CHINA AS TOP TRADING PARTNER IN 2020 OF INDIA

CHINA AS INDIA'S TOP TRADING PARTNER IN 2020

• According to provisional data from India’s commerce ministry, China regained its position as India’s top trade partner in 2020 despite high border tensions between the two countries.
• China as a Top Trading Partner: The two-way trade between India and China stood at USD 77.7 billion for the year 2020. Trade with China was USD 85.5 billion total in the previous year (2018-2019).
• Replaced USA: Now, China is the largest commercial partner displacing the US bilateral trade at USD 75.9 billion amid reduced demand for goods in the middle of the Covid-19 pandemic.
• Imports from China: Total imports from China at USD 58.7 billion were more than India’s combined purchases from the USA and the UAE, which are its second- and third-largest trade partners, respectively.
• Exports to China: India has only managed to increase its exports to China by about 11% from a year ago to USD 19 billion last year. Thus, a bilateral trade gap with China stood at almost USD 40 billion in 2020, making it India’s largest. Trade Gap/Deficit is the amount by which the cost of a country's imports exceeds the value of its exports.

ANALYSIS OF THE TRADE RELATIONS

Emergence of China as the top trading partner is due to increased import of Chinese medical supplies. Online shoppers seem to prefer Chinese mobile phones and electronic gadgets despite the environment of anti-China sentiments in the nation. As per the Prime Day 2020 sale data of Amazon, an e-commerce giant, OnePlus, Oppo, Huawei’s Honor and Xiaomi were among the top-selling smartphone brands in India. Also, India continues to rely heavily on Chinese-made heavy machinery, telecom equipment and home appliances. The increase in trade is despite the tense relations between the two countries and India’s ambitions to bolster its manufacturing capabilities under Aatmanirbhar Bharat.

MEASURES TAKEN TO REDUCE IMPORT DEPENDENCE

Recent Ban: The ban on more than 100 Chinese apps citing national security reasons. It has increased scrutiny of Chinese investments in many sectors, and is weighing a decision to keep Chinese companies out of 5G trials. The government recently put import restrictions on tyres, while also making its prior approval mandatory for foreign investments from countries that share land border with India to curb "opportunistic takeovers" of domestic firms - a move which will restrict FDI from China.

Focus on Self-Sufficiency: The Ministry of Commerce and Industry has also identified 12 sectors - food processing, organic farming, iron, aluminium and copper, agro chemicals, electronics, industrial machinery, furniture, leather and shoes, auto parts, textiles, and coveralls, masks, sanitisers and ventilators - to make India a global supplier and cut import bill. To cut import dependency on China for APIs (Active Pharmaceutical Ingredients), the government in March 2020 approved a package comprising four schemes with a total outlay of Rs. 13,760 crore to boost domestic production of bulk drugs and medical devices in the country along with their exports.

CHINA OVERTAKES U.S. AS TOP TRADING PARTNER

As per the data from the Ministry of Commerce and Industry, the USA was India's top trading partner for the year in 2019-20. In 2019-20, the bilateral trade between the USA and India stood at USD 88.75 billion as against USD 87.96 billion in 2018-19. The USA is one of the few countries with which India has a trade surplus. India’s trade surplus with the USA increased to USD 17.42 billion in 2019-20 from USD 16.86 billion in 2018-19. In 2018-19, the USA surpassed China to become India's top trading partner.

BILATERAL TRADE BETWEEN INDIA AND US

There is a huge potential to boost bilateral trade between the countries on account of increasing anti-China sentiment in both the nations. Because of the anti-China sentiment, several USA companies are exploring new suppliers in countries like India to cut dependence on China and if this happens, then it will greatly help India to boost exports to the USA. Presence of Indian diaspora in the USA is one of the main reasons for increasing bilateral trade. A balanced trade deal can further boost the economic ties. India and the USA are negotiating a limited trade pact with a view to iron out differences at trade front and boost commercial ties. However, India should be a bit cautious while negotiating the pact with the USA in areas such as agriculture, dairy and issues related to intellectual property rights. Recently, the USA administration has extended the ban on immigrant and non-immigrant visas till the end of 2020. India’s IT services exports to the USA, which depend significantly on the H-1B visa, has been an important constituent element of bilateral economic trade.

CONCLUSION

India cannot afford to sever its entire economic links with the world’s second-largest economy. Chinese finance can help in sustaining India’s start-up economy. India needs to be very selective in its measures. For example, India can curb Chinese firms' involvement in the telecom sector in India, especially 5G trials. But at the same time a large part of the infrastructure India already has in place in the 4G network is all Chinese, so India will still need China for maintenance and servicing. However, through Atmanirbhar Bharat Abhiyan, India can try to replace chinese products with domestic products in the sectors where it is possible. Further, it needs to boost up its economic relations with other countries.

QUESTIONS (1-5)

Q.1 Which of the following Departments and Ministry have released the provisional data in which China regained its position as India’s top trade partner in 2020?

1. Department of Foreign Affairs and Trade
2. Department of Finance and Taxation
3. Department of Commerce: ANSWER
4. None of the above

Q.2 Which of the following statements is/are correct in the context of the China's becoming the top trading partner of India?

1. China becomes the largest commercial partner displacing the European Union bilateral trade at USD 75.9 billion amid reduced demand for goods in the middle of the Covid-19 pandemic.
2. Total imports from China at USD 58.7 billion were more than India’s combined purchases from the USA and the UAE.

1. Only I is correct
2. Only II is correct: ANSWER
3. Both I & II are correct
4. None of the above

Q.3 International trade and domestic trade differ because of:

1. Different government policies
2. Immobility of factors
3. Trade restrictions
4. All of the above: ANSWER

Q.4 Consider the following statements and state which of the following is/are incorrect in the reference to the above mentioned passage?

1. Emergence of China as the top trading partner is due to increased import of Chinese medical supplies during the COVID-19 pandemic.
2. The trade relations between India & China remain to flourish despite the ban on more than 100 Chinese apps citing national security reasons.
3. There is a move from the Indian Govt. and weighing a decision to keep out Chinese companies from 5G trials & rollout.

1. Only I & II follows
2. Only II & III follows
3. All I, II & III follows
4. None of the above: ANSWER

Q.5 The policies made by the government which is related to exports and imports of the country is known by which of the following terms?

1. Commercial policy: ANSWER
2. Fiscal policy
3. Monetary policy
4. Finance policy