India's Export Dynamics with China

Export Growth:India's exports to China surged by 8.74% in FY24, reaching $16.67 billion, as per data released by the commerce ministry. This marks a notable increase from $15.33 billion in the previous fiscal year. Notably, India's exports to China predominantly comprised raw materials and minerals, indicating a specific pattern in trade dynamics.

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Trade Deficit Concerns:Despite the growth in exports, concerns linger over India's trade deficit with China. Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), highlighted that the deficit has been persistent, totalling over $387 billion in the past five years. Imports from China have been on an upward trajectory, rising from $70.3 billion in FY19 to $101.75 billion in FY24, accentuating the trade gap.

Rising Demand:India's increasing reliance on Chinese imports can be attributed to the burgeoning demand for materials essential in sectors like solar energy, electronics, and electric vehicles. Moreover, the presence of Chinese companies in India preferring to source supplies from their home country further fuels this dependency.

Merchandise Exports:India's total merchandise exports for FY24 amounted to $437.06 billion, reflecting a slight decline from the previous fiscal. Noteworthy contributors to export growth include electronic goods, pharmaceuticals, engineering goods, iron ore, cotton yarn/fabric, handloom products, and ceramic products & glassware.

Challenges:China faces internal challenges such as declining property investment, debt,risks, and subdued consumption growth, as evidenced by a decline in merchandise exports for the first time since 2016. Despite internal challenges, China's imports have seen growth in key items such as iron ore, cotton yarn, cotton, quartz, unwrought aluminium, and sanitary items.

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Trade Strategy Shift:India aims to rebalance its trade strategy from east to west by pursuing free-trade agreements with major economies, excluding China. Negotiations are underway with countries such as the US, UK, Australia, Japan, Peru, Chile, and Asian countries. By the end of 2024, India could sign, or be close to signing, FTAs with all major economies except China. India and China trade under the Asia-Pacific Trade Agreement (APTA), which provides concessions on certain goods.

Domestic Manufacturing Boost:To promote self-reliance and curb imports, the Indian government has introduced initiatives like the production-linked incentive (PLI) schemes across critical sectors. These measures have yielded positive results, evidenced by decreased imports in sectors like mobile handsets.

As India navigates its trade relations with China amidst global economic shifts, strategic policy interventions remain crucial in fostering a balanced and self-reliant trade ecosystem.

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