The Hindu Business Line : Trading with China

A REVOLUTION OF sorts is happening in the Sino-Indian economic relationship, with bilateral trade set to cross $19 billion by December, far ahead of the 2008 target of $20 billion. In just the first four months of 2005, trade reached $6.3 billion against $7.6 billion in calendar 2004, and $3.6 billion the previous year. At this rate, the $30-billion target set for 2010 should be reached much ahead.

What makes the performance impressive is the fact that private business has taken the initiative even as an official policy on the direction of a new Sino-Indian economic relationship is yet to take shape. The kernel of the revised policy is contained in the report of the Joint Study Group, which was set up following the June 2003 visit to Beijing of the then Prime Minister, Mr Atal Bihari Vajpayee, to explore ways of expanding bilateral trade and economic cooperation and draw up a five-year plan for Sino-Indian trade and economic development. The comprehensive recommendations of the Group — including specific suggestions on how to improve bilateral contact in the spheres of trade, services, economic cooperation (in agriculture and rural development, electronics, etc), not to speak of a regional trading arrangement between the two countries — were presented in April to the new Prime Minister, Dr Manmohan Singh, and his Chinese counterpart, Mr Wen Jiabao, who was on a visit to New Delhi. The Ministerial-level joint economic group set up by the two countries is yet to complete studying these recommendations.

The irony of it all is that while private initiative has basically been behind the current spurt in the two-way trade, official policy may be somewhat more restrictive. For instance, citing security grounds, New Delhi has put on hold the plans of the Chinese telecom company Huawei Technologies to invest $60 million in its Indian arm. Since this is not the sort of action that would promote healthy growth of an economic relationship, hopefully the decision has been carefully thought through. India cannot do more business with China if it does not allow free movement of Chinese corporate personnel to, and in, the country. If indeed a threat is perceived, the security agencies must gear up rather than take recourse to blanket bans.

Apart from trade, where India enjoys a surplus (mainly because of its primary goods exports), the avenue of mutual investment and joint venture cooperation in third countries has not been explored at all. Thus, cooperation can be explored in petrochemicals and, more important, oil and gas exploration, where GAIL has already shown the way, forming a joint venture with Sinopec, China's biggest energy and chemicals company. The information technology sector also holds out prospects. Since both are also huge markets, it would be a pity if the opportunity for effective exploitation for mutual benefit goes untapped. More integrated economic ties are also sure to lead to beneficial political fallouts.

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