NEW DELHI: The widening trade deficit with China has the country's strategic establishment worried, providing backing to the commerce department's move to restrict imports as part of its 'China strategy' while pressing for free-trade agreements with other countries to diversify sourcing.
The National Security Council Secretariat, which recently hosted inter-ministerial consultations on the burgeoning India-China trade gap and its strategic implications, has sent out a note to all stakeholders detailing its concerns. "The country's growing trade and economic relations with China are being seen as a serious concern, as India could become strategically dependent on its neighbour," a government official told ET.
India's trade deficit with China is estimated to reach $60 billion by 2014-15, up nearly three-fold from $23 billion in 2010-11. Bilateral trade with China was $63 billion in 2010-11, with China accounting for $43 billion worth of imports.
"Participants at the inter-ministerial workshop were especially worried about forecasts that China could account for 75% of India's manufacturing in the next five years, up from the present 26%," the official said. The workshop was attended by officials of key ministries and departments, including finance, home and the department of industrial policy and promotion.
"Excessive dependence can be disruptive in case of strained relations," said Narendra Sisodia, a defence analyst and former additional secretary of NSC Secretariat. In general terms, if a country that is supplying basic components to another stops supplies, it would hurt the importing country because its manufacturing will be adversely affected, he said. "Much also depends on whether a country has alternative sources of supply and how quickly those could be mobilised."
Tapping other sources is a prominent part of the commerce department's China strategy, which stresses freetrade agreements with countries such as South Korea and Japan that could provide cheap manufacturing inputs as tariffs go down. The department is also considering imposing imports restrictions, especially in power and telecom sectors, to force Indian companies to diversify sourcing and reduce their dependence on China.
It will put out its China strategy for inter-ministerial consultation. "Other departments and ministries, including finance, power, telecom and home, will be consulted once the paper is ready," another government official said.
Industry body Ficci feels promoting Chinese investments could address trade deficit concerns. "India could facilitate Chinese investment and export from those firms back to China. It could also encourage more joint ventures that can create capacities for exporting to China," Ficci chief Rajiv Kumar said.
Source : economictimes.indiatimes.com