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Is the India-China trade story hitting a new normal?

Indian exporters have a good run despite Covid 19

It is not just anti-China sentiment in the European countries and the US that is helping India’s export sector, which touched $95 billion in the April-June period—the highest quarterly figure ever, beating the earlier record of $90 in the fourth quarter of 2020-21.

India’s exports to China have increased too in the last one year despite the mounting political tensions between the two countries post the Galwan clash.

Chinese news organisation Global Times noted that China has been importing from India at a much faster rate than ever.

Also read: China is India's largest trading partner but New Delhi will not lower its guard

This, according to the media house, is part of China’s efforts “to at least alleviate an ongoing trade imbalance issue to a certain extent.”

“Chinese exports to India grew 64.1 per cent year-on-year from January to May, while imports surged 90.2 per cent,” Chinese news organisation

Global Times said. It added that trade between China and India soared

70.1 per cent in US dollar terms in the first five months of this year to $48.16 billion.

Also read: GT Voice: Resilience in China-India trade difficult to dismiss

However, analysts also said that China’s imports of raw materials from India have increased as the economic recovery is already underway.

“The country is importing various types of raw materials which are then further used to make finished products. These finished products are either exported by China or often used for domestic markets as well,” Sharad Kumar Saraf, former president, Federation of Indian Export Organisations (FIEO) told India Narrative.

Also read: India's exports touch $95 billion in April-June quarter–the highest ever: Goyal

Notwithstanding the border clash and subsequent banning of several Chinese applications in India, New Delhi and Beijing have continued with trade. “This is a new normal. Trade between the two countries has continued as there is a genuine demand from both sides. The attempt has been to delink the political dynamics from trade,” an analyst said.

Subhomoy Bhattacharjee, Senior Adjunct Fellow at RIS (Research and Information System for Developing Countries) added that with the economic recovery, China’s demand for raw materials has increased.

“China has increased its imports from India and this is not just a political statement. The country’s demand for raw material is once again rising and it wants to be in pole position,” Bhattacharjee said.

Orders from European countries and the US have also surged amid anti-China sentiments. There has been a secular increase in demand from India with improvement in port turnaround and overall supply chain management.

Also read: India continues to feed the world as its non basmati rice exports increase by 288% in April

Several countries in Europe, which have been primarily sourcing goods from China, are not only de-risk their supply chain management but are looking for alternative sources as allegations of gross human rights violations related to the Uighur Muslims hit China.

“There is a growing anti-China sentiment which is sweeping across the Euro Zone, which has helped India get many more orders,” an analyst said.

Interestingly, last year, export orders and supplies – both were impacted when Covid 19 infections had risen. But this year, despite the rise in the number of cases in India during the first two months of the financial year, export orders remained in-tact and there was no disruption in the supply chain.

A revival in the US economy – the country’s GDP rose by 6.4 per cent in the first three months of this year, along with containment of the pandemic in Europe have led to India’s exports boost.

“India’s exports sector is more efficient today as port turnaround has improved significantly, there has been a clean-up in the sector and this has pushed the overall growth,” Bhattacharjee added.