India-China trade imbalance growing

Beijing, (PTI): Despite the India-China bilateral trade growing at nearly 50 per cent this year, the surging trade deficit is all set to top the record figure of USD 4.11 billion in 2006.The growing trade imbalance in India-China bilateral trade has caused concern among Indian officials who are highlighting the need for the Indian industry to diversify the country's trade basket with the Communist trading giant, whose total foreign trade has touched a record USD 1.17 trillion, up 24.4 per cent, in the first seven months of 2007.

India-China bilateral trade in January-June zoomed to USD 17.20 billion, achieving an impressive growth of 47.97 per cent over the same period last year, latest Chinese customs figures said.

If the current momentum of USD two billion of bilateral trade per month continues, the targeted trade figure of 20 billion US dollars by 2008 will be achieved a year earlier than expected.

Indian exports to China touched USD 6.9 billion during January-June, up 29.29 per cent over the corresponding period in 2006.

At the same time, Chinese exports to India soared by an impressive 64.07 per cent to touch USD 10.24 billion during the first six months of the year compared to the same period in 2006.

India suffered a trade deficit of USD 3.34 billion during the first six months, compared to USD 1.09 billion in the first quarter of 2007, signalling that the deficit is set to reach a new record in 2007.

In 2006, India's trade deficit with China amounted to a record USD 4.11 billion compared to USD 843 million of trade surplus the country enjoyed in 2005.

"We are greatly heartened by the positive momentum in our bilateral trade. Yet, both countries need to examine its various parameters closely, particularly the narrow composition of the trade basket and the insufficient use of each other's comparative advantages," sources told PTI here.

"For sustainable high volumes of bilateral trade, diversification of the trade basket is not only important but imperative," they said.

During his visit to China in April this year, Commerce and Industry Minister Kamal Nath had raised the issue of the growing trade imbalance with his Chinese counterpart, Bo Xilai.

India-China trade ties have witnessed a qualitative change in recent years and it has the potential of growing even faster. "For this we need to work on diversifying the India-China trade basket and facilitating greater interaction and information flow between the commercial sectors of both our countries," industry sources said.

In 1995, India-China trade was just over USD one billion. Less than a decade later in 2004 trade crossed the USD 10 billion mark to record 13.6 billion. In 2005, bilateral trade stood at USD 18.7 billion and in 2006, it touched USD 25.05 billion, registering a growth of 33.87 per cent.

Sources say there are several areas, including the fields of agriculture, dairy industry, food processing, auto-components, pharmaceuticals, health care, machine tools and Information Technology, where the two countries could benefit from expansion and diversification.

India is currently exporting iron ore, cotton and other raw material, IT-related products and services to China, while China is mainly exporting finished industrial products to India.

Meanwhile, China's foreign trade reached USD 1.17 trillion, up 24.4 per cent during January-July, according to Chinese customs statistics.

The European Union remained its largest partner with a trade volume of USD 190.1 billion, a growth of 28.5 per cent over the same period of last year, followed by the United States with USD 167 billion, up 17.5 per cent, and Japan with USD 130 billion, up 15.2 per cent.

The total trade volume included USD 654.4 billion in export, up 28.6 per cent, and USD 517.6 billion in import, up 19.5 per cent. The trade surplus was USD 136.8 billion, or 77 per cent of the figure for the whole of last year.