India concerned about widening trade deficit with China

[Vinod2070]

The trade gap can be reduced by focusing on increasing the manufacturing competitiveness in the country and also taking specific initiatives for industries like production of electronic items.

This requires vision and long range planning, simplifying labor laws, de-bottlenecking infrastructure in specific areas etc.

All this can be achieved and achieved quickly. Just a question of political will.

I agree there are limited opportunities at this time for India to export much to China. The trade gap can be reduced by reducing imports of manufactured and electronic goods.

 

[Bang Galore]

That's a good point. It's the Indian business that are buying Chinese goods, it is the Indian people who are buying Chinese goods.

They are all making the choice to do that. They feel our products are more competitively priced, and are apparently not all that nationalistic in terms of what country it is coming from.

Indians buy Chinese goods because they are price competitive. That is a given. However it has no bearing on any trade dispute. As I said earlier, Indians have a love of Gold, far exceeding any interest in Chinese goods. It didn't stop the government from hiking tariffs. In many sectors, Indian companies understand that the Chinese companies/products won't be allowed in. They may gripe about it but they all move on. Everyone moves on.

 

[faithfulguy]

Did you pull that bolded part from your hat ??

Chinese software industry is worth 2.5 Trillion CNY (40 billion USD)

China Software Industry Reached RMB 2.5 Trillion - New Market Research Report Available At Researchmoz.us

India's domestic software industry worth is 10 billion USD. IT exports are worth 70 billion.

2.5 trillion Y / 6.2 and you get 40 billion USD.
Your ancestors that invented the zero must be rolling in the graves.

You didn't understand the thrust of the argument. For a trade war, you must have something substantial to lose. If India-China trade remains skewed, India will really have very little to lose. There are no free lunches. With increasing political friction, it is only a matter of time before there are restrictive practices implemented. China will have to give somewhere, either on trade or diplomatically. There are no permanent free lunches.Period.

Instead of threatening trade war, India should look at increase its productivity and competitiveness. Trade war is not the way to go.

 

[Chinese-Dragon]

They may gripe about it but they all move on. Everyone moves on.

That's true enough. Life goes on, regardless of such things.

So why do Indians continue to buy Chinese goods? Is someone forcing them to do that? No.

They make a choice to buy a product, based on how much value they feel they can get from the money they spend. That's it, they can choose any product from your market, and they chose this one. It makes more profit for the domestic companies that sell it, and gives more value to the customer that buys it, hence why both Indian companies and Indian customers choose products that end up being made in China.

It's all about competitiveness. Increase your competitiveness, and the companies/customers will choose to buy from you instead. That's how the global economy works.

 

[faithfulguy]

The trade gap can be reduced by focusing on increasing the manufacturing competitiveness in the country and also taking specific initiatives for industries like production of electronic items.

This requires vision and long range planning, simplifying labor laws, de-bottlenecking infrastructure in specific areas etc.

All this can be achieved and achieved quickly. Just a question of political will.

I agree there are limited opportunities at this time for India to export much to China. The trade gap can be reduced by reducing imports of manufactured and electronic goods.

How do you propose reducing imports of manufactured goods? Blame India for lack of competitiveness and technical ability. Trade war will not solve any problems.

 

[Lightningbolt]

The only ones here getting emotional are some Chinese members who want to rant rather than discuss. You won't see me doing that. I'm just pointing out a common sensical point. There is always a measuring of trade that takes place. Indians buy the most Gold but the government has over the last few months continuously increased tariffs to taper off the demand because of excessive imports and the current account situation. Any government strikes a fine balance between economic needs & what people may want. There are a number of factors governing trade which also include the political. India-China relations have been tense in the last year, to imagine that the GoI will not look at a skewed trade balance is silly. I'm not suggesting that trade restrictions are imminent, merely that they will be always available as an option.

You clearly do not understand the incredible damage it will do to the Indian economy and its future growth if India reduces imports from China. You can already see Indian imports from China falling and already hurting Indian growth which is reliant on consumption.
Indian consumers are extremely reliant on affordable goods as well as Indian companies that buy industrial goods from us at affordable prices to upgrade businesses.
You clearly do not understand basic economics and businesses. Consumers and companies buy goods that give them the best bang for their buck and they are highly reliant on us. Without us they will have to buy from western countries and those are very expensive which means consumers and companies cannot afford it and thus stunts economic and technological progress in India as not many can afford them.

There is a reason countries reduce trade barriers to increase economic growth. It's a necessary thing even though it damages domestic industries. Most of our domestic industries have suffered as foreign competition and goods were allowed to enter China but it benefited Chinese consumers and Chinese companies to have a higher standard of living by bringing consumer prices down through competition which makes consumer goods and industrial goods affordable. It allows businesses access to affordable technology to which they didn't have before and allow then to upgrade their business by increasing efficiency and thus contributing to productivity increases and economic growth.

