China is India’s first trading partner (for now)
Indians depend on Chinese manufacturing. Two-way trade stood at US$ 77.7 billion in 2020, more than with the United States. Modi’s autarchy has yielded no results. Border disputes could exacerbate divisions. Joe Biden is pushing for an anti-Chinese alliance.
New Delhi (AsiaNews) – China is India's top trading partner again, this despite attempts by the Modi government to reduce trade with its neighbour following repeated clashes between the two countries along their Himalayan border.
According to the latest data from India’s Ministry of Commerce, two-way trade between the two countries in 2020 reached US$ 77.7 billion, down from US$ 85.5 billion in 2019, but higher than India's trade with the United States (US$ 75.9 billion).
For strategic reasons, the Indian government announced plans for economic self-sufficiency to reduce dependence on foreign imports, especially from China.
Like in other countries, the SARS-CoV2 coronavirus pandemic has generated concerns about the security of international supply chains, which are dominated by the Chinese in manufacturing.
Over the past year, Prime Minister Narendra Modi banned hundreds of Chinese web applications as well as investments in key sectors such as technology, energy and infrastructure.
However, data show that the prime minister’s autarchy did not reach the desired goals. India is still too dependent on importing household appliances, industrial machinery and telecommunications equipment from China.
Last year, India’s trade deficit with its northern neighbour stood at US$ 40 billion. Total imports from China reached US$ 58.7 billion, more than the sum of imports from the United States and the United Arab Emirates (India’s second and third trading partners).
India's exports to China grew to US$ 19 billion (+11 per cent over 2019).
According to media reports, Modi gave the green light to a dozen Chinese investments in manufacturing: both signs that economic decoupling from China is difficult to achieve, at least in the short term.
However, geopolitical factors might trump economic and trade considerations.
Delhi and Beijing recently reached an agreement to demobilise troops near the Pangong Tso glacial lake, along the Line of Actual Control (LAC) that divides India’s Ladakh region from Tibet.
Since last summer, soldiers from the two sides have fought each other – sustaining dead and wounded – at different points on the Himalayan border.
The two countries share a 3,488 km border in the impervious Himalayan region, over which they fought a brief but bloody war in 1962.
Delhi claims large sectors of Aksai Chin (which the Chinese received from Pakistan), whilst Beijing claims the Indian state of Arunachal Pradesh.
Analysts point out that the deal is a temporary. The Modi administration has repeatedly stated that India cannot ignore border issues in its relations with China.
Yesterday Indian Foreign Minister Subrahmanyam Jaishankar told his Chinese counterpart Wang Yi that bilateral relations between their countries have suffered a severe blow over the past year.
For Jaishankar, this is due to "provocative behaviour and unilateral attempts by the Chinese side to alter the status quo."
Then there is the “Biden factor”. To counter China's advance into the Indo-Pacific, the new US president wants to strengthen ties with regional allies and partners.
One of Washington's main goals is to give beef up the Quad, the Quadrilateral Security Dialogue, with India, Japan and Australia.
For China, this is the embryo of an Asian NATO; for Indians, it is a tool to counter the growth of Chinese influence.