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China Reclaims Top Trading Partner Spot Despite Strained Relations with India

China regains its position as India's largest trading partner, driven by a surge in imports despite ongoing political tensions. Experts highlight India's efforts to reduce this dependence and the need for a more balanced trade relationship.

China Reclaims Top Trading Partner Spot Despite Strained Relations with India

China Back on Top as India's Trade Partner

New data reveals a significant shift in India's trade landscape. China has reclaimed its position as India's largest trading partner, surpassing the United States in the fiscal year 2024 (FY24). This development comes despite ongoing political tensions between the two Asian giants.

                             

 

Numbers Speak Volumes

According to the Global Trade Research Initiative (GTRI), India's bilateral trade with China stood at a staggering $118.4 billion in FY24. This figure reflects a rise in both imports (3.24% to $101.7 billion) and exports (8.7% to $16.67 billion) compared to the previous year. While exports saw a modest increase, the significant rise in imports from China is the key factor behind this shift in trade dynamics.

 

 

A Long-Term Trend

This trend of rising dependence on Chinese imports is not new. Over the past five years, India's imports from China have surged by nearly 45%, while exports have stagnated. This has resulted in a widening trade deficit, increasing from $53.57 billion in FY19 to a concerning $85.09 billion in FY24.

 

 

US Trade on a Decline

In contrast, India's trade relationship with the US has witnessed a decline. Two-way trade between the two nations reached $118.3 billion in FY24, with a slight dip in both exports and imports compared to the previous year. While the US has been India's top trading partner in recent years, China's resurgent import dominance has reshuffled the ranking.

 

 

India's Efforts to Diversify

The Indian government is aware of its dependence on Chinese imports, particularly for critical products like telecom equipment, smartphone parts, pharmaceuticals, and advanced technology components. To address this issue, various initiatives are underway, including production-linked incentive schemes (PLI) that encourage domestic manufacturing, anti-dumping duties to counter unfairly priced imports, and stricter quality control measures.

 

 

A Look at Other Trade Partnerships

The GTRI report also sheds light on India's trade relations with other countries. Russia's trade figures reveal a significant increase in imports (up 952%) but a stagnant export growth, leading to a wider trade deficit. On the other hand, trade with Saudi Arabia shows a positive trend, with exports more than doubling and a slight reduction in the trade deficit. The UAE also witnessed a rise in both exports and imports, albeit with a shift from a marginal surplus to a trade deficit.

 

 

The Road Ahead: Balancing the Trade Equation

China regaining its top trading partner position underscores the complex relationship between India and its neighbour. While trade is crucial for economic growth, the significant dependence on Chinese imports raises concerns about vulnerability. India's ongoing efforts to diversify its trade partnerships and promote domestic manufacturing hold the key to achieving a more balanced trade ecosystem in the long run.


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