A dip, after five years, in India’s Trade Deficit with China

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India’s trade deficit with China in the financial year 2020 dropped to $ 48.66 bn that came to the level that was in financial year 2015.

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• The fall in imports in India in the year 2020 was because of the impact of pandemic that caused lockdown and also Indian economy grew by 4.2%.
• However it is becoming increasingly apparent that China is diverting its exports to India through Hong Kong.
• Imports from China shrinked to 7 per cent in the FY 2020 whereas overall imports fell by nearly 8 per cent in the same year.
• India’s exports to China rose to record high for the first time crossing the $ 20 bn mark with a growth of more than 16 per cent.
• A trade deficit is an amount by which the cost of a country's imports exceeds its exports. It's one way of assessing the international trade, and it's also called a negative balance of trade.
• However, there is no evidence to put forth that India has replaced its import dependence on China by either diverting those goods to other countries or manufacturing them in India itself. But the trend of trade of the coming 12 months will reveal whether the past year was an exception or a turning point as India’s economy begins to rebound.
• As stated by Commerce Ministry, in the past one year India either banned or restricted the import of more than 10 items those were of Chinese origin.
• There was surge of 4% in China in the exports in the year 2020 despite the lockdown and slow down in the economy worldwide. With stringent lockdown the spread was controlled and the economy rebounded by bringing the industries back to life.
• China was the only major economy of the world that registered positive growth in foreign trade in goods. Its exports rose to 6.7% both with ASEAN and EU nations.