India, China must take steps to bridge trade deficit

Delhi, IndiaWritten By: Akash SinhaUpdated: Dec 10, 2018, 12:16 PM IST


Story highlights

India and China need to iron out their differences as neither of the two neighbours can afford to sit back comfortably amid uncertainty about the US trade policy.

India's bid to start trade with China in domestic currency has suffered a setback when China outrightly rejected the demand. The move could have not only helped India bridge the trade deficit with China but could also have acted as a booster for the depreciating rupee.

The trade deficit between the two Asian neighbours has ballooned to $63 billion in China's favour. This is over a nine-fold increase over the past decade, claimed a Reuters report. 

India's export to China has improved in the last few years but there hasn't been any colossal change in the trends. It's export to China had grown by 13 per cent in FY17, by 31 per cent in FY18, and by around 17 per cent in the first half of FY19. 

While India wants to supply more sugar, medicines, soymeal, rapeseed meal, and rice to China, the latter want to increase its export of dairy products, apples and pears. 

The meeting between Indian Prime Minister Narendra Modi and Chinese President Xi Jinping on the sidelines of G20 Summit has not yielded anything good for India except a progress in talks. 

China had imposed a ban on Soymeal import from India over quality issues in 2011. India is trying hard to get the ban removed. Also, the trade tariff truce between China and the US is good news for global markets but not for India. 

India and China need to iron out their differences as neither of the two neighbours can afford to sit back comfortably amid uncertainty about the US trade policy.

However, bridging a trade deficit of this magnitude will not be an easy task for India especially when the Sino-US trade battle is seeing a temporary truce. The escalation of the issue may have forced China to look for alternatives like India. Nonetheless, the trade war is a temporary solution. China and India must work collectively to find a permanent solution to the persisting issues.

As of now, India is trying to catch a train which has just left the platform with China onboard. 

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)