Despite border tensions, China retains top spot as Indias trade partner
Indian imports from China reached nearly $100 billion for the first time in calendar year 2021

Despite border tensions, China retains top spot as India's trade partner

After a particularly bad year on the Line of Actual Control (LAC) with neighbouring China, India seems to be getting back well with the dragon on the trade front. According to Ministry of Commerce, two-way trade between the Asia’s two economic giants last year stood at $77.7 billion – greater than bilateral trade with US which stood at $75.9 billion amid pandemic. So, China has dislodged US as India’s largest commercial partner. Trade with China has taken a hit though. In 2019, it was just $85.5 billion.

China emerged as India’s biggest trade partner in 2020, despite tensions along the Line of Actual Control (LAC). In 2020, trade between the countries stood at $77.7 billion. However, this figure was markedly down from the previous year’s mark of $85.5 billion.

China also emerged as India’s biggest trade partner in the first half of 2020-21, dislodging the US in the process, which had held top spot since 2018-19, commerce ministry data showed. Bilateral trade between India and the US stood at $75.9 billion.

The COVID-19 pandemic and the subsequent restrictions hurt trade worldwide, and India was no exception.

Despite the anti-China sentiment across the country, following the Galwan Valley clash last June, India continues to rely on China for imported machines.

The Centre did respond strongly to the aggression in Ladakh, firstly by banning Chinese apps and then slowing down permissions for Chinese investments, but the country remains heavily dependent on Chinese-made heavy machinery, telecom equipment and other equipment. As a consequence, the trade margin with China was at almost $40 billion in 2020, making it India’s largest. As per the ministry, India’s imports from China stood at $58.7 billion, more than India’s combined purchases from the US and the UAE, the second- and third-largest trade partners, respectively. As per one estimate, 51 per cent of India’s imports from China consist of heavy machinery.

Import of other goods from China did go down, mainly due to market disruptions caused by the pandemic. In fact, Indian exports to China grew 11 per cent year-on-year to $19 billion in 2020.

India is keen to boost its manufacturing capabilities as part of the government’s Atmanirbhar Bharat campaign. However, economists say there’s much more to be done. Amitendu Palit, an economist specialising in international trade, told The Indian Express: “We will continue to rely on China for numerous imports for four to five years, but the process of becoming ‘atmabirbhar’ [independent] has definitely begun.”

China supports India as host of BRICS summit

India has China’s support in hosting this year’s BRICS summit.

Also read: India cuts China imports post Galwan; to slash trade deficit by $15 bn

The Chinese authorities have stated that they would like to work with New Delhi to strengthen cooperation among the five-member grouping of emerging economies – Brazil, Russia, India, China, South Africa.

India assumed chairmanship of BRICS this year.

China’s foreign ministry spokesman Wang Wenbin confirmed while speaking with media that Beijing supports New Delhi in hosting the summit. However, it is not confirmed yet if Chinese President Xi Jinping will attend.

Prime Minister Narendra Modi travelled to the Chinese city of Xiamen in 2017 for the BRICS summit after India and China resolved the 73-day standoff at Doklam.

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