With India?s exports growing at a scorching pace despite the slump in key Western markets, thanks partly to the shift in export destinations and diversification of the product basket, China is gaining importance as a key trading partner of India.
?The bilateral trade (between China and India) is expected to reach $100 billion by 2015, from $61.74 billion in 2010. In the first six months of this year, the trade between the two nations has already crossed $35 billion,? said a recent Deloitte report.
China is currently India?s third largest trading partner after the UAE and the US. The Sino-Indian trade is growing much faster than India?s trade with other countries (see table). The Deloitte report points that in order to sustain this growth, the trade imbalance between the two countries needs to be corrected. ?The imbalances can be corrected by increased access to Indian goods in the Chinese market and diversifying the trade basket by India,? the report said.
According to report, the Indian government has been seeking improved market access in the auto component, engineering, IT, pharmaceuticals and agro-processing sectors from the Chinese government against the backdrop of a record trade deficit of $20 billion last year.
Currently, Indian exports to China are mainly driven by cotton and iron ore, amounting to $20.8 billion while Chinese exports are majorly driven by machinery, totaling to $40.8 billion.
Interestingly, the trade between the two nations registered a 43% jump in volume in calender year 2010, to about $62 billion. In the recession-hit 2009, it had dipped to $43 billion. China became India?s largest trading partner in 2008, with $51.8 billion in bilateral trade.
CII director general Chandrajit Banerjee said, ?Bilateral trade has multiplied manifold over the last decade and today, mutual investments too are going up as businesses of both sides seek to leverage the benefits of dynamic and growing markets. The two countries are developing their special identities in each other?s economies and proceeding rapidly on participating in each other?s growth and development process.?
A commerce ministry official said, ?According to the recent data, China and India have a healthy trade relationship but it is heavily in favour of China. China is the top source of India?s imports and is accounted for 10.69% of India?s total imports.?
Talking about areas where India can gain an upper edge in Chinese market, the report said, ?IT companies have much to gain from investing in China, as the Chinese domestic market is growing at a rate of 50%-60% and is currently estimated at $20 billion.? It further added: ?The Indian embassy in Beijing expects India to become the biggest destination of Chinese companies to contract projects outside China. The cumulative value of contractual Chinese investment (projects) till June 2009 was $29.6 billion. The overall turnover realized from these projects till June 2009 was about $11 billion.?
Indian officials have been pressing China, most recently during Premier Wen Jiabao?s visit to New Delhi in December 2010, to address the growing trade deficit by providing better market access for Indian pharmaceutical and IT companies.
The report highlights that there has been an increase in Indian companies exploring opportunities in China and vice-verse. Some of the key sectors with the potential of collaboration and opportunities for Indian companies are automobiles, IT & ITes, real estate, infrastructure and tourism.
?Over the last six years, the trends indicate that the Indian auto sector is growing with the production doubling during these years. Similarly, China witnessed an increase of 3.5 times in the number of vehicles produced during the same period. Traditionally, Indian component manufacturers have been masters of high-quality precision components while the Chinese players have mastered the art of mass production. Thus, this sector would demonstrate significant growth if the two countries could achieve extensive collaboration. A company could look at utilising the component design expertise of Indian engineers and low-cost mass production expertise of China to cater to the global original equipment manufacturers (OEMs),? the report added.