It speaks volumes for the maturity with which India has separated its business from its politics, that it signed more deals with Chinese Premier Wen Jiabao than it did with US President Barack Obama?$16 bn with Wen versus $10 bn with Obama?despite all the problems on the diplomatic front. While India has a negative trade balance of $20 bn with China, up from $4bn in 2005-06, it is still aiming at increasing trade to $100 bn by 2015. Though the Chinese premier has called for easier procedures to move capital and people across the two countries, this is not likely to happen anytime soon ? the two countries which attract more than $100 bn of foreign investment each year, have just less than a billion of investments taking place between them.
While the deals signed with Wen include large ones in the power sector, and a large proportion of India?s new 3G telecom networks are to be run on Chinese equipment, the Chinese don?t appear to be in any hurry to reciprocate. Though China accounts for 6.5% of India?s exports, the flows are heavily skewed with just two products ? minerals and cotton?accounting for 60% of the flows. And if one excludes these two primary products, China share in India?s exports is a mere 3%. Reducing India?s sizable trade deficit of $ 20 bn would not be an easy task since the Chinese share in India?s top 5 exports are miniscule. While China hardly imports India top two export products?gems and jewellery and mineral oil?its share in India?s electrical and non- electrical machinery exports is low hovering in the 3-4% range. The record is worse when it comes to other important export products like apparel, pharmaceutical and transport vehicles, the other three booming Indian export products. Interestingly, India exports several of these items, such as pharmaceuticals to developed European markets, the Chinese market remains largely closed. For now, however, India has taken the mature view that these imports help Indian industry remain competitive and so are desirable in themselves. If the two countries have to start talking about a Free Trade Agreement, however, some of India?s trade concerns will also have to be addressed.