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The trade deficit with China stood at $3.3 billion in February, a 13% rise from the year-ago period
The trade deficit with China stood at $3.3 billion in February, a 13% rise from the year-ago period

India’s trade balance with China doesn’t bode well for a boycott

The latest improvement in India’s exports can be partly attributed to the high demand from China

The border tensions with China have given rise to calls for an economic boycott of the neighbour. A look at India’s trade balance with China shows that the trade interdependence between the two countries is quite deep.

“The bilateral trade with China has always had a coat of wariness. But unless Indian companies begin to make the products currently imported from China in a cost-effective way, we would only be hurting ourself by putting restrictions on these," said an economist, on condition of anonymity. China accounted for 11.8% of India’s total imports as of February. However, in India’s total exports, its share was a mere 3%. Clearly, we buy more from China than we sell.

Graphic: Satish Kumar/Mint
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Graphic: Satish Kumar/Mint

Ergo, India’s trade deficit with China is a large chunk of its overall trade deficit.

The trade deficit with China stood at $3.3 billion in February, a 13% rise from the year-ago period. At the same time, India’s trade deficit was $9.8 billion in February 2020, flat from a year ago.

To be sure, the coronavirus pandemic may have changed this markedly, as India’s overall imports have crashed in the past two months.

Given Chinese businesses were slowly opening up even as India and other countries were under lockdown, the neighbouring country could cater to a lot of cross-border trade. A fallout of this would be an increase in China’s share in India’s overall imports.

It is no denying that Chinese exports into India are entrenched in the supply chain of several sectors.

What did we import from China?

Engineering goods dominate the import basket, followed by electronics. Electronic imports formed a quarter of the total imports in February.

Another major segment is key raw materials for sectors such as pharmaceuticals and automobiles.

While imports are crucial, the latest improvement in India’s exports can also be partly attributed to the increased demand from China. In a way, this interdependence in trade is best not disturbed, even as the economy is headed towards its worst year.

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