ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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No Worries on Deficit with China

India’s trade deficit with China is now close to $40 billion and is likely to go up to $60 billion in the next two years, leading to serious concerns over India’s ability to sustain it (“India’s Trade Deficit with China: How to Bridge the Gap?,” EPW, 11 July).

The deficit is the result of China’s structural shift from a primary products base to a manufacturing regime. But India should not worry about its trade deficit with China. One reason for India’s deficit with China is the former’s weak manufacturing sector, which, in turn, stems from restrictive labour, land and tax laws, poorly built infrastructure, and inadequate power supplies. India simply does not produce enough goods of high quality to meet the demand of China’s huge consumer population. India’s trade with China is more balanced than that of some of its other trading partners. In 2013–14, the trade deficits with China represented roughly 55% of total China–India trade, while its trade deficit with Iraq, Switzerland and Australia was 90%, 83% and 62% of total bilateral trade, respectively.

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