India?s merchandise exports to China have faltered this fiscal, as a slowdown in the world?s second-largest economy has dented its appetite for commodities, conventionally the mainstay of India?s shipments to the bigger neighbour, reports Banikinkar Pattanayak in New Delhi. China?s share in India?s total merchandise exports dropped to 3.9% during the June quarter of this fiscal, compared with 4.7% in all of
2013-14, as per the commerce ministry data. India exported items worth $14.82 billion to China last fiscal, but its imports from the neighbour hit $51.03 billion, leading to a trade deficit of over $36 billion in 2013-14. Barring the last fiscal, China?s share in India?s exports has been declining steadily in recent
years (see chart).
Interestingly, the share of India’s top three traditional export items to China ? cotton, ore and copper ? has been shrinking in recent years, while that of some value-added products, including mineral oils and mineral fuels has been growing. However, raw materials still account for a substantial chunk of India’s exports to China.
Cotton, copper and ore segments made up for just 39.2% of India’s merchandise exports to China in the first quarter of 2014-15, down consistently in recent years from as high as 59% in 2011-12.
While restrictions on mining have hurt iron ore exports, subdued prices globally are to be blamed for the poor show of textile product exports, particularly in the current fiscal. China’s crackdown on commodity financing this year to prevent a subversion of lending rules by importers using metals and ore as collateral made the matter worse for Indian suppliers as well.
Already, the slowdown from the double-digit economic growth in recent years has affected China’s exports, consequently driving down its demand for raw materials of which India has been a key supplier, along with East Asian countries. China’s export growth slowed to just 8.6% last year after a decade of averaging around 20% annually.
The World Bank said on Monday the growth in the world’s second-largest economy could slow from 7.7% in 2013 to 7.4% this year, 7.2% in 2015 and 7.1% in the year after that. The International Monetary Fund has predicted China to grow at 7.4% in 2014.
Any slowdown in growth of export to China due to a slowdown there can potentially worsen India’s trade deficit with its giant neighbour, which stood at a whopping $36 billion in 2013-14, as imports from the communist nation still continue unabated.
“Our exports to China have been hit badly by restrictions on iron ore mining as well as an import duty on it. Unfortunately, India hasn’t been successful in significantly raising its exports of important value-added products, such as pharmaceutical items and automobiles, into China,” said Ajay Sahai, director general of the Federation of Indian Export Organisations.