India- China Trade Ties


    In News

    • India’s imports from China spiked sharply post the Galwan clash, in which 20 Indian soldiers were killed.

    About Trade Ties 

    • Overview: China is India’s second biggest trading partner after the United States.
      •  In 2021-22, India-China bilateral trade stood at $115.83 billion, which was 11.19 percent of India’s total merchandise trade of $1,035 billion.
        •  The US was just a notch above, with 11.54 percent ($119.48 billion) share.
          • Other countries: Apart from the US and China, the other eight countries and regions among India’s top-10 trading partners during 2021-22 were UAE, Saudi Arabia, Iraq, Singapore, Hong Kong, Indonesia, South Korea, and Australia.
    • Imports Items: During 2021-22, 15.42 percent ($94.57 billion) of India’s total imports ($613.05 billion) came from China. 
      • The top commodities that India bought included: electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers and parts; nuclear reactors, boilers, machinery, and mechanical appliances and parts of thereof; organic chemicals; plastic and plastic articles; and fertilisers.
      • Imports have been up significantly since Galwan clash: 
        • The monthly figure of imports from China, which hit a low of $3.32 billion in June 2020 during the Covid lockdown, started rising soon after the easing of restrictions and rose to $5.58 billion in the following month (July 2020). Since then, it continued rising and scaled a new peak of $10.24 billion in July this year.
    • Exports: In 2021-22, India’s exports to China stood at $21.25 billion, which was 5 percent of India’s total shipments ($422 billion). 
      • Among the top commodities China bought from India included: Ores, slag, and ash; organic chemicals, mineral fuels, mineral oils, and products of their distillation, bituminous substances, mineral waxes; iron and steel; aluminum and articles of thereof; and cotton. 
        • Among single items, light Naphtha ($1.37 billion) was India’s most valued export item to China during 2021-22.
    • Spike in trade deficit: India’s trade deficit with China has increased from $1 billion to $73 billion in the past 21 years.
      • During the first seven months (April-October) of the current financial year (2022-23), India’s trade deficit with China stood at $51 billion, which was 39 percent higher than the figure ($37 billion) recorded in the corresponding period of the last fiscal.
      • In fact, China alone accounted for over one-third of India’s total trade deficit ($191 billion) during 2021-22.
      • The rising gap between imports and exports from China is evident from the fact that two decades ago, India’s imports accounted for about 60 percent of the total bilateral trade between the two countries, but now it is over 80 percent.