Govt wishlist: Trade deficit to surplus with China by 2020

As the first India-China trade talks in four years loom ahead scheduled for January 17 in Beijing the government of India is confident the new decade will bring a balancing of the current trade gap....

As the first India-China trade talks in four years loom ahead scheduled for January 17 in Beijing the government of India is confident the new decade will bring a balancing of the current trade gap between the worlds two most potent economies. Trade with China,Indias number two trade partner,touched 40 billion in 2009 thanks to 30 billion in imports from China. The commerce ministry believes the import over export deficit will evolve into a surplus by 2020 thanks to a saturation of Chinese products in developed economies.

The 3:1 deficit will disappear as China is forced to diversify its import portfolio beyond the inexpensive markets it has dominated in south-east Asia. China has a deficit,but it is all in countries like Korea,Taiwan,Vietnam,and Singapore; It is buying from where it will get products cheap, said Commerce Joint Secretary Dinesh Sharma. We have so far behaved like the developed countries by reserving our exports for our best interests.

Sharma is among those who expect that behaviour to change during the next 10 years as China will likely have to increase its import capacity beyond raw materials like iron ore,from India,Sharma said. We are currently among the largest exporters of cars in the world,but there is not a single Indian car in China, he added. In the next decade,a good number of cars in China will be from India.

The trend already seems to be in motion as the export of ores,slag and ash dipped by nearly 3 million during the first three-quarters of FY 2008-2009 compared to the previous fiscal. Iron and steel exports fell from 233.58 million in 2007-2008 to 160.55 over the same duration,while non-railway related automotive equipment to China stood at 21.5 million,an increase of almost 4 from the previous fiscal. Theyre going to have to come to more hardcore items and more away from raw materials, he said.

If the shift does occur,it will not be entirely new to the ministry which enjoyed a trade surplus over China in the early 2000s,Sharma said. As recently as 2003-2004,the deficit stood at 1.1 billion. However,as the affordability and efficiencies of Chinese manufacturing spread across nearly all economies,India failed to keep up with Chinas economic expansion. But while the Chinese near saturation of inexpensive markets and developed economies barely back on their feet after economic struggles of the last two years,the next decade will be Indias opportunity to pounce on the Chinese market. Theres no other way,its just the orientation of the business.