Data: What is India’s trade with China like?
Sai Krishna Muthyanolla
April 27, 2020
Ever since the outbreak of COVID-19 with its origin in Wuhan (China), there have been renewed demands for ban of Chinese goods and for reducing trade with China. But as data suggests, it is easier said than done. Here is why.
Internationaltrade is one of the areas that has been severely hit by COVID-19 and most ofthe countries reliant on export & import of goods & services arebearing the brunt.
As far as  India is concerned, as per a press release in June 2019 by Ministry of Commerce and Industry, India holds 2.1% share of the global exports and 2.6% share of the global imports as on 2017.  Some of the leading trade partners of Inia include – USA, China, UAE, Saudi Arabia, Hong Kong etc.
AsChina is the country of origin for COVID-19, there are increasing questionsover China’s reluctance to share information about the initial outbreak.Because of this, there has been a diplomaticbacklash with many countries threatening to move out their manufacturingfacilities from China. There have also been statements from global leaders torelook their trade relations with China.
Evenin India, there have been demands from certain quarters along with some publicsupport to ban trading with China. But this is easier said than done. In thisstory, we look at the extant of trade with China and India’s dependence on thesame. For the analysis, we have majorly relied on the information provided onMinistry of Commerce and Industry’s Export & Import Data Bank.
Highest
Trade Balance Deficit in last financial year over the 10-year period.
Trade balance is the difference between the total monitory value of the exports and the imports. For balance of trade, only the visible goods are considered, and the services excluded.
Whenthe value of exports exceeds the value of imports, it is referred to as TradeSurplus. Whereas if the value of imports is higher than that of the exports, itis referred to as Trade Deficit. Since independence, India generally had atrade deficit. However, the value has varied over the years.
For2018-19, the trade deficit was ₹12.86 lakh crores. This is the highest for thepreceding 10-year period (2010-19). Prior to this, the previous financial year i.e.2017-18 accounted for the highest trade deficit of ₹10.45 lakh crores. Theprevious highest can be traced back to 2012-13, when the deficit was ₹ 10.34crores. This was followed by 4 years of reduced trade deficit, of which theleast being in 2016-17 with ₹ 7.28 lakh crores.
In
2018-19, USA emerged as India’s leading trade partner, overtaking China
For2018-19, USA had a share of 10.42% of the total trade by India (including both importsand exports), an increase from the previous year’s 9.69%. This is higher thanthat of China which accounts for 10.32% of the total share of internationaltrade conducted by India.
Untilthe previous year, China had the highest share in India’s global trade. China’sshare in the previous 4 years i.e. between 2014-18 was 9.55%, 11.01%, 10.83%and 11.66% respectively. The increase in USA’s share can be attributed to anincrease in both the imports and the exports. For the year 2018-19, the shareof USA in exports was 15.88%, a marginal increase from 15.77% recorded in theprevious year. The significant increase was observed in  the share of imports which increased from5.72% in 2017-18 to 6.91% in 2018-19. Over the five-year period (2014-19),USA’s share in imports and exports has gradually increased from 4.87% and13.68% respectively in 2014-15.
Meanwhile,a significant drop in the share of China’s imports into India was observed in2018-19. In 2018-19, imports from China accounted for 13.69% of the total,significantly less than the 16.4% in 2017-18. Meanwhile, there is an increasein share of exports to China, which stood at 5.08% in 2018-19, compared to 4.4%the previous year.
Amongthe other significant trading partners, although UAE’s share in overall tradehas increased in 2018-19, compared to 2017-18, its share is still less that ofthe earlier years.
Meanwhile, over the five-year period (2014-19), the share of Saudi Arabia in overall trade has reduced from 5.16% to 4.04%. While the volume and share of imports from Saudi Arabia has increased, the same increase isn’t observed in the case for the exports to Saudi Arabia. Hong Kong, Singapore and Iraq are among the other countries which have witnessed increasing trade with India.
India
has the highest trade deficit with China and a surplus with USA & UAE
Amongthe countries which have the higher volumes of trade with India, India’s tradesurplus is with only USA and UAE during the five-year period of 2014 to 2019.
HongKong and Singapore, with who India had a trade surplus previously also recordeda trade deficit for 2018-19. One of the key reasons for having a favourabletrade balance with USA is the high value exports of semi-precious metals andpearls.  So is the case with UAE, wherethe value of exports for these commodities is high.
Meanwhile, the increase in the import of organic chemicals, plastics, mineral oils & products etc. from Hong Kong has resulted in the negative trade balance for 2018-19. Import of these products along with electrical machinery are the reasons for a trade deficit with Singapore.
