India-China trade: Deficit rising,close the gap before it’s too late

Columnist  | Abhijit Bhattacharyya

Opinion, Oped

The most alarming fact is that the value of Indian exports either stagnated or declined.

It’s clear that the real thrust to Sino-Indian bilateral trade began in 1999-2000, and from the start it was “Advantage China” and “Disadvantage India”.

India’s bilateral trade with China has been a one-way street, for many years, and it’s been “Advantage China” all the way.

The facts speak for themselves. At the beginning of the 21st century (1999-2000), India’s exports to China stood at $539.04 million, while imports from China came to $1.282.89 billion — an adverse trade balance of $743.85 million. In the subsequent years, this imbalance only grew, and it is high time that India takes corrective action. In 2000-2001, India’s exports were $831.3 million, to China’s $1.502 billion. Just look at the figures:

2001-2002: India $951.95 million to China’s $2.036 billion
2002-2003: India $1.975 billion to China’s $2.792 billion
2003-2004: India $2.955 billion to China $4.053 billion
2004-2005: India $5.615 billion to China $7.097 billion
2005-2006: India $6.759 billion to China $10.868 billion
2006-2007: India $8.321 billion to China $17.475 billion
2007-2008: India $10.871 billion to China $27.146 billion
2008-2009: India $9.353 billion to China $32.497 billion
2009-2010: India $11.617 billion to China $30.824 billion
2010-2011: India $14.168 billion to China $43.479 billion
2011-2012: India $18.076 billion to China $55.313 billion
2012-2013: India $13.534 billion to China $52.248 billion
2013-2014: India $14.824 billion to China $51.034 billion

It’s clear that the real thrust to Sino-Indian bilateral trade began in 1999-2000, and from the start it was “Advantage China” and “Disadvantage India”.

China began with a $743.85 million trade surplus in 1999-2000. The proverb “morning shows the day” comes to mind. It indeed did for both Beijing and New Delhi. One wonders what made the Indian government ignore this huge imbalance for so long. What were the compulsions, if any, and were they foreign or domestic?

The irony is that whereas India’s bilateral trade deficit was bad from 1999-2000 to 2004-05 (varying between $743.85 million in 1999-2000 to $1,482 billion in 2004-05), the year-on-year Chinese surplus figure never exceeded the $2 billion mark. Against that, India’s deficit (or the Chinese surplus) started becoming unmanageable and alarming from 2005-06, when it touched a record $4.108 billion. The adverse trend kept increasing from then on.

In 2010-11, it went into negative territory, touching minus $29.31 billion and then kept on going downhill: in 2011-12 $37.23 billion; in 2012-13 $38.74 billion and in 2013-14 it was $36.21 billion. Then in 2014-15, the gap shot up to $48.479 billion. The figure was $52.696 in 2015-16 while in 2016-17 it marginally dropped to $51.110 billion.

The most alarming fact is that the value of Indian exports either stagnated or declined. Thus whereas India’s exports to China in 2013-14 stood at $14.824 billion, it declined to $11.934 billion in 2014-15; $9.010 billion in 2015-16, and marginally rising to $10.171 billion in 2016-17.

The question arises: why have Indian exports steadily fallen over the years? Does it show India’s inclination and propensity to take shortcuts for “more import from” and “less export to” China?

Are we taking the “easier route” of “import for internal trading” at the expense of our indigenous industrial production, factory expansion and employment generation? Are we unwittingly taking recourse to what the United States did over three decades ago? The US then depended on comparatively cheap mass-produced fast-moving consumer goods (FMCG), manufactured by Western as well as joint-venture Chinese corporations based in China, which sent the goods from there to the US. At that time, the US imported huge amounts of goods from China to avoid buying “comparatively expensive” American goods.

Is India making the same mistake now? Is the cost of goods taking precedence over quality?

But in the long run, India has no alternative but to adopt a course correction — both for the health of the economy as well as to ensure political survival.

It would be an understatement to say that the situation is alarming. Why? Because the Chinese are investing $52 billion for the China-Pakistan Economic Corridor (CPEC), passing through our territory in Jammu and Kashmir under the illegal occupation of Pakistan and China.

Can it then be said that the entire CPEC investment money in our own territory is being sourced from India? Is India unknowingly, but indirectly, funding a cause which it deems to be a violation of its sovereignty? Is it incorrect to suggest or ask: “Is India scoring a same-side goal under the banner of Sino-Indian bilateral trade?” Only for the sake of so-called Chinese goodwill?

There is one factor which is too conspicuous to be ignored. The entire Sino-Indian bilateral trade appears to be between a country supplying cheap raw material (India) and a nation that is an industrial goods manufacturer (China), which could be likened to Lenin’s famous quote on imperialism being the highest stage of capitalism, in which the industrial nations send their finished goods (at a fat profit) to consumers who had earlier exported the raw material to produce it. Low-cost raw material ending with high-priced finished goods results in an adverse trade balance for India!

Let’s see what India imports from China and what it exports to that country. Indian exports to China include iron ore, cotton yarn, granite and natural stone, plastic raw material, bulk minerals and ores, human hair, pearl, precious, semi-precious stones, finished leather, marine products, electronic components, etc.

China’s exports to India include telecom instrument, electronic components, computer hardware peripherals, organic chemicals, consumer electronics, electronic instruments, electric machinery and equipment, airconditioners, refrigeration machinery, products of iron and steel, project goods, aluminium products, cranes, lifts and winches, machine tools, accumulators and batteries and moulded and extruded goods.

Even before moving into the White House, US President Donald Trump has been crying hoarse about his country’s adverse trade balance vis-a-vis China, but it is doubtful how far, or how much, he will be able to do anything to reverse the situation. India, however, hasn’t yet reached the position where America stands today. Does India really want to fall to that position? Will it do any good to a nation of 1.26 billion? Should India remain a nation of eternal trade deficit even in the 21st century?