Xi may push for RCEP, but Modi may stress on trade deficit at Mamallapuram summit

India and China are likely to announce additional confidence building measures to strengthen relationship between the two countries when Chinese president Xi Jinping and Prime Minister Narendra Modi meet in Mahabalipuram later this week.

But no new agreements are expected to be signed, a government official has said.

The timing of Xi’s visit to India, scheduled on October 11-12, is important as it is is taking place right after his meeting with Pakistan’s Prime Minister Imran Khan in Beijing and concurrently with the crucial meeting of Trade and Economic Ministers from countries negotiating the ambitious Regional Comprehensive Economic Partnership (RCEP) pact including the ASEAN, India, China and three others in Bangkok.

Also read: PM Modi to meet Chinese President Xi Jinping on October 11-12: MEA

“The objective of the India-China Summit in Mahabalipuram is the same as that of the first bilateral Informal Summit in Wuhan in April 2018. The aim is to build contacts at the highest level. We do not expect any MoU or agreement signing,” the official told BusinessLine.

While on paper the agenda of the meet appears simple, it is actually nuanced and complex with both countries eager to push their interests. China, which is fighting a long and fierce trade war with the US, is keen that India agrees to ambitious market opening commitments at the RCEP so that it has tariff-free entry into the country’s market and has uninhibited access to the entire bloc which also includes the ASEAN, Japan, South Korea, Australia and New Zealand.

“New Delhi has not yet been able to agree to the steep demands for market access being put forward by most of the RCEP members including China. Xi is likely to try and convince Modi to take the plunge,” a Delhi-based trade expert said.

The reason for India's indecision at RCEP is the fact that almost all industrial sectors ranging from plastics and chemicals to steel and engineering goods are against lowering of tariffs, especially from China, as they fear a surge in cheap imports. Farmers and the dairy industry, too, are up in arms against opening up of their sectors.

At the bilateral meet, India is likely to use the opportunity to press for the full implementation of the earlier set of confidence building measures agreed to between the two leaders which included bridging of the yawning trade gap between the two countries. Although the trade gap, in Beijing’s favour, has come down to $ 53 billion in 2018-19 from over $60 billion a year before, it still accounts for almost a third of India’s total trade deficit with the world. “After the Wuhan meet, China had agreed to import a number of items from India such as sugar, soyabean and buffalo meat, but more progress is required in the talks. Indian officials will take up the pending trade issues with Chinese officials who will accompany the Chinese President,” another official said.

The reason why Mahabalipuram, near Chennai, was chosen as the venue for the talks is the fact that it is a world heritage site and there has been a historical connect between Southern India and China. “There used to be a lot of trade with China during the rule of the Pallava and Chola dynasties. President Xi is interested in history and culture. And Mahabalipuram also has appropriate logistics facility. So, it was felt that it would be an ideal venue,” the official said.