From UPSC perspective, the following things are important :
Prelims level : India's trade deficit
Mains level : Atmanirbhar Bharat
India’s trade with China last year fell to the lowest since 2017, with the trade imbalance declining to a five-year low on the back of a slump in India’s imports from China.
Try this PYQ:
Q.Among the following, which one is the largest exporter of rice in the world in the last five years? (CSP 2019)
- Two-way trade in 2020 reached $87.6 billion, down by 5.6%, according to new figures from China’s General Administration of Customs (GAC).
- India’s imports from China accounted for $66.7 billion, declining by 10.8% year-on-year and the lowest figure since 2016.
- It, however, rose to the highest figure on record, for the first time crossing the $20 billion-mark and growing 16% last year to $20.86 billion.
What constitutes India’s import from China?
- While there was no immediate break-up of the data in 2020, India’s biggest import in 2019 was electrical machinery and equipment, worth $20.17 billion.
- Other major imports in 2019 were organic chemicals ($8.39 billion) and fertilizers ($1.67 billion), while India’s top exports were iron ore, organic chemicals, cotton and unfinished diamonds.
India’s exports to China
- The past 12 months saw a surge in demand for iron ore in China with a slew of new infrastructure projects aimed at reviving growth after the COVID-19 slump.
- China’s total iron ore imports were up 9.5 per cent in 2020.
A friction-induced low
- The trade deficit, a source of friction between India and China, declined to a five year-low of $45.8 billion, the lowest since 2015.
- Whether 2020 is an exception or marks a turn away from the recent pattern of India’s trade with China remains to be seen.
- While India’s imports from China declined, so did India’s imports overall with a slump in domestic demand last year.
- There is, as yet, no evidence to suggest India has replaced its import dependence on China by either sourcing those goods elsewhere or manufacturing them at home.