Economic policy

It’s time for New Delhi to reconsider its anti-China economic policy

India Illustration: Xia Qing/Global Times

Observers had estimated that bilateral trade between China and India could surpass the $100 billion mark in 2021 despite a cold political and diplomatic relationship between the two nations. The latest trade data from China Customs revealed that the new record was set in October, with two-way trade totaling $102.29 billion in the first 10 months of the year, up 47.8% year on year. annual.

In US dollars, China’s exports to India were $78.33 billion in the 10 months, up 51% year on year, with China’s imports from India totaling 23, $96 billion over the same period, up 38.2 percent year on year, according to data from the General Administration of Customs of China.

The target of $100 billion in trade between China and India per year was proposed more than 10 years ago. The milestone came at a time when their bilateral relations are strained as New Delhi advocates a “decoupling” approach from China.

The latest trade figures also serve as a timely reminder for the Modi government of India to right their wrong course and show once again that it is anything but an easy task for India to cut economic and trade ties with China. .

Despite its reluctance, India is deeply intertwined in a global value chain in which China plays a central role. Many Indian export-oriented companies rely heavily on raw materials from China, such as bulk pharmaceutical chemicals, photovoltaic modules and raw silk.

And, COVID-19 has also boosted the growth of trade between the two countries as India has been hit hard by the pandemic while China has become increasingly essential in the global industrial chain due to effective containment. of the epidemic by China. And China’s increased imports of iron ore and other materials from India in the first half of the year also helped boost trade.

There are short-term drivers behind the ‘$100 billion’ milestone, and analysts warn that the growing momentum in bilateral trade could prove difficult to sustain as the Indian government has not backed down from its policy economic decoupling from China.

Clinging to a long-held dream of becoming a leading global power, India has chosen a reckless approach of reducing its engagement with China, even turning its back on regional free trade agreements in which China plays a leading role, such as the Regional Comprehensive Economic Partnership (RCEP) – a mega free trade agreement that includes around 30% of the world’s GDP and population.

Under these circumstances, it would be the most sensible route for India to join the regional trade pact and help build its own productive capacity if New Delhi aspires to have a say in the global value chain.

But the policies put in place by New Delhi are not helpful in boosting India’s domestic productive capacity, and the policies will also generate serious negative side effects, possibly shading the long-term development of the South Asian country.

The Modi government has been promoting its Made in India campaign for many years but has failed to deliver on its promises. And New Delhi’s so-called economic decoupling approach has proven futile. In contrast, the Chinese market has kept its door open to the world, including Indian companies.

The merits of economic cooperation and partnership with a huge economy like China are obvious to all, however, New Delhi, at the insistence of the Biden administration, has been playing geopolitical games with China, at price of its future growth. .

The article was compiled based on an interview with Liu Zongyi, Secretary General of the Research Center for China-South Asia Cooperation at the Shanghai Institutes of International Studies. [email protected]