China-India Trade Ties Grow Stronger

India-China trade increased by 15.3%in the first quarter of 2022.

Despite Indian government initiatives like Make in India and Atmanirbhar Bharat to make the country self-reliant, India-China trade increased by 15.3% to reach a record high of nearly $32 billion in the first quarter of 2022. It is one of the highest quarterly percentage increases among China’s major trading partners, according to the data released by China.

 “The growth of trade between both countries has increased more than fourfold in the last decade, but skewed heavily in favor of China,” says Bipin Sony, an assistant professor with Dr. B.R. Ambedkar School of Economics University in Bengaluru.

In 2022, from January to March, India’s imports from China jumped to $27.1 billion, a 28.3% rise from the same period in 2021; however, exports dropped 26.1% to $4.9 billion. When bilateral trade crossed $100 billion for the first time to reach $125.6 billion in 2021, $97.5 billion in imports accounted for the bulk of the trade.

Prior to the pandemic, in the first quarter of 2019, imports jumped 54%, while exports rose just 9%. The ever-widening gap between India’s high imports and low exports ballooned the trade deficit 87.5% in 2021-2022.

India’s strong services sector has few takers in China, and its exports are mainly confined to raw materials. Indian imports are mainly finished and intermediate products like electronic equipment, critical pharma ingredients, chemicals and textiles. Intermediate products are less of a concern, as they portend growth in manufacturing; but imports of finished products point to poor manufacturing competitiveness.

“China has well-established, low-cost production aided by cheap labor and economies of scale,” says Sony. “Interestingly, the technical standards are not set for most products in India; and most of the standards are voluntary. This has enabled low-cost, low-quality products from China to penetrate the Indian market easily and eventually replace the local manufacturers.”