Will India-China Economic Dialogue Help Exporters?

By M H Ahssan

Will China really open up its market further for Indian exporters? This question has again come to the fore with yesterday's first-ever Strategic Economic Dialogue between the two nations. During the India-China Joint Group on Economic Relations last year, China had said that it would give India access to some sectors such as pharmaceuticals and IT, but the promise is hardly kept, at least till now. It is expected that that the new round of talks would spark fresh interest for businesses from both the sides.

In the last few years, India-China trade has witnessed a robust growth, crossing the target of $60 billion in 2010. The two nations have set a trade target $100 billion by 2015, which seems achievable considering the recent pace of bilateral trade growth. But despite this growth, India's trade deficit with China, which stood at $20.02 billion in 2010 increasing from $15.87 billion trade in 2009, is still a concern.

Clearly, the recent growth in India-China bilateral trade is favouring the latter. Another worry is that India's exports to China are primarily non-manufactured goods, particularly raw materials, of which only iron ore comprises a whopping 50 percent, but China's exports to India mostly include value-added finished and semi-finished products. This is, needless to say, against the interest of our economy.

Yesterday's dialogue, held against the backdrop of India's growing trade deficit with China, seems to hold some promise as both the countries have agreed "to deepen bilateral investments, further open up markets and share developmental experiences". According to news reports, the two sides have agreed to strengthen cooperation in infrastructure development, energy efficiency, and communication on macro-economic policies. These are certainly very good developments, and if steps are implemented as proposed, both the countries will benefit from these greater commercial interactions.

I feel that India and China, two of the fastest growing economies in the world, should think beyond the history of rivalry and move faster towards greater collaboration as there is a huge scope for both the economies to benefit from each other. For example, there is a lot for India to learn from China in areas like urban development, power projects, and infrastructure. China, on the other hand, can learn from India's success story in the field of information technology and IT enabled services. Also, there is enough scope for Indian and Chinese businesses to participate in infrastructure, transportation and power distribution projects in both the countries .  
 
As far opportunities that could arise for our exporters from greater India-China collaboration are concerned, I also think that China's large domestic automobile market offers huge opportunities for the Indian automotive sector. Moreover, Indian auto companies can also consider to use China as a low cost manufacturing base. In addition, I feel, with China's recently unveiled 12th Five Year Plan, which signals to the nation's gradual policy shift to a domestic consumer-driven economy, Indian exporters can expect a lot from the Chinese market in the coming days.