India to up services exports to China to fill trade gap

There is a need for India to expand its presence in Chinese markets so as to overcome the issues of trade imbalance with China, without interrupting the bilateral trade flow between the two economies.

By Sai Nikesh D

In a move towards bridging a widening trade deficit with China, the Government of India (GoI) is keen on promoting its services in China, so as to fill the existing trade gap between the two economies.

In this regard, the Ministry of Commerce & Industry, GoI, is focusing on promoting services from key Indian sectors like information technology, pharmaceuticals, tourism, textiles and agricultural products, in the Chinese markets.

The Indian government is also keen on setting up a joint working group with Beijing, to discuss growth prospects and further plan a strategy to market Indian services in China.

India is seeking to fill the gap that occurred due to decrease in service exports from China, which was a result of the latter’s tilt towards high-end technology products, said an official, according to the sources.

India is further mulling to boost the tourism cooperation with China, with an aim to make the nation a most favoured tourism destination for Chinese, added the official, while also pitching for higher export market scope for Indian generic products in China, which lags significance in the sector compared to that of India.

According to Reserve Bank of India (RBI), while China ascended to become largest trading partner of India from 2008, its exports to India increased so sharply that, it is inflicting an unsustainable trade deficit on India.

According to RBI, the total bilateral export potential of India to China was estimated at $ 28.4 billion in 2008 and it reached to $ 53.3 billion in 2012.

The export potential of India was nearly three times than that of actual bilateral export with China in 2008 and increased further to three and half times in 2012, due to the decline of bilateral exports in 2012, the RBI said.

In this regard, the RBI says there is a need for India to expand its presence in Chinese markets so as to overcome the issues of trade imbalance with China, without interrupting the bilateral trade flow between the two economies.

Earlier in February 2015, the Reserve Bank of India (RBI) had said in its annual survey report on ‘Computer Software and Information Technology Enabled Services Exports: 2013-14’ that the exports of the computer services and ITES services registered a growth of 14.6% in dollar terms, over the exports during previous financial year.

The RBI 2015 report also said that in the current year, engineering design and product development stood as the fastest growing segments, driven by value-added solutions from existing players and newer global in-house centres being established in India.

Expressing his dissatisfaction over 15% decline in India’s trade in February 2015, M Rafeeque Ahmed, President, Federation of Indian Export Organisations (FIEO) also said on Friday, that ‘Indian exporters are losing out particularly in the case of China, which has fixed exchange rate against Euro and other currencies, while Indian Rupee is fast fluctuating except against the US dollar. This partly explains 48% growth in China’s exports in February, 2015.’

The FIEO president urged the government to implement the Foreign Trade Policy, may be effective from April 1, 2015, so as to provide a long term stable regime for exports and asked to immediately introduce Interest Subvention for the exporters.

 

This article was published in The Dollar Business on March 16, 2015.

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