Adverse gap: Editorial on India-China trade and the need to strengthen domestic manufacturing

The recent comments by the Union finance minister, Nirmala Sitharaman, at a summit in Thailand on the growing trade deficit between India and China shine a light on critical aspects of New Delhi's economic growth story that are often ignored in the heat and dust of immediate local and global concerns. Ms Sitharaman pointed out how the gulf between India's imports from China and its exports to that country was growing, and how trade barriers imposed by Beijing were making it hard for Indian products to succeed there. The numbers back up the first part of her assertion. India's trade deficit with China in the first six months of this financial year — April to September — has grown compared to the same period last year. This, even as China remains one of India's top trading partners. And Ms Sitharaman is not alone in complaining about China's trade barriers. Multiple countries around the world have made the same criticism of Beijing's policies.

India must no doubt continue to seek — as it has been seeking — a more balanced economic relationship with China. But Ms Sitharaman's remarks should also force deeper reflection with regard to India's own limitations and what it must do in order to negotiate fairer trade ties. This has never been more urgent than now, with trade increasingly being used as a geopolitical weapon, best demonstrated by the policies of the United States of America under President Donald Trump. India's trade deficit with China might be particularly stark, but it also suffers large, adverse gaps between its imports and exports with many other top economic partners, including the United Arab Emirates and Saudi Arabia. India, in fact, suffers from a net trade deficit overall. A look at the global landscape suggests that in most cases, countries enjoy a trade surplus in those relationships where they are major exporters of either manufactured goods or commodities. India is not a major supplier of oil or minerals, although it is a leading exporter of refined petroleum products. It is also not a manufacturing power in the way that China, some Southeast Asian economies and sections of Europe are. As a result, India's basket of export-oriented goods simply cannot match the hunger for Chinese products. China should reduce its trade barriers. But ultimately, Indian exports need to be irresistible on price and quality in order to compete with China and the world.