Sino-Indian ties on a roll, despite hiccups

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With bilateral trade valued at $38.6 billion in 2007, China is currently India’s second-largest trading partner, and is soon expected to leapfrog EU.

In January, during his first official state visit to China, Indian Prime Minister Manmohan Singh said that trade with China was expected to grow to $40 billion by the end of 2008 alone, and that the two countries were exploring the possibility of a regional trading agreement. Both countries had inked 11 agreements. The economic pacts would boost trade to $60 billion by 2008 from the current level of almost $40 billion. Trade is itself the barometer of the transformation of relations between the two galloping economies: the present mark of almost $40 billion was originally set for 2010.

Meanwhile, in a clear reference to China, the defence minister AK Anthony earlier this week said that India would have to constantly upgrade its military and economic capabilities and leave no room for “complacency”.

China’s frequent claims on the Tawang region of Arunachal Pradesh and incursions by its troops in the area have become an irritant in the otherwise warming ties between the two countries. The two countries have also stepped up their military cooperation by staging their first war game in China late last year. Another joint drill is to be conducted in India later this year. In fact, when the Olympic Torch issue almost derailed the relations between the two countries, the Chinese ambassador to India, Zhang Yan, admitted that the progress on the vexed boundary issue was “too slow”, Zhang said: “But if we want to have a proper solution, which can satisfy both sides, it usually takes time.” He said bilateral ties were now moving on a fast-track with frequent high-level visits, coupled with an impressive growth in trade and economic relations. Bilateral trade in 2003, for instance, stood at only $7.6 billion. It jumped to $38.7 billion in 2007. Moreover, in January this year, bilateral trade witnessed a 50% increase over the previous year, setting the stage for “a good beginning”, he said.

However, a Free Trade Agreement (FTA) with China was not an immediate necessity following objections from within the government and the industry. “On the issue of FTA with China, there are deep divisions both within the government as well as within the industry,” the minister of state for commerce, industry and power Jairam Ramesh has recently informed the Rajya Sabha.