India will be seeking greater market access for its manufactured goods in China to help bring down the huge trade deficit with its fastgrowing Asian neighbour when Chinese Premier Wen Jiabao visits New Delhi this week.
The trade imbalance between the two countries stems from the skewed nature of the trade basket, which comprises mainly of raw materials, such as iron ore flowing out of India and highvalue manufactured goods coming in from China.
The commerce ministry's official figures show that iron ore and other minerals account for as much as 54.32 per cent of the top 10 commodities that India exports to China. Cotton and other commodities constitute another 6.23 per cent while machinery and instruments comprise a measly 2.72 per cent.
On the other hand, as much as 41.4 per cent of China's exports are made up of electronic goods and machinery and another 11.2 per cent consist of steel and electric machinery.
According to sources, commerce and industry minister Anand Sharma had during his visit to China in January this year done part of the spade work and the economic issues are expected to be thrashed out further during Premier Wen's visit.
India is worried as the trade deficit with China is expected to widen to $16 billion this year. Although there is a realisation on the part of the Chinese leadership that this imbalance is not sustainable in the long run, not much has been done at the ground level to address the issue.
India wants China to lower the trade barriers for its pharmaceutical and engineering goods so that exports of high-value goods go up to match more closely the value of imports flowing in from the neighbouring country.
The more open Indian market has been flooded with cheap Chinese goods to the extent that this has often caused problems for India's own industry.
Power equipment manufacturers BHEL and Larsen & Toubro (L&T) point out that there Chinese rivals have duty-free access to the Indian market and are increasingly eating into their market share. However, Indian companies cannot compete in the Chinese market as there is a 30 per cent import duty on all capital equipment imports. The duty has been put in place to protect the domestic industry.
Information technology (IT) and information technologyenabled services (ITeS) is another area where there is tremendous scope for bilateral cooperation between the two countries. Indian IT companies, which are doing well worldwide, face various problems in operating in China and this issue also needs to be addressed.
Foreign secretary Nirupama Rao on Monday said India was looking at greater investments by China, particularly in the infrastructure sector. China accounts for a negligible 0.05 per cent of the foreign direct investment (FDI) flows into India this year. "We need greater synergy and dialogue to explore the lessons that we could draw from the Chinese model of infrastructure development for the benefit of the business and engineering community of the countries," Rao added.
A senior commerce ministry official said both sides will work towards ensuring greater value addition in their bilateral trade and promote the introduction of additional goods and services in their markets.
Addressing a meet on 'India China opportunities and challenges in the emerging global order' organised by the Federation of Indian Chambers of Commerce and Industry (Ficci), Chinese ambassador Zhang Yan said both countries need to create an environment that is friendly for two-way investment.
Courtesy: Mail Today