India’s trade deficit with China just fell for the first time in years — but there could be a catch
Indiamanaged to reduce its trade deficitwith Chinaby $10 billion to $53 billion in 2018-19, according to data from the Ministry of Commerce.
- In addition to dramatically increasing exports of cotton
textiles, India imported less electronic items as the value of the rupee fell over the course of last year.
- However, there might be another reason why the
tradedeficit fell so convincingly. China might be routing its exports through Hong Kongto understate the extent of its trade surplus.
This was largely due to the fact that India capitalised on China’s trade tensions with the US to boost its exports to the Middle Kingdom - which rose by 31% to $17 billion while reducing its imports.
In addition to dramatically increasing exports of cotton textiles, India imported less electronic items as the value of the rupee fell over the course of last year.
India’s Commerce Minister,
Whopping reduction trade deficit with China.Unprecedented.Exports increased substantially.Result Of High level engagement,Strategic planning,coordination with stakeholders,market research,sustained efforts,constant monitoring,hand holding with exporters #leadership @narendramodi— Chowkidar Suresh Prabhu (@sureshpprabhu) April 12, 2019
This marks quite a turnaround. India’s trade deficit with its third-largest trading partner has been gradually increasing since 2013-14.
In 2017-18, India’s trade deficit with China ballooned to a record $63 billion - a gap that was considered “untenable”. In response, India signed a number of export deals and lobbied China to reduce trade barriers.
However, there might be another reason why the trade deficit fell so convincingly. As global pressure increases on China to correct its trade imbalance with trading partners like India, China might be routing its exports through Hong Kong to understate the extent of its trade surplus, according to Mint.
In fact, it seems that India’s imports from Hong Kong increased considerably over the course of 2018 - from $11.1 billion to $16 billion - and these products are reported to be the same ones that India used to import from China such as mobile phone components.
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