4 min read.Updated: 13 Jul 2020, 09:41 PM ISTAjit Ranade
The border clash between the two nations has snapped ties that could have spelt greater value for both
For two years in a row, India’s biggest trading partner has been the US and not China, and this is based on merchandise trade only, i.e. without including India’s impressive export of software services. More encouragingly, India’s trade surplus with the US has been rising and its trade deficit with China falling for three consecutive years. As of March, India had a current account surplus of $28 billion with the US, inclusive of net software exports, and a $48 billion deficit with China. In all likelihood, this trend would have continued were it not for the disruption of covid-19 and the fatal military clash in Galwan Valley. Despite thorny border issues spanning decades, several tense standoffs, including most recently for 72 days at Doklam, there hadn’t been fatalities for nearly 50 years. An eyeball-to-eyeball confrontation at the border has always been defused before it could get nasty. But after the incident of 15 June, in which 20 Indian as well as an unspecified number of Chinese soldiers were killed in eastern Ladakh, the mood on bilateral trade has soured. Chinese imported cargo is languishing at ports, as clearance is either denied or delayed. This is hurting Indian importers that have already paid for the cargo. India’s export consignments face similar hurdles in China. Various confirmed orders to Chinese companies for road construction or for supplies to the Indian railways stand cancelled. India has also banned 59 Chinese apps, despite their user base in India of over 200 million.