China Surpasses US as India’s Largest Trading Partner

Context:

According to data released by the Global Trade Research Initiative (GTRI), China has emerged as India’s largest trading partner in the fiscal year 2023-24, with two-way commerce totaling USD 118.4 billion. This marks a narrow overtaking of the United States, whose two-way trade with India amounted to $118.3 billion during the same period. The shift reflects a dynamic in bilateral trade relationships, with China reclaiming its position as India’s top trading partner after the US held the position in the preceding two fiscal years.

Relevance:

GS II: International Relations

Dimensions of the Article:

1. Understanding India-China Bilateral Trade Dynamics
2. India – US Bilateral Trade
3. Trade Relations with Other Countries (2019-2024)

Understanding India-China Bilateral Trade Dynamics

Overview of Bilateral Trade:

• India’s bilateral trade with China in FY24 amounted to $118.4 billion.
• Imports from China increased by 3.24% to $101.7 billion, while exports rose by 8.7% to $16.67 billion compared to FY23.

Trends in Exports and Imports:

• From FY19 to FY24, India’s exports to China experienced a slight decline of 0.6%, reaching $16.66 billion.
• Conversely, imports from China surged by 44.7% during the same period, reaching $101.75 billion.

Major Imports from China:

• India primarily imports electrical and electronic equipment, engineering goods, chemicals, plastics, and textiles from China.

Major Exports to China:

• India’s major exports to China include engineering goods, agricultural products, ores and minerals, chemicals, and petroleum products.

Trade Balance Imbalance:

• The trade balance heavily favors China, with the trade deficit expanding from $53.57 billion in FY19 to $85.09 billion in FY24.

Reasons for High Trade Deficit:

• India relies on Chinese imports to meet domestic demand and preferences, contributing to the widening trade deficit.
• India’s exports mainly consist of primary commodities, while Chinese exports are dominated by machinery, chemicals, and technology.
• India’s pharmaceutical industry heavily depends on China for active pharmaceutical ingredients (APIs), further exacerbating the trade deficit.
• Limited market access for Indian agricultural and competitive products in China hampers export growth.
• India’s reliance on critical products from China, such as telecom components and lithium-ion batteries for EVs, contributes to the trade deficit.
• This dependency on China poses economic and national security risks for India.

Mitigation Measures:

• India has implemented measures like production-linked incentive schemes (PLI), anti-dumping duties, and quality control orders to reduce dependence on China.

India – US Bilateral Trade:

• In FY24, India-US bilateral trade reached $118.3 billion, with exports decreasing by 1.32% to $77.5 billion, and imports dipping by 20% to $40.8 billion compared to the previous fiscal year.
• Over the past five years, trade with the US exhibited positive growth, with exports increasing by 47.9% to $77.52 billion and imports growing by 14.7% to $40.78 billion, resulting in an expanded trade surplus for India to $36.74 billion.

Trade Relations with Other Countries (2019-2024):

• The UAE emerged as the third-largest trading partner of India in 2023-24, with trade valued at USD 83.6 billion, followed by Russia (USD 65.7 billion), Saudi Arabia (USD 43.4 billion), and Singapore (USD 35.6 billion).

With Russia:

• Exports witnessed a significant increase of 78.3% from $2.39 billion to $4.26 billion, while imports surged by 952% from $5.84 billion to $61.44 billion, resulting in a widened trade deficit from $3.45 billion to $57.18 billion.

With Saudi Arabia:

• Saudi Arabia’s exports more than doubled, increasing by 107.9% from $5.56 billion to $11.56 billion. Imports grew by 11.7% from $28.48 billion to $31.81 billion, leading to a slight reduction in the trade deficit from $22.92 billion to $20.25 billion.

With UAE:

• Exports to the UAE rose by 18.3% from $30.13 billion to $35.63 billion, while imports increased substantially by 61.2% from $29.79 billion to $48.02 billion. This shift turned a marginal trade surplus of $0.34 billion in FY19 into a deficit of $12.39 billion by FY24.

-Source: Indian Express