To better understand why there is a gaping trade deficit between India and China, take a look at the list of things each country exports to the other.
Some of China’s biggest exports to India are telecommunications equipment, computer hardware, industrial machinery and other manufactured goods. India sends back mostly raw materials such as cotton yarn, copper, petroleum products and iron ore.
As India has grown its consumers and corporations have been importing an increasing amount of China’s affordable products but India’s exports to China have not kept pace.
During his visit to China, Prime Minister Narendra Modi will be seeking better access to Chinese markets to correct the widening trade imbalance.
“The visit is going to be crucial because our trade deficit with China is very huge compared to other countries,” says N.R. Bhanumurthy, an economist at think-tank National Institute of Public Finance and Policy.
While China has a cost advantage in most products, analysts say India is very competitive in the pharmaceutical, textile and some services sectors. That is where it needs more access if it wants to start to rectify the skewed trade balance.
2 The 13-Year Gap
Even though India is now growing faster than China (see number 4) the world’s largest democracy still has a way to go to catch up with the size of the economy in the world’s most populous nation.
China, though, got a 13-year head start on India in opening its economy and giving companies greater freedom to invest and produce. In exports, capital spending and foreign investment, India today is remarkably similar to China circa 2001.
That should both console and concern India as it gets back on its feet after three years of weak growth and high inflation. Console, since it suggests the country’s economy could remain on a China-like trajectory for years to come. But concern, because India’s delay could mean that the country has missed out on some big advantages that catalyzed China’s boom.
3 The Border Perception Gap
Friction along the two nations’ 2,200-mile-long border, much of which is undefined and contested, has mounted in recent years, India says. And it poses a serious hurdle to improving relations between Delhi and Beijing.
Part of the problem, Indian officials say, is that India and China have “differing perceptions” of their de facto border, known as the Line of Actual Control. Both sides patrol up to their respective perceptions of the border, leading to frequent claims of transgressions.
Without a clearly demarcated border, “it is quite natural for some incidents to happen,” Chinese Defense Ministry spokesman Col.Geng Yansheng said in September during a border confrontation between the two countries.
4 The GDP Growth Rate Gap
Everyone from the World Bank to Goldman Sachs had predicted it wouldn’t happen for another two years but recent recalculations indicate that India has already dethroned China as the world’s fastest-growing big economy.
5 The FDI Gap
While Chinese companies have been great at peddling their products in India, they have been surprisingly reluctant to invest here. China has invested less in India than even Poland, Malaysia or Canada have.
via 5 Gaps That Define the India-China Relationship, in Charts and Maps – WSJ.
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