Incase of the other top countries with which India trades, it has a tradedeficit. An increase in this deficit year on year with many of these countriesis observed.
WhileIndia has managed to reduce the trade deficit with China in 2018-19 compared tothe previous year, it is still very  highat ₹ 3.75 lakh crores. In the previous year i.e. 2017-18, the trade deficitwith China was ₹4.06 lakh crores.
Ashighlighted earlier, the increase in imports from Saudi Arabia is higher thanthe increase in exports, resulting in an increased trade deficit.  So is the case for other countries like Iraq& South Korea where the rate of increase in imports is higher than that ofexports.
Thetrends with these major trading partners point towards a higher rate ofincrease in imports compared to that of the exports across the board.
Marginal
fall in imports from China in 2018-19, after more than 3-fold increase over a ten-year
period
In2009-10, the total value of imports from China was ₹ 1.46 lakh which increasedsteadily to ₹ 4.922 lakh crores in 2017-18. The year 2017-18 also marked thesingle largest one-year increase in the worth of imports with an increase of ₹  0.81 lakh crores compared to the previousyear. The value of imports from China, fell only marginally i.e. by around ₹157crores in 2018-19, amounting to a total of Rs 4.92 lakh crores.
Meanwhile,the value of exports to China has crossed ₹1 lakh crore for the first time in2018-19 with ₹1.173 lakh crores. The previous highest was in the year 2013-14,where the value of exports was ₹ 90.6  thousand crores. The commodities which havecontributed towards this increase include – Organic Chemicals, Fish &Aquatic invertebrates, Coffee, Tea etc.
Thehuge deficit of trade with China, has a major impact on India’s overall tradedeficit due its sheer volume. The country with the next highest value ifimports into India in 2018-19 was USA, where the imports amounted to a totalof  ₹ 2.485 lakh crores i.e. just overhalf the volume of imports from China.
Electrical
Equipment, Nuclear Reactors, Organic Chemicals among the top imports from China
Amajor share of the imports from China include Electrical Machinery andEquipment, which includes electronic items also. In 2018-19, ₹ 144.4 thousandcrores worth of goods were imported under this category. The marginal fall inthe imports from China in 2018-19 as indicted earlier can be attributed to amajor extent to this commodity. In the previous year, the total worth ofElectrical machinery and equipment was ₹ 184.8 thousand crores.
NuclearReactors, Machinery, appliances etc. are the second most imported items byIndia from China. These imports have a year on year consistent increase. For2014-15, the worth of imports was ₹ 62.1 thousand crores which graduallyincreased to ₹ 93.6 thousand crores in 2018-19.
Organic Chemicals also form a substantial part of the imports from China and have seen an increase in their value. In 2018-19, ₹ 60.1 thousand crores of organic chemicals were imported, while five years back i.e. in 2014-15, they were worth ₹ 38.6 thousand crores. These three commodities occupy a major share of the imports compared to others. Other major imports into India from China include – Fertilizers, Plastic articles, Iron & Steel, Optical, Articles made of Iron & Steel, Vehicles (excluding railway related), Misc. Chemical products etc.
Barringa dip in the value of Iron & Steel, the worth of most of the other topimports into India has increased.
India
still hugely reliant on China for import of multiple commodities
Inthe year 2018-19, 96 different types of commodities were imported into Indiafrom China. As highlighted earlier, the fall in volume is very marginal in2018-19 compared to that of previous year. However, in terms of share of imports,the reduction is significant. In 2018-19, the total share of imports from Chinais 13.69%, compared to that of 16.4% the previous year. USA and Singapore haveincreased their share of imports into India.
Whilethere is a fall in the import of Electrical machinery and equipment from Chinain 2018-19, it has been compensated from countries like Vietnam, Hong Kong,Singapore and few European countries like Belgium & Netherlands. However,their share even for this commodity is quite low with the volume of Electricalequipment imported from China being many times higher.
Thenature of most of the top imports from China are not final consumables but areused in various commercial activities including agriculture and manufacturing. Forinstance, most of the electronic spare parts used in assembling electronicgoods in India are imported from China.
Anydisruption in these imports could adversely affect the manufacturing andagricultural sectors in India.
As it exists, any ban of imports from China could lead to more trouble unless India finds other sources of import for similar items or augment domestic availability. Finding alternates overnight will also be a challenge because of the sheer volume. Hence, despite demands for ban of trade with China or ban of Chinese goods, it may not happen without finding the right alternatives.
Featured Image: India’s trade with China