India seeks easier norms for entry of its goods in China

NEW DELHI: Before grabbing China’s offer to invest in and help develop India’s infrastructure, the Narendra Modi-led government wants to ensure easier norms in return for India to export IT, pharmaceuticals, farm goods, and health and tourism services so that the trade imbalance between the two countries gets reduced.

In response to the five-year trade and economic planning cooperation plan that China submitted to India in February, the new government at the Centre has proposed to raise the country’s exports to $95 billion over the next five years from $15 billion at present.

"India-China trade in the next five years must stand at $200 billion, comprising $105 billion worth of imports and $95 billion exports," a government official familiar with the development told ET. China is now India’s biggest trading partner but the trade balance is heavily skewed in China’s favour.

India has said the trade deficit must be cut to one-fourth, targeting $10 billion by 2020 from close to $36 billion at present. "The only way to cut trade deficit is by asking China to invest in manufacturing activity. Rather than importing, China can manufacture machinery, heavy duty power equipment etc in SEZs (special economic zones), NIMZs (national investment and manufacturing zones) or industrial parks," said the official, who did not wish to be identified.
The Cabinet has already cleared signing of a memorandum of understanding with China for setting up industrial parks in India. The five-year trade and economic planning road map prepared by India after several rounds of interministerial consultations has noted that information technology sector can be a win-win for both economies if China eases its licensing norms to allow participation of Indian companies in local projects.

Pharmaceutical companies, which rank among India’s potential strengths in bilateral trade, face registration hurdles in China, where it takes three-five years for registration compared with just three-six months in India.India has also asked China to allow export of buffalo meat to the country.

China had proposed in its five-year plan to enter critical areas including telecom, railways, roads, and nuclear and solar power for investment in India. While China was silent on narrowing the trade deficit, it noted that the gap was on account of the very nature of the two economies, China’s being manufacturing-led and India’s services-led.

China, which has accumulated over $4 trillion of forex reserves, plans to invest $500 billion overseas in the coming years, it announced in March.

"There is no need to fear investment from China. It just needs to be leveraged well. We need investment in building our roads, railways, manufacturing. Barring the sensitive areas, flow of funds should not be discouraged from China," the official cited earlier said.

Although India has said that it will welcome investment from China in sectors like roads, effluent treatment and railways, the matter is yet to be examined by the ministries of defence and home affairs. China is keen on railways, particularly electrification, high-speed trains, wagons, last-mile connectivity and gauge conversion.

It has also identified sewage treatment and tunnel building among areas where it can offer substantial expertise. China has invested about $0.4 billion in India in the past 14 years, contributing just 0.18% to the overall foreign direct investment in the country.