The deadly border skirmishes between India and China have cast a cloud over trade relations, which have seen the latter rapidly expand its footprint in the Indian economy, spanning infrastructure, physical goods and hi-tech, with the value of total bilateral trade surging 20% in the last six years, according to official data. At least some of this surge, experts admit, has come at the cost of local industry.
Chinese firms have ploughed huge investments into some of the country's most iconic tech brands, such as the ride-hailing service Ola, a fintech company Paytm, food-delivery app Zomato and e-commerce platform Flipkart.
How large are Chinese investments in India and what do the two countries trade in? Mapping these two variables shows bilateral trade clocked an average double-digit growth in the last three years, and much of it to China's advantage.
According to data from the commerce ministry, India's bilateral trade with China was worth nearly $80 billion in 2019. Data posted on India's Beijing embassy website, which it sourced to China's customs department, showed total bilateral trade between Jan and Nov 2019 at $84.3 billion, a drop of nearly 3.2% from the previous year's $ 95.7 billion.
China is India's largest trading partner, but the latter runs a large trade deficit. This means India buys far more goods from China, in value terms, than it sells to that country.
Imports from China account for an average 16% of India's total. On the other hand, in India's total exports, China's share is just 3.2%. So, to be sure, the trade imbalance is substantial and works to India's disadvantage.
Despite this, analysts say stakes for China are high in India's technology sector. In 2019-20, Chinese tech firms invested in India the most, according to data from FDI Intelligence, a global investment advisory firm owned by The Financial Times Ltd.
In 2019, there were "19 inbound projects, which is more than double the eight projects invested in Russia, the second-highest destination for investment", according to an April 22 report published by FDI Intelligence. Two-thirds of Indian unicorns -- a label for start-ups valued at $1 billion – have Chinese investment, according to data from the think-tank Gateway House.
In 2018, Alibaba invested $216m in online grocer BigBasket. It also invested $210m in food delivery app Zomato. Tencent has $400 million riding on ride-hailing app Ola, besides $700 million in e-commerce platform Flipkart, an investment made in April 2017. This investment set a record of being the highest foreign investment picked up by an India-based tech firm. Alibaba is a large investor also in Paytm, while Tencent has invested in Byju's, an education start-up.
India exports mostly a basket of primary goods to China, including cotton, yarn, organic chemicals, ores, natural pearls, precious stones, and fabrics. Chinese imports into India include electric machinery, electronic equipment, nuclear reactors, boilers, solar energy components and APIs (active pharmaceutical ingredients), the backbone of India's pharma industry.
"India is likely to put a lot of things under the scanner now, though I don't see any overnight impact on goods trade," said Geethanjali Nataraj, a trade economist with the Indian Institute of Public Administration.
Nataraj said a "trust deficit" between the two countries was apparent, referring to Indian commerce ministry's tightening of foreign investment rules in April. The new rules say any business from a country "which shares land border with India" will need the government's nod before investing in an Indian firm.
"This was to block possibility of opportunistic takeovers from China," said Biswajit Dhar, a trade expert who teaches at the Jawaharlal University and who previously advised the commerce ministry,
According to Dhar, going forward, India will likely reduce overdependence on any one country, including China. "Of most sectors, the health sector's heavy dependence on Chinese active pharmaceutical ingredients is most crucial. Nearly 90% of our critical therapeutic is import-dependent. One solution is to ramp up our public pharma sector's capacity," he said.
Disclaimer: This article first appeared on Hindustan Times, and is published by special syndication arrangement