Robust trade to help boost Sino-Indian ties

China's export of key commodities, consumer goods and services, along with robust investment, is contributing to burgeoning Sino-Indian trade, which can help to stabilize overall ties between the two neighbors, analysts say.

China has edged out the United States to become India's largest trading partner in the fiscal year ending March, with a total two-way trade of $118.4 billion, according to data released earlier this month by think tank Global Trade Research Initiative.

The strong trade partnership can serve as a building block to steer bilateral ties onto a positive trajectory, analysts said.

While China is projected to become the world's largest economy, India is all set to become the third largest, said Swaran Singh, a professor of diplomacy and disarmament at Jawaharlal Nehru University in New Delhi.

"So, expansion of their economic engagement is natural given the size of their population, rapidly growing economies and consumerism of youth and middle class on both sides," Singh said.

The reason for China-India two-way trade surpassing India's trade with the US is the import of commodities worth more than $100 billion from China, he said.

India's imports from China are largely low-tech consumer products coming in large volumes, he said.

"Small-town, small-time traders of India have ensured this by importing cheap commodities across various sectors."

He cited the popularity of Chinese cellphone brands, which have grabbed a huge share in the Indian market by offering advanced products at affordable prices, while noting the general reluctance of the US to share advanced technologies, which is not the case when it comes to China's exports to India.

"As the world's largest trading nation for nearly the last two decades, this also underlines the increasingly competitive nature of Chinese exports in general," he said.

Geographical proximity

Robert Carnell, chief economist and head of research for Asia-Pacific at Dutch bank ING, said that with China being both geographically nearer and its products typically cheaper, it is no surprise India's trade with China is marginally higher than the India-US trade.

India always imports a lot more from China than from the US, and exports a lot more to the US than to China, Carnell said. Exports and imports combined, the trade volumes from India with the two countries are almost even, with China having the edge.

"Around 50 percent of India's imports from China are for machinery, including electronics and computers," he said.

One thing worth noting is that India is moving up the value chain in global trade, he said. "China produces and exports a lot of high value-added machinery, including electronics, and as India develops, it is going to require more of these, and fewer low value-added imports."

Aditi Dave, a business journalist in Mumbai, said China surpassing the US as India's top trading partner can be attributed to increased Indian imports from China in crucial sectors and a decline in trade with the US.

Timir Baran Chatterjee, a mentor and managing partner at TCN Global, a leading advisory firm dealing with economic and allied activities, said the reemergence of China as India's top trading partner underscores the deep economic interdependence between the two countries.

"This shift highlights China's dominant role in India's import sector, supplying crucial goods such as electronics, machinery, pharmaceuticals and chemicals, which are pivotal for India's manufacturing and technological sectors," he said.

"This trade dynamics also indicate potential areas for collaboration and conflict mitigation (as) both nations navigate their complex relationship amid global economic shifts and regional security concerns."

Singh said what is interesting is how India's imports from China have been expanding despite India's national security filters that disincentivize imports from China.

Carnell said it is early to come to any conclusions about potential improvement of overall ties.

"I think that it (the increased trade) certainly won't hurt, and it is a first step," he said. "But it is quite a leap to think that a gradual improvement in trade links will deliver a meaningful improvement in ties between these two economies."

Arunava Das in Kolkata, India, contributed to this story.