Changing Trends of Bilateral Trade Engagement

4. 2 Changing Trends of Bilateral Trade Engagement

Bilateral trade between India-China has grown rapidly in the past few years and picked up significantly after Chinese accession to WTO. Bilateral trade turnover jumped by nearly twenty five times, from US$ 2.7 billion in 2001 to nearly US$ 68.8 billion in 2012 (Table 4.2). With a conservative estimate, the India-China trade turnover was expected to cross US$ 60 billion in 2010 and further to 125 billion in 2012. The expected target was almost achieved where trade reached US$ 58.9 Bilateral trade between India-China has grown rapidly in the past few years and picked up significantly after Chinese accession to WTO. Bilateral trade turnover jumped by nearly twenty five times, from US$ 2.7 billion in 2001 to nearly US$ 68.8 billion in 2012 (Table 4.2). With a conservative estimate, the India-China trade turnover was expected to cross US$ 60 billion in 2010 and further to 125 billion in 2012. The expected target was almost achieved where trade reached US$ 58.9

emerged as the largest trade partner of India 30 since 2008-09.

During the last nine years, exports of India to China have grown at an annual rate of 29.8 per cent and by 2009, formed 7.7 per cent of the total exports. In 2001, China was lagging behind several countries including Belgium and Singapore so far as its share in the total trade of India is concerned. In the same year, China shared

3.5 per cent of India’s total trade whereas the US shared 14.4 per cent, the UK 5.1 per cent and Belgium 4.1 per cent of total India’s trade. The trade scenario changed significantly in 2009 with a sizable increase in India’s bilateral imports. China not only jumped up in its ranking among India’s lead bilateral trade partners but also splashed the Indian market with its exports, causing serious bilateral trade imbalances. It is now sharing nearly 9 per cent of India’s total trade in 2009. Its current bilateral trade is larger than the combined bilateral trade of Germany, the UK and Japan with India.

Table 4.2: India's Bilateral Trade Engagement with China

(US $ Million)

India's Bilateral exports

India's Bilateral Imports

Total Bilateral Trade Trade

Year

Share in

Share In

Actual Growth

Total

Actual Growth

total

Actual

Growth Balance

33.4 -656 2001-03

44.3 -820 2004-07

52.7 -6937 2007-10

29.4 -20027 2010-212 17164

Source: Direction of Trade Statistics, Online accessed on October 27, 2013, IMF, Washington DC. Note: Growth denotes compounded annual growth rate (CAGR).

30 See Financial Express, Submission of MoS in the Lok Sabha, http://www.ibef.org/artdisplay.aspx?cat_id=60&art_id=23501

During the last decade, the growing bilateral trade imbalance against India was not corrected, while taking an unmanageable shape even during the current episode

of recession. With an increase in the two-way trade, the trade deficit increased exponentially, and it may not be sustainable for a long period of time. While the uncovered trade gap was reported at US$ 602 million in 1998, it increased alarmingly to US$ 39.2 billion in 2012. During the earlier part of the decade (i.e. 2001-02), the size of the trade deficit declined for a few years, but started growing since 2002. During the last decade, the growth of the trade deficit was robust for the period 2004-07 when the global economy was booming. The trade deficit made a quantum jump in 2006 to reach a level of US$ 7.9 billion from US$ 3.5 billion in the previous year, posting an annual growth rate of 129 per cent. A peak bilateral deficit to the extent of 39.2 billion was reported in 2012. However, the growth rate of bilateral trade deficit has started declining since 2006, though the volume of the same is growing significantly over the years except for 2009.