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Ahead of PM Modi visit, India’s hardtalk on China trade: open up

China has been warned “in as many words” that New Delhi may subsequently restrict Chinese imports of “non-essential items.

Written by P Vaidyanathan Iyer | New Delhi |
Updated: March 24, 2015 4:04:16 pm
Narendra Modi, Xi Jinping, India China relations File: Prime Minister Narendra Modi and Chinese President Xi Jinping in India.

India  has raised the heat on trade talks with China, with New Delhi warning Beijing that “protectionist tendencies” in the Indian industry may force the government to take a “proactive view” on Chinese imports.

According to Indian officials, New Delhi is frustrated that administrative agencies in China have not responded to India’s demands in three key sectors — pharmaceuticals, agriculture, including bovine meat, and IT services — where the country has “demonstrated its strength”.

The timing of the official communication from the Department of Commerce is significant with Prime Minister Narendra Modi scheduled to visit China within the next two months. While a large part of Modi’s bilateral talks President Xi Jinping would focus on the crucial boundary question, the PM is also expected to raise issues relating to greater market access for Indian products and services, and Chinese investment in India. The dates of Modi’s visit will be finalised during talks between India’s NSA Ajit Doval and his counterpart Yang Jiechi that commenced Monday.

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According to senior officials in the Ministry of Commerce and Industry, China has been warned “in as many words” that New Delhi may introduce standards for a variety of products and subsequently restrict Chinese imports of “non-essential items where India had quality concerns”. The officials said Bejing’s first reaction when India expresses concern in a particular area is to sign a memorandum of understanding, with little follow-up action. “We have signed several MoUs with China. Two of them relate to export of buffalo meat and IT services. But in both these areas, where India has immense potential to export, Chinese agencies have been very bureaucratic,” a senior official told The Indian Express.

Bovine meat needs sanitary and phytosanitary clearance from the relevant Chinese agency. “It’s been more than two years, but they continue to delay finalisation of protocol on sanitary and phytosanitary measures and certification procedures,” the official said, adding that Indian buffalo meat finds its way to China through Vietnam.

Similarly, for IT services, tenders floated by Chinese state organisations have set a high bar of US$100mn for bidding. “This is an artificial barrier and many Indian companies are unable to participate despite their competence,” the official said. Trade in pharmaceuticals has, meanwhile, become a strategic issue, the officials said. India imports almost 70% of its API (active pharmaceutical ingredient) requirement from China. But non-trade barriers have held back Indian drug companies from exporting formulations to the Chinese market.

“There are regulations which require state-run hospitals to sell two branded versions of a medicine for every generic version they want to sell,” a commerce ministry official said, adding this was why Indian companies were unable to get a foothold in China despite their products being much cheaper.

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Officials in the Department of Commerce also pointed out that the bilateral trade balance has consistently worsened over the years. In 2013-14, bilateral trade stood at US$65.78bn, with India suffering a deficit of US$36.21bn. During the first half this year (April-September 2014), bilateral trade was US$16.4bn, with a US$9bn deficit. A slowdown in China will likely derail the two countries’ plans to cross US$100bn in bilateral trade.

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First published on: 24-03-2015 at 12:00:40 am
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