G. Srinivasan

India’s economic engagement with the People’s Republic of China had been a tantalising tale of euphoria and crisis ever since two nations began to engage with each other in the 1950s on the initiative of two charismatic leaders Jawaharlal Nehru and Chou En-lai (Zhou Enlai).

But this relation cooled after 1963, in the wake of Chinese incursions into Indian territory. This war and the unresolved border dispute rankled for long till 1978, when Deng Xiaoping launched China’s modernisation. Now, the two Asian giants are poised to celebrate the 60th year of their commercial cooperation.

Even as China began its quest for modernisation by marrying Marxist canons with market principles to create a sui generis development model in its bid to fast-track economic development, India remained immune to the way and the sway of globalisation and economic liberalisation that were sweeping the erstwhile Soviet Union and the East Bloc countries.

It took a close brush with bankruptcy in the early 1990s for India to usher in bold economic and trade policy reforms to free itself from the shackles of control and licence raj.

After resumption of bilateral trade in 1978, India and China signed the Most Favoured Nation Agreement in 1984 and since 1988, when Prime Minister Rajiv Gandhi visited China, it was resolved to widen and deepen the relationship at various levels through an elaborate framework for promoting trade and economic relations.

Trade agreements

Thus, according to Chinese Customs statistics, bilateral trade zoomed from a modest $339 million in 1992 to $8 billion in 2003.

According to the Directorate-General of Commercial Intelligence and Statistics, India’s exports to China in 2008-09 amounted to $9.3 billion, against $10.8 billion in 2007-08, marking a decline of 14.39 per cent. India’s imports from China touched a staggering $31.3 billion last fiscal against $27.1 billion in 2007-08, showing a robust growth of 16 per cent.

India’s exports appear to be led by minerals and raw materials or low-value added items feeding the escalating demand for these products in the Middle Kingdom. Per contra, electronic goods, organic coke and briquettes, medicinal and pharmaceutical products and light industrial goods lead India’s imports from China.

Even as India’s exports last year ambled along in the wake of the world economic slowdown, China’s exports, in general, and to India, in particular, raced on, provoking outcries from domestic manufacturers for official intervention.

New Delhi responded by revving up its anti-dumping machinery, though it denied any China-specific action. Thus, between July and December 2008, of the 42 anti-dumping probes India launched, China accounted for a chunk of 17 cases, evoking concerns from the Chinese authorities at official meetings.

Even through non-tariff measures the Indian industry was sought to be helped as Chinese goods pulverised its products in terms of both price and quality. The Government clamped a six-month ban on Chinese toys that had apparently captured two-thirds of the domestic toy market.

Better synergies

This was followed up by safeguard duties on aluminium imports from China, a five-year duty on Vitamin C, and an extension of a ban on dairy products.

China faced similar action from its long-standing trading partner too; the US slapped a safeguard duty on Chinese car tyres. All this was despite the three countries, as part of G-20, being committed to eschewing protectionist policies in the wake of worst global recession.

With little scope for boosting merchandise exports to China, India’s services exporters have stepped up their activities in China with some of the leading IT companies setting up shop in China.

As both India and China cooperate in global forums such as the World Trade Organisation and G-20, the coming years could see better synergies and more synchronised actions by the two to sustain global economic growth and ameliorate the lot of the poor millions in both the countries.

(This article was published in the Business Line print edition dated October 1, 2009)
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