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As per latest details, India and China trade reached record levels in 2023 despite a slowdown mid-year.

Key-highlights of the trade details

• Bilateral trade volume reached 136.2 billion US dollars last year, with a year-on-year growth of 1.5%.
• India’s exports to China also increased by 6% last year.
• The bilateral trade deficit, which India has been seeking to decrease could also be lower.

 Why India’s trade with China is important?

• Top source of imports: India’s trade with China is important because, for the last 15 years, China has been India’s top source of imports.
  • In 2007-08, China’s share in India’s imports was around 10.8 per cent. It gradually went up and reached 16.4 per cent in 2017-18.
  • It languished around 13.7 per cent for 2018-19 and 2019-20, but in the two post-Covid years (viz., 2020-21 and 2021-22), China’s share in India’s imports reached 16.53 per cent (record high) and 15.43 per cent, respectively.
• Double share: To put these numbers in perspective, in these two years, the second biggest source of imports for India was the UAE, with an import share of 6.7 per cent in 2020-21 and 7.31 per cent in 2021-22. These numbers indicate that China is not only India’s biggest source of imports, but its share in total Indian imports is also more than double that of the UAE.
• Dominance in non-oil merchandise imports: In total non-oil merchandise imports, China’s dominance is even more pronounced. As oil imports account for 25-30 per cent of India’s total imports, India’s dependence on China for non-oil imports can be as high as 25 per cent or more.
• Export Market: China is a big market for Indian exports, as well. China has been among the top four export markets for India in the last few years. After Covid, India’s exports to China have gone up.

Improvements in Relations

• Over the past year, China-India relations have shown a positive momentum of improvement.
  • The two sides maintained high-level communications and interactions.
  • President Xi Jinping and Prime Minister Modi reached important consensus on stabilizing bilateral ties.
  • China supported India’s presidency of both G20 and SCO.

 What are the other sources of contention between the two?

• No FTA: India withdrew from the Regional Comprehensive Economic Partnership (RCEP) before signing a deal and consequently, there is no FTA between India and China right now.
• Competing interests:Despite growing economic cooperation, India and China have also been geopolitical rivals. Both countries are attempting to assert their global influence, and they have competing interests in a number of regions such as the Asia-Pacific and the Indian Ocean.
• Rivalry:India and China are rivals in the Asia-Pacific region.

• India has sought to increase its regional influence, forming alliances with several countries in the region, including Japan and Australia.
• China, on the other hand, has been attempting to assert its regional dominance by increasing its military and economic presence in the South China Sea.