India and China Trade Relations

Why in News?  

•  Recently, contrary to the demands, India’s imports from China have recently seen a sharp increase post the Galwan Valley clash in 2020.  

Highlights

• China is India’s second biggest trading partner after the US.  
• In 2021-22, Indo-China bilateral trade was USD 115.83 billion – 11.2% of India’s total merchandise trade of USD 1,035 billion (Indo-US trade – 11.54%). 
• China as a trading partner stood at 10th position about 2 decades ago; this upward trend has begun since 2002-03.  
• China was India’s top trading partner in 2011-12, from 2013-14 to 2017-18 and in 2020-21.  
• The major difference in India’s trade with the US and China is that while India enjoys a trade surplus with the US (USD 32.85 bn – 2021-22), with China India has a trade deficit of USD 73.31 bn (2021-22), the highest for any country.  
• While India’s imports from China (between 2001-02 and 2021-2020) have increased from USD 2 bn to USD 94.57 bn, (in the same period) India’s exports to China have increased from about USD 1 bn to only USD 21 bn.  
• From the perspective of the government, the political and security challenges are deepened when the state is dependent on importing products and services from an unfriendly country.  
• India imports most of the Active Pharmaceutical Ingredients (APIs) it uses in its pharmaceutical industry from China. The cost of Chinese APIs is cheaper than the Indian ones even on the Indian market. 
• The depth of the problem was revealed during the Covid-19 pandemic when due to travel restrictions, exports of Chinese APIs to India were temporarily restricted and consequently India had to cut its exports of APIs too.  
• Approximately 24% of coal energy generated in India may be coming from plants that are using critical equipment imported from China. This, therefore, may not necessarily be considered a strategic dependence, but is certainly a form of a security challenge.  
• While there are demands to limit or even block such imports from China, this would simply mean forcing private Indian power companies to suffer higher costs