Trade Sector Updates – Falling Exports, TIES, MEIS, Foreign Trade Policy, etc.

India’s trade with China falls at five-year low

Note4Students

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)

(a) China

(b) India

(c) Myanmar

(d) Vietnam

India-China Trade

  • 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.
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