India's Trade Deficit With China Reduces To $48.66 Billion For Year 2019-20

India's trade deficit with China significantly reduced from over $53 billion in the fiscal year 2018-19 to $48.66 billion in the year 2019-20, owing to a reduction in imports, revealed government data on Thursday, July 2.

The trade deficit between the countries stood at $63 billion in the financial year 2017-18.

A trade deficit is an amount by which the cost of a country's imports exceeds the cost of its exports.

According to the data, exports to China in the last financial year stood at $16.6 billion, while imports aggregated at $65.26 billion.

The reduction in the trade deficit has been largely attributed to a fall in India's imports from the neighbouring country while maintaining the levels of export to China.

It is important to note that China plays a crucial role in the Indian economy, accounting for about 14 per cent of the total import. It is a major contributor to Indian sectors like mobile phones, telecom, power, plastic toys, and critical pharma ingredients.

India imports commodities like clocks and watches, musical instruments, toys, sports goods, furniture, mattresses, plastics, electrical machinery, electronic equipment, chemicals, iron and steel items, fertilisers, mineral fuel and metals from China.

A continuous widening trade deficit with China has been a cause of worry for the central government and a reduction of dependence holds significance amid the rising border tensions with the dragon country.

The government is taking a number of steps which includes framing technical regulations and quality norms for several products to ensure a reduce India's reliance on China.

It has also imposed anti-dumping duties on several goods which are being dumped in the domestic market at below the average prices from China in an attempt to guard domestic players competing with cheaper imports.

For the purpose of imposing technical regulations, 371 products have been reportedly identified. Out of the identified lot, technical regulations for 150 products have been formulated which amounts to $47 billion of imports.

Additionally, over 50 quality control orders (QCOs) and other technical regulations have been notified in the past one year on goods including electronics, toys, air conditioners, bicycle parts, chemicals, safety glass, pressure cooker, items of steel, electrical items such as cables.

Another source of Chinese investment into the country through foreign direct investment has also shown a considerable dip in the year 2019-2020.

As per the data, FDI from China dropped to $163.78 million in 2019-20 from $229 million in the previous fiscal year.

India had received $ 350.22 million FDI from the neighbouring country in 2017-18 and $ 277.25 million in 2016-17.

In April, the government tightened FDI norms coming from the countries which share land border with India. As per the amended FDI norms, a company or an individual from a country that shares land border with India can invest in any sector only after government's approval.

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