Friend or Foe?

Recent bonhomie cannot gloss over the fact that China can throw a spanner in India's growth story by withholding exports of key ingredients

- Devabrata Dutta

US President Donald Trump has done what was thought to be unthinkable only months ago.

By slapping 50% tariffs on India, he has single-handedly pushed India into the China corner.

Indo-Sino ties were in a deep freeze post-Galwan clashes in June 2020.

But ties are thawing, especially after Prime Minister Narendra Modi met Xi Jinping, China's president, on the sidelines of the Shanghai Cooperation Organisation (SCO) summit in Tianjin recently.

“What we seek is stability and predictability in relations with China,” says Ashok Kantha, former Indian Ambassador to China. However, he says that it is difficult to speak of full normalisation, given longstanding problems, divergent strategic outlooks and China's arming of Pakistan.

Import Inc

Trump's tariff crusade has established one thing: in a world where protectionism is on rise, it is hard to separate geopolitics from geo-economics. Even as a cordial Indo-Sino relation is desired for strategic reasons, it is hard to ignore economic ties and tensions that these two nations share.

China is India’s second-largest trading partner. India’s import reliance on China is so high that even amid diplomatic tensions after Galwan, New Delhi’s trade with Beijing did not stop.

India’s trade deficit with China reached a historic high of nearly $100bn in the last fiscal. This is a result of lopsided trade relationship where China is India’s largest source of imports, accounting as top supplier in all eight major industrial product categories.

India mainly exports primary commodities like iron ore, cotton, copper, aluminium, diamonds and other natural gems.

The Indian embassy in Beijing noted that market barriers in China have stymied Indian exporters in sectors such as agriculture, pharma and IT services. In short, India is not selling what China wants to buy.