China emerges as India's third biggest export destination
The reopening of the Nathu La pass must have been more of a confidence-building exercise than developing trade. Without land route, China has become India’s most vital trade partner.
By Tushar K Mahanti, TNN |
The reopening of the Nathu La pass must have been more of a confidence-building exercise than developing trade. Without land route, China has become India’s most vital trade partner.
China has, in fact, been at the centre of the dramatic directional shift of India’s exports in the new millennium — from `Destination the US’ it is now `Destination China’.
China’s share in India’s total exports has jumped from 1.5% in 1999-’00 to 6.4% in the first 11 months of ‘05-06, while that of the US has declined from 22.8% to 16.9% during the same period. With this rise, China has become India’s third biggest export partner after the US and the UAE against 15th in 1999-00.
In actual terms, exports to China has grown by an annual compound rate of 48.8% during the last six years from $538m in 1999-’00 to $5,836m last year (11 months). Exports to the US, during the same period, have grown by 10.7%, annually compounded.
The US, with 16.9% share, of course, is still way ahead of China, but the gap is narrowing down fast. And with a widening commodity basket, the export potential to China too has improved substantially over the years — from primary and finished steel to plastic and linoleum products, drugs and pharmaceuticals, marine products, agro chemicals, cotton yarn and fabrics, machinery and instruments, the list has been expanding steadily.
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But, of course, China was no exceptions. Exports to Asian neighbours in general, have increased dramatically in recent years. UAE, for example, has become India’s second largest export partner next only to the US in 2005-06. Export to UAE has increased by more than three-and-a-half times during the last six years.It’s share in India’s aggregate exports, as a result, has increased from 5.7% in 1999-’00 to 8.3% last year. Growth in exports apart, what is important is that while traditional items like gems and jewellry, cotton
and manmade ready-made garments, yarn and fabrics continue to account for the larger part of the export , there has been a significant change in the commodity composition of trade too.
Electronic goods, machinery and instruments, plastic and linoleum products have steadily increased their share in the export basket to the UAE. India’s export trade with Hong Kong and Singapore too has prospered immensely during this period. Between 1999-’00 and ‘05-06, Singapore’s share in India’s aggregate exports has jumped from 1.8% to 5.4%.
In actual terms, exports to Singapore have increased more than eight times during this period. And if the share of Hong Kong in India’s aggregate exports has declined during this period, actual exports to Hong Kong have increased by more than 50%.
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Higher exports to neighbouring Asian countries are, however, not what the government is aiming at. It must be worried that India has failed to retain its share in most of the developed European countries. Shares of the UK, France, the Netherlands, Belgium and Italy, to name a few, in India’s total export earnings have fallen during this period.
With newer trade obligations and restrictions emerging regularly, over-dependence on the Asian neighbours may prove costlier in the future. For, as exports to China have been rising, imports from it too have been going up, resulting in a sharp rise in trade deficit.
India’s trade deficit against China has risen five times from $748m in 1999-’00 to $3,774m last year. In contrast, trade surplus against the US, despite lower export growth, has increased from $4,831m $8,391 during the same period. Trade surplus against most of the developed countries such as France, Italy, the Netherlands and the UK too has increased during this period.
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