, New Delhi will be eager to push the advantage ahead. The two countries have a trade target of $100 billion to meet by 2015 and hectic work is on between the ministries concerned of the two countries to reach the goal. But, New Delhi is seized with the old problem of a skewed trade deficit with China, and steps taken so far have not yielded the desired result. With Chinese President Xi Jinping’s coming visit to India next week, the issue has returned to the forefront. New Delhi has been flagging the matter at various bilateral forums with Beijing, and while it has received suitable assurances, there has been little action on the ground. The cause of this trade deficit, simply put, is the following: While India has given Chinese products a huge market that is price-sensitive (which suits the cheap Chinese goods that have found their way here), most Indian manufacturers do not enjoy a similar vast access in China. In the end, what we get is far less than what we give in terms of commerce. India's trade deficit with China stood at more than $40 billion in 2012-2013, while exports to that country have fallen from a little over $18 billion in 2011-2012 to a bit more than $13.5 billion the following year. In 2013-2014, the bilateral trade deficit had been $35 billion in favour of China. Mr Xi's visit will be considerably successful if the trade deficit matter gets adequately tackled. Union Minister of State for Commerce (independent charge) Nirmala Sitharaman has been burning the midnight oil to formulate a strategy for turning around the deficit in India's favour. One way is to persuade China to not just consider India a lucrative market for its finished products, but a destination to set up production bases. India has, after all, a relatively cheap and skilled labour workforce — something that can work to the advantage of both nations. This suggestion, if pushed hard enough, can offer impetus to Prime Minister Narendra Modi's idea of ‘Make in India'. As Ms Sitharaman has candidly observed, “Manufacturing in China and selling in India is not looking favourable for India.” It appears unlikely that New Delhi will continue with a trade policy that disadvantages India.
If China is sincere in addressing the lopsided bilateral trade deficit which does not favour India, it will have to revamp its investment strategy for this country. The figures tell the story: According to reports, in the last 14 years, China has invested only about $0.4 billion in India — that’s a contribution of just 0.18 per cent to overall foreign direct investment inflows. This can and must change to have both countries beaming in satisfaction. If China seizes the opportunity India is offering under the Modi Government of opening up this country's infrastructure sector — whether in roads or railways or high-speed and bullet trains — to foreign investment, a sound balance in commerce can be struck.