Sustaining India – China Bilateral Trade: An Analysis of India’s Rising Trade deficit with China.

This paper evaluates India’s export opportunities to China as well as market access constraints faced by Indian firms in China at the disaggregated product level. Our main conclusions include: By 2015, it is expected that average wages in China would rise by 80% thereby loosing competitiveness in labour intensive industries particularly when compared to other South East Asian countries. These developments provide new opportunities to India to diversify and increase value-added exports to China. 30 products at HS 4 digit have been identified with potential export opportunities for India. Of these, 7 products are globally export competitive. Most of these identified products are value added intermediaries. In addition to these, there are a number of products where India’s share in China’s imports is less than 1%. Most of these products fall under Electrical Machinery (85), Machinery (84), Optical equipment (90), Plastics (39) and Organic Chemicals (29). As far as market access is concerned, Tariff does not seem to emerge as a major constraint for most products except for agricultural products. In addition to tariff, each product is subjected to a number of NTBs that cover Import licensing and Inspection, Registration of environmental management, labeling requirements etc. In addition to these, agricultural products are subjected to Food safety law, Quarantine measures, Food additive standards, MRL standards etc.