The recent visit of Chinese Premier Li Keqiang to India was not business as usual. There was a lot of nostalgia as he recalled the Chinese youth delegation that he had led to India 27 years ago and the “warmth and friendship of the Indian people”.
There was appreciation of how India, “one of the fastest growing economies of the world”, was playing an increasingly notable role in the global arena and there was applause for India’s enormous achievements.
Most importantly, there was a strong underlining of India’s priority today in China’s foreign policy with Premier Li Keqiang making New Delhi the first stop of his maiden official trip after assuming office. Both sides willing, “Sino-Indian ties would be the most important bilateral partnership of the century”, Li Keqiang promised.
Bilateral trade
See it as Premier Li Keqiang’s response to changing global economic dynamics or simply a desire to bring the two countries closer, the fact is that the economic engagement between India and China is one of the most rapidly evolving bilateral relationships today.
As India’s Prime Minister Manmohan Singh also pointed out, “the relationship between our two countries is of growing significance and essential for our peaceful development and sustained economic growth, as well as for stability and prosperity in our region and the world”.
China today is our largest trade partner. Bilateral trade, totalled $75 billion in 2011-12, is projected to touch $100 billion by 2015. This is no mean achievement considering that just 11 years back, trade between the two countries was merely $3 billion. India is also the largest market for project exports from China with current execution orders estimated at over $55 billion.
Over the years, India has also become an attractive destination for about 100 Chinese companies across a wide range of sectors, while Indian investments into China are marked by the presence of companies in areas such as IT, auto components, banking and pharmaceuticals.
There are complementarities of size and strength between the two economies which make India and China natural partners.
With a combined population of 2.5 billion and a growing middle class, India and China are the fastest growing major economies offering a huge market and rich human resources. Between us, we have the finest and most efficient manufacturing and services companies and these should work together.
The Premier has quite rightly indicated that “linkages between our vast markets” could be a game changer for the world.
Issues to be addressed
No doubt, India is enthused by the encouraging statements from the Chinese leadership.
However, on the ground, there are bottlenecks that need to be tackled and issues that need to be addressed.
Foremost among these is the growing trade asymmetry that has become unsustainable for India since it has implications for our current account. India mainly exports raw materials to China and imports a large quantum of finished goods which has led to a swelling trade deficit — from $17 billion in 2007-08 to $39 billion in 2011-12. This must change. India needs to shift its export profile towards finished and value-added products and see a sizable jump in shipments to bridge the growing trade gap.
The Chinese Premier has assured us that he understands our concerns over the trade deficit and has promised greater market access to Indian products.
China would like to see more competitive Indian products enter its market and stands ready to provide facilitation.
CEOs’ forum
While we welcome these views and would work towards opening up a new chapter in bilateral relations, India would be watching to see how the Chinese Government acts on its promise related to market access.
The formation of the India-China CEOs’ forum, of which FICCI is the secretariat from India, is an important initiative that will play a key role in stepping up engagement between the two countries. The first meeting of the CEOs’ forum which was held on the sidelines of the Premier’s visit, has already identified the opportunities.
The Indian side urged its Chinese counterpart to consider investing in our Special Economic Zones (SEZs) from where they can export to third countries as well.
The upcoming National Investment and Manufacturing Zones (NIMZs), which will be the pivot for us to enhance the share of manufacturing in overall GDP, also present a good opportunity for Chinese companies to evaluate. Indian companies are large customers for Chinese firms in ICT/telecom and power sectors. Perhaps it is time that the Chinese side looks at indigenising production of some of the products exported to India by way of setting up manufacturing plants in India.
In the energy sector, companies from both sides agreed to work together and laid particular emphasis on sharing technologies in the renewable areas
Another important suggestion that came up was to consider giving a fillip to the rupee-renminbi trade as this would help minimise the exchange risk and give a further boost to trade.
There was also a suggestion to enable banks on both sides to open more branches in each other’s countries to facilitate trade and investment.
These are all interesting ideas to be pursued and will add a new facet to our relationship that has long gone beyond bilateral scope and has acquired regional, global and strategic dimensions.
(The author is President, Federation of Indian Chambers of Commerce and Industry.)