India's Trade with the PRC: Trends and Patterns

The PRC's uninterrupted growth is characterized by higher productivity, lower wages, and exploitation of economies of scale among other parameters. PRC's GDP grew by 9.9% in 2005 due to buoyant domestic investments and exports. Its GDP is expected to double by 2010 and likely to quadruple by 2020 that would make it the world's third largest economic power. ⁴ The country accounts for 22.0% of the world's population.

As a result of 15 years of economic reform, India achieved an average GDP growth of around 8% during 2003–2005 with 8.1% growth in 2005. India is expected to grow at the rate of 8–8.5% during 2006–2010 (Asian Development Outlook, 2006). India accounts for only 2.4% of the world surface area but constitutes about 17% of world population. Almost one third of the world's poor people reside in this country. Therefore, increased integration of India with the rest of the world will have significant impact on the development of Asia and the world at large.

India-PRC trade has been growing very rapidly since the mid-1990s. In 1994–1995, India's export to the PRC was $254.3 million, which grew to $5,344.88 million during 2004–2005 registering an exponential growth of 35.60% per annum and a growth of 80.87% over 2003– 2004. During this period, the growth of India's overall export was only 26.15% and the share of the PRC in India's total export was 6.64%. India's exports to the PRC have been growing at a much faster rate than its total trade, which roughly grew by 20.00% annually in dollars during the same period. India's imports from the PRC have shown similar increasing trend over the last 10 years. India's import from the PRC skyrocketed to $6,768.92 million in 2004–2005 from $761.04 million in 1994–1995, showing an annual exponential growth of 24.10% and an average growth of 67% over the previous years. Total trade between the PRC and India touched $18.00 billion in 2005 and is expected to reach $50 billion in the next 5 years (i.e., by 2010). Total trade between the two countries has been growing at an annual exponential rate of 28.13% between 1994–1995 and 2004–2005, which is much more than the growth rate of India's overall trade during this period.

Another significant trend is that trade deficit between the PRC and India, which stood at $1,424.04 million from $1,101.04 million of the previous year, has also been increasing. Trade deficit, which has been increasing continuously over the years, was $506.74 million in 1994– 1995. If the growth rate of India's exports to the PRC is maintained at the present level, this gap is expected to narrow down. India's total trade to the PRC was $12,113.8 million in 2004–2005, registering a growth of 72.85% over the previous year. PRC's share in India's total trade was 6.39% during the same period. India's trade to and from the PRC, its growth rates, and trade balance are shown in Table 2 [ PDF 8.9KB | 1 pages ]. The trends of India's trade to and from the PRC are also shown in Figure 1 [ PDF 11.8KB | 1 pages ].

India's exports of principal commodities to the PRC from 1998–1999 to 2004–2005 are shown in Table 3 [ PDF 11KB | 1 pages ]. Iron ore is the single largest item of India's exports to the PRC during 2004–2005 and the trend has been increasing over the years. This is the most important item in India's export basket followed by primary and semifinished iron and steel, which is the second largest of India's exports to PRC. Other major product/product categories of India's export basket to the PRC are plastic and linoleum products; processed minerals; inorganic/organic/agro chemicals; ores and minerals; drugs, pharmaceuticals, and fine chemicals; machinery and instruments; residual chemicals and allied products; nonferrous metals; marine products; cotton yarn, fabrics, and made-ups; etc.

Table 4 [ PDF 11KB | 1 pages ] shows India's imports of principal commodities from the PRC from 1998-1999 to 2004- 2005. India's major import item from the PRC has been electronic goods. Import of this item has been consistently increasing over the period of the study. The second largest import items are coal, coke and lubricants. India imports substantial amount of coal from the PRC, which suddenly shot up at a very high level during 2004–2005, although it was modest in the early years. Organic chemicals are the third largest import items from the PRC in last several years. Other important import items are: nonelectrical machinery; electrical machinery; medical and pharmaceutical products; textile yarn, fabrics, and made-ups; silk yarn and fabrics; nonferrous metals; silver; iron and steel; inorganic chemicals; raw silk; nonmetallic manufactures; manmade filament/spun yarn/waste; metaliferrous ores and metal scrap; and others. The 20 major items in India's import basket from the PRC as listed in Table 4 cover more than 80% of India's imports from the PRC.

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Comment(s)

There are [2] comment(s) for this entry. Post a comment.

1. S.N.Singh
   (posted 17 May 2007 / 06:34:01 PM)
   
   I reviewed the paper thoroughly and based on the hypothetical model, we cannot access the actual scenario of trade among countries. Several hidden and more effective factors should also be brought into consideration.
   
   Thanks
   Singh S.N
2. Geethanjali Nataraj
   (posted 23 February 2007 / 05:38:04 PM)
   
   I have gone through the article. I think the data on India's trade with China can be easily updated by another year to 2005-06. The ministry of commerce, government of India has posted data up to 2005-06 in its data base. Secondly, the source of most of the tables is also mentioned as CMIE. I am not sure whether it is a good idea to use CMIE database. It is generally considered to be unreliable . To depict trade between two countries, it would be advisable to use international trade sources say for instance COMTRADE.
   Thanks
   geethanjali.