India - China trade improving in favour of India: PHD Chamber

While appreciating the remarkable turnaround by Indian exports during November 2017, Mr. Anil Khaitan, President, PHD Chamber of Commerce and Industry said that India has seen a major breakthrough in its exports to China during last few months whereas the surge in imports for Chinese products in Indian market is on deceleration.

India's exports to China grew by 72% in October 2017 whereas growth of imports from China was only 4.2%, said Mr. Anil Khaitan.

According to a recent study by PHD Research Bureau, PHD Chamber of Commerce and Industry "India - China Trade Relationship: The Trade Giants of Past, Present and Future", exports to China are expected to improve further in the coming months.

Despite substantial volume of imports from China, of lately, India's import growth from China shrunk from 65% to 4% during April - October 2017 whereas exports growth to China witnessed a surge from 40% to 72% during the same period, said Mr. Anil Khaitan.

India's trade deficit with China has also eased from USD 4.92 billion in April 2017 to USD 4.6 billion in October 2017, he added.

China overtook UAE to become India's biggest trading partner in 2013.

Presently, China is India's 4th biggest export destination whereas the biggest import source, said Mr. Anil Khaitan.

The trade between India and China witnessed a tremendous jump from USD 2.71 billion in 2001 to around 70 billion in 2016, said Mr. Anil Khaitan.

India's top ten imports from China comprise of 79% of the overall imports from China. The majority of the share is held by Electrical equipments (HS-85) at 34.5%, followed by Mechanical appliances (17.7%) and Organic Chemicals (9.2%) among others, said Mr. Anil Khaitan.

Conversely, India's top ten export items to China comprise of 73% of the overall exports to China. The majority of the share is held by Cotton (HS 52) at 14.2%; followed by Ores, Slag and ash (HS 26) at 13.1% and Organic Chemicals (HS 29) at 8.8% among others, he added.

With industrialization gaining pace, India's import pattern with China has shifted dramatically from intermediate goods to capital goods, said Mr. Anil Khaitan.

India's import share of capital goods from China jumped from 47% in 2011 to 57% in 2016 whereas share of intermediate goods fell from 37% to 29% during the same period, said Mr. Anil Khaitan.

Over the past decade, China has been able to enhance its footprint in India to a greater extent. However, the trend has seen a consistent reversal in the first half of 2017-18, said Mr. Anil Khaitan.

On the diversification front, China's basket of exports to India is highly concentrated towards fewer selected products. This enhances the situation of high volatility for China due to higher reliance on fewer products in the coming times, said Mr. Anil Khaitan.

Interestingly, the intra-industry trade relationship between India and China has expanded consistently over the years. Around 53% of the trade between India and China is in the form of intra-industry, or similar products. This share has increase from 28% in 2007 to 53% in 2016, said Mr. Anil Khaitan.

The overall tariff structure for products from India attracted comparatively higher tariffs from China. The simple average tariff on products such as Tobacco registered highest rates of 29.25%; followed by sugar and sugar products (25.17%); cereals (21.75%); edible preparations (20.7%) among others, he added.

India is one of the biggest manufacturers of generic pharma products.

However, we are unable to export to China because of China's stringent protectionist policies, said Mr. Anil Khaitan.

While Indian pharma companies are able to export their generic drugs to USA and EU, it is quite surprising that exports of generic pharma products to China are in a lackluster trajectory, he added.

Despite being contiguous nations, India and China witness high trade cost.

The extra barriers imposed on agricultural and processed products needs to be mitigated to boost the agri-products trade and reduce the ever rising trade costs, said Mr. Anil Khaitan.

Although the mounted trade deficit with China is substantial, given the recent trends and amendments in the Foreign Trade Policy 2015-20, the volume of trade deficit is expected to ease in the coming years, he added.

Going ahead, with the shift in taste and preferences for Chinese products coupled with growing and competitive Indian production capabilities and shift in the consumption patterns of Indian consumers, the terms of trade are expected to improve in favour of India, said Mr. Anil Khaitan.

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