In News:

• China’s latest transgression on the Line of Actual Control (LAC) in Arunachal Pradesh led to calls for snapping trade ties.
• However, official data show that India’s imports from China have jumped to a record high over the last 30 months.

What’s in today’s article:

• Background
• India-China Trade Relationship (Data, Imports/Exports, Reasons behind trade deficit)

Background:

• Indian and Chinese soldiers clashed in the Tawang sector of Arunachal Pradesh last week.
• Both the countries had been working to de-escalate tensions since the major clash which took place in Galwan valley in 2020.
• The incident took place on December 9 after 300-400 soldiers from the People’s Liberation Army (PLA) intruded across the Line of Actual Control.
• The intrusion was resisted by Indian soldiers deployed there in a firm and resolute manner, forcing the Chinese to retreat.

India – China Trade Relationship:

• According to data from the data from the Commerce Ministry, the total merchandise trade between India and China rose 34% to $115.83 billion in the 12 months to March 2022.
• Trade between the two nations so far this year — between April and October — stood at $69.04 billion.

Major Imports/Exports from/to China:

• China is India's largest trade partner for the year 2022.
• India’s major imports from China are –
  • Electronic goods ($35.4 billion), engineering goods ($24.9 billion), chemicals and related products worth $19.6 billion, other manufactured goods ($8.3 billion), and textiles ($2.8 billion).
• India's major exports to China include –
  • Engineering goods ($5.4 billion), agricultural and allied products ($3.8 billion), ores and minerals ($2.9 billion), chemicals and related products ($2.9 billion), and petroleum and crude products ($1.9 billion).
• Traditionally, India imports more from China than it exports, thus India's trade balance in 2021 stood at negative $65.05 billion.

Reasons behind high Trade Deficit:

• The reason behind India's extremely high and continuously widening import-export trade deficit is that it imports goods to fill the gapbetween domestic production and supply as well as consumer and demand preferences for various products.
• More specifically, the growth of the trade deficit can be attributed to two factors –
  • A narrow basket of commodities, mostly primary, that India exports to China.
  • Market access impediments for most Indian agricultural products and competitive markets, such as pharmaceuticals, IT/ITES, etc.
  • The raw material-based commodities that India exports have been overshadowed by Chinese exports over time.
• Many industries in India, especially the medical industry, are heavily reliant on Chinese products.
  • For example, India's $42 billion pharmaceutical industry imports about 68% of its active pharmaceutical ingredients (APIs) APIs from China.