China back as India’s top business partner, despite bitter relation

Total imports from China at $58.7 billion were more than India's combined purchases from the US and the UAE

China has again recovered its status as India’s top trade partner in 2020 after New Delhi’s dependence on imported machines had surpassed its attempts to control commerce with Beijing after a months-long border battle. According to provisional data from India’s commerce ministry, the two-way business between the longstanding economic and strategic enemy stood at $77.7 billion in 2020. Though this amount is lower than the previous year’s $85.5 billion total, it was enough to ke China the largest commercial partner replacing the United States bilateral trade with which came in at $75.9 billion amid muted demand for goods in the middle of a pandemic.

While PM Narendra Modi has banned numbers of Chinese apps, delayed approvals for investments from the Dragons and had called for ‘Atma Nirbhar Bharat’ - self-reliance India after a violent dispute along the Himalayan border, still India continues to rely heavily on Chinese produced heavy machinery, telecom equipment and home appliances. As a result, the bilateral trade gap with China was at almost $40 billion in 2020, making it India’s largest.

Total imports from China at $58.7 billion were more than India’s combined buying from the U.S. and the U.A.E, which are its second-and third-largest trade partners, respectively.

Amid the demand disruptions caused by the Covid-19 pandemic, India had managed to lessen imports from the Asian neighbour. The South Asian nation also managed to increase its exports to China by about 11 per cent from a year ago to $19 billion last year, which makes any further worsening of ties with Beijing a threat to New Delhi’s export revenue.

The strained relation with China is already pressing the country’s ambition of becoming self-reliant to support its manufacturing capabilities. 

The national capital is also delaying to issue visas to Chinese engineers who are wanted to help the Taiwanese companies establish factories under an allegedly production-linked incentive program, or PLI, to promote local manufacturing.

“Still a very long way to go” is how Amitendu Palit, an economist specializing in international trade and investment at the National University of Singapore, narrated New Delhi’s efforts to wean itself away from Beijing.

“The PLI schemes will take at least four-five years to create fresh capacities in specific sectors. Till then reliance on China would continue," he said. 

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