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NITI Aayog explores ways to reduce trade gap with China

  • Published
    25th Oct, 2023

According to the latest update, NITI Aayog has initiated a study on ‘how to reduce dependence on Chinese imports and reduce trade gap’.

About the study:

  • Study on China is part of the bigger process to align India’s trading strategies with emerging geopolitical situations and political risks to safeguard supply chains.
    • In certain industries China is central to certain supply chains that raises its vulnerability during crisis situations.
  • Study will also examine the global trade flows to recommend how India may diversify its imports to other trading partners in specific product categories.
  • It will also identify product categories where India has comparative advantage to scale up exports to China.
    • The study will also examine tariff and non-tariff barriers, regulatory ecosystem and market access concerns for Indian exports to China.
  • Study on sectors for India to be a global manufacturing hub is to identify the sectors with most significant opportunities by analysing future trends in manufacturing, industrial capabilities, infrastructure, policy framework, and market potential.
    • The study will analyse at least 12 sectors and their future trends.
    • It will also assess the infrastructure requirements, including transportation, logistics, power supply, and digital connectivity, for each identified sector.
    • Policy framework, including regulatory environment, tax structure, trade agreements, and ease of doing business, relevant to manufacturing in India will also be examined.

Trade Deficit with China:

  • In FY 23 it touched 83.1 billion dollars from 5 billion dollars in FY 19.
  • Last year, of the total trade deficit of India, China accounted for 263 billion dollars which was around 32%

Mutual Interests of India and China

  • Both are members of BRICS, which is now establishing a formal lending arm, the New Development Bank.
  • India is a founding member of the China-backed Asian Infrastructure Investment Bank.
  • China welcomed India’s full membership of Shanghai Cooperation Organization, Eurasian political, economic, and security alliance.
  • Both countries have advocated democratization of international institutions such as World Bank, IMF, etc.
  • China and India have similar stand during WTO negotiations.
  • China and India, being the main targets of criticism by the US and its friends, have so far successfully coordinated their strategies in the environmental summits.

India’s Three-Pronged Strategy towards China:

  • The first prong is to engage in bilateral and multilateral forums such as BRICS, SCO and the Russia-India-China trilateral, in order to maintain overall stability, deepen economic ties, and foster diplomatic cooperation on regional and international issues.
  • India has also sustained efforts to enhance its military and deterrent capabilities as the second prong of policy.
  • There is an emerging third prong in India’s China policy in the form of new external balancing effort.
  • The evolution of India-US relations in particular but also of India’s relationships with Japan and Australia as well as the quadrilateral cooperation among them indicates a growing convergence in their views regarding stability in the Indo-Pacific region particularly with respect to China’s intentions in laying territorial claims to more than 80 per cent of the South China Sea as well as to the sovereign territories of India and Japan.
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