India's trade deficit with China could nearly double to $60 billion in the next two years if the two partners do not address market access constraints and nontariff barriers faced by Indian goods in the neighbouring country, the department of commerce cautioned in the foreign trade policy statement released last week. The statement came ahead of Prime Minister Narendra Modi's expected visit to Beijing in the second week of May.
India is pushing for tariff concessions from China in oil seeds, textile items and marine products in the fourth round of tariff concessions under Asia-Pacific Trade Agreement (APTA) in a bid to correct the imbalance in bilateral trade. The trade deficit widened to $36 billion in 2013-14, accounting for a quarter of India's overall export and import gap. While India's exports to the bigger Asian rival fell 18.6% in April 2014-January 2015, imports grew 17.16%. India's imports include manufactured items in both "non-essential" categories and power and telecom equipment, as per the statement.
"If the current situation persists, by 2016-17, merchandise imports from China will exceed $80 billion while India's exports will be around $20 billion, leaving an unsustainable trade deficit of $60 billion," the commerce department said. The matter was also taken up during the recent visit of an Indian delegation to China in March, but Beijing refused to give an assurance."We did not get any commitment from their end on any of the issues, be it agriculture, pharmaceuticals or IT. It has so far maintained that the wide trade gap can be explained by the divergent nature of the two economies, with India being a services-led one while China is a manufacturing economy," said a government official.
"There is definitely a level of frustration as there have been a lot of MoUs on bovine meat to IT and pharma, but no action on the ground," he added. India is seeking reduction in tariffs on close to 200 product lines from China under APTA including textiles, oil cakes and marine products. APTA is a preferential trade agreement between the six countries of Asia- India, China, Bangladesh, Sri Lanka, Laos and South Korea."PM is also likely to take this up during his visit,' said the official.
According to the government, a series of non-tariff barriers block India's exports of pharmaceuticals, IT/ITES and agri commodities including bovine meat, oil meals and cake, tobacco, rice, fruits and vegetables to China. India has also been pushing China to allow Indian companies to bid for tenders in its state-owned enterprises. In pharmaceuticals sector, India has been seeking removal of entry barriers as registration of existing drugs in China takes three-five years, compared to just three-six months in India. India also questioned China's decision to continue curbs on Indian buffalo meat imports at an agriculture committee meeting of the World Trade Organisation (WTO) recently. Non-essential imports is another issue Of the $12.5 billion (about Rs 78,000 crore) worth of consumer imports in each of the past two years, mobiles phones alone accounted for $5 billion (about "31,000 crore) worth of imports and this segment has seen a surge in imports in the past three-four years.
The statement pointed out that the approach for electronics exports promotion must include discouraging non-essential imports and improving product standards, among other things. The commerce department also recommended that states play a role in rationalising non-essential imports."Foriegn direct investment flow from China is one way of addressing the problem of widening trade deficit.
If China sets up manufacturing facilities in India, those items will not get imported from Beijing," said Ram Upendra Das, professor, RIS for developing countries. The department of industrial policy and promotion secretary Amitabh Kant conducted a 'Make in India' workshop in Beijing last week to drive Chinese investment into Indian manufacturing. During Chinese president Xi Jinping's visit to India in September last year, China had committed investment of $20 billion in India over the next five years. The commerce department recommended that the country must remain vigilant and"take action to safeguard against unfair trade practices to protect the legitimate trade interests of Indian industry".
Source:- economictimes.indiatimes.com
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