InvestorQ : How big is the trade deficit that India runs with China and is there a way this deficit can be reduced?
diksha shah made post

How big is the trade deficit that India runs with China and is there a way this deficit can be reduced?

Answer
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rhea Babu answered.
3 months ago


Currently, India runs an annual trade deficit of nearly $50 billion with China but that is more in abnormal trade restrictions period. Normally, this trade deficit should be closer to $70 billion on a consistent manner. Now, a research paper has pointed out that India has the potential to reduce its trade deficit with China by $8.4 billion.

This import reduction is possible just by rationalizing 25% of imports from China. According to the research note, India needs to work on rapidly upgrading domestic manufacturing skills as part of Make in India initiative in a handful of sectors like chemicals, automotive components, drug formulations and electronics.

The report estimates that such a substitution can be instrumental in reducing India’s deficit with China by nearly 15-20% of the current figure. Apparently, there are 40 sub-sectors where India could easily reduce its import dependency on China and reduce the trade deficit in the process. It would be positive for the INR and also reduce the risk of a downgrade.