Trade: engine of bilateral collaboration
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Trade: engine of bilateral collaboration book
During his visit to India in Janu ary 2002 – the first by a Chinese Premier in the new millennium – Zhu Rongji expressed the hope that bi lat eral trade, which was at US$3 billion then, would grow to US$10 billion in near future (Cherian 2002). When Premier Wen Jiabao came to India in April 2005, the two coun tries aimed to take bi lat eral trade to US$20 billion by 2008. The target was upgraded to US$40 billion to be achieved by 2010 during President Hu Jintao’s visit to India in Novem ber 2006. The latest target set during Premier Wen’s second visit to India in Decem ber 2010 aims bi lat eral trade to reach US$100 billion by 2015.1
The frequent upgrading of targets on bi lat eral trade indicates the rapidity with which such trade has been growing. The growth has been fast to the extent that it has caught even official agencies by surprise. The last five or six years par ticu larly have seen bi lat eral trade achieving its target before the deadline. Trade crossed US$20 billion in 2006-7 when it was supposed to do so by 2008. It went beyond US$40 billion in 2008-9 when the target date for doing so was 2010. The current expectations are that bi lat eral trade will cross US$100 billion before its targeted deadline of 2015. Indeed, since trade stat ist ics in the pub lic domain are avail able only for bi lat eral merchandise trade, and data on bi lat eral trade in ser vices is not avail able, the actual size of goods and ser vices trade between the two coun tries is prob ably larger than what statistics show. In that case, the US$100 billion level might be reached even sooner. Fast growth in bi lat eral trade, how ever remark able, has raised questions about its structure, composition and sustain abil ity. These questions range from whether the trade is imbalanced, and dominated by low value pri mary items, to whether it is sus tain able in future in its present form. Most of these are India’s concerns. Since trade is expected to be the funda mental form of eco nomic engagement between the world’s two largest and fastest growing eco nom ies in future, it is im port ant to ana lyse the nuances of the bi lat eral trade relationship. This chapter aims to do so from an Indian per spect ive. It studies the trends in bi lat eral trade over the last decade and examines India’s import and export baskets, from and to China, for identi fying the specific factors determining the nature and compositions of the baskets. Thereafter it proceeds to ana lyse the feas ib ility of a bi lat eral trade pact between the two coun tries, from eco nomic and stra tegic perspectives.