India has no option but to import our goods, if you cut us off, you are committing economic suicide. Where are you going to replace the goods we provide and at what cost? If you buy expensive goods you just reduce the number of Indian consumers and companies that can be successful as vast majority of them are priced out of the market.

Ideally you fully open to global trade and allow the market to determine what consumers and firms buy. India don't have a big manufacturing base and certainly don't have the full supply chain to manufacture everything domestically. Not even we can manufacture every component ourselves even though our manufacturing base and expertise is far greater than India.

If India wants to increase manufacturing and increase exports to reduce the trade deficit, the best way is to reduce regulations and bureaucracy and reduce taxes. Indian jingoism is the main reason India will never catch up to us. Indians are far too nationalistic to allow the kind of open economy that we have.

 

[Bang Galore]

You want to reduce your trade deficit by manufacturing things using comparative advantages that others want and not by reducing trade. If you want zero trade deficit then you can stop trading altogether but you will be like Iran that can't get any goods and shut yourself from the world. As walle said, beggers cant be choosers. India is an extremely poor country and cannot afford to buy expensive western goods and expect to develop fast. You need affordable goods that poor countries like India can afford or your country will develop at a very slow pace as you can't afford expensive goods.

Too many silly rants here, economic policies are not based on foolish notions like this. If a trade deficit with China becomes unmanageable, it will have consequences. Simple.

India needs us far more than we need India. Our exports to India represents only 2.33% of our total exports. India is still an economic lightweight compared to us. Our government fiscal revenue alone is bigger than the entire Indian economy.

This is not a D-measuring contest, that may be used in a different thread. In this case, why would India need China more? You think 2.33% or whatever has no value, do you believe you can replace those exports elsewhere? India can replace those imports but can you? Use your brains without rushing in with a "we are greater" rant. That is irrelevant in this discussion. We need you...?

 

[Chinese-Dragon]

You clearly do not understand the incredible damage it will do to the Indian economy and its future growth if India reduces imports from China. You can already see Indian imports from China falling and already hurting Indian growth which is reliant on consumption.
Indian consumers are extremely reliant on affordable goods as well as Indian companies that buy industrial goods from us at affordable prices to upgrade businesses.
You clearly do not understand basic economics and businesses. Consumers and companies buy goods that give them the best bang for their buck and they are highly reliant on us. Without us they will have to buy from western countries and those are very expensive which means consumers and companies cannot afford it and thus stunts economic and technological progress in India as not many can afford them.

There is a reason countries reduce trade barriers to increase economic growth. It's a necessary thing even though it damages domestic industries. Most of our domestic industries have suffered as foreign competition and goods were allowed to enter China but it benefited Chinese consumers and Chinese companies to have a higher standard of living by bringing consumer prices down through competition which makes consumer goods and industrial goods affordable. It allows businesses access to affordable technology to which they didn't have before and allow then to upgrade their business by increasing efficiency and thus contributing to productivity increases and economic growth.

India has no option but to import our goods, if you cut us off, you are committing economic suicide. Where are you going to replace the goods we provide and at what cost? If you buy expensive goods you just reduce the number of Indian consumers and companies that can be successful as vast majority of them are priced out of the market.

Ideally you fully open to global trade and allow the market to determine what consumers and firms buy. India don't have a big manufacturing base and certainly don't have the full supply chain to manufacture everything domestically. Not even we can manufacture every component ourselves even though our manufacturing base and expertise is far greater than India.

If India wants to increase manufacturing and increase exports to reduce the trade deficit, the best way is to reduce regulations and bureaucracy and reduce taxes. Indian jingoism is the main reason India will never catch up to us. Indians are far too nationalistic to allow the kind of open economy that have.

That's exactly right.

If a trade deficit with China becomes unmanageable, it will have consequences. Simple.

Sure, and given the recent massive slowdown in the Indian economy, the most likely event in that case will be that India will simply reduce buying Chinese goods, and reduce nation-wide consumer consumption overall.

Unless they want India's current account deficit and fiscal deficit (both by FAR the largest in the developing world) to become unstable.

 

[Genesis]

No, I'm sorry to disappoint you, I'm not crazy. However you certainly have very little idea of what constitutes an equal comparison. The U.S. and Europe don't do it for a number of reasons but that doesn't stop them from threatening to. The U.S. & China have a much larger labour price gap than between India & China, their trade with you is worth something to them. That is the key to my point. Unless China is valuable to India as a market, there are no barriers stopping India from restricting Chinese goods. If trade imbalance remains skewed, restrictions will apply. The government of China understands that. Pretty much everyone understands that. If a side has nothing to lose, then it will lose nothing. The country worrying will always be the one which has something to lose.



They will simply sell something else. Do you really believe that is a realistic reason?



Imports are not investments, you really should get your facts right. The second point is, that the world knows how the rules apply & no one will care about an Indo-China dispute, especially if they stand to benefit from it. After all what is China's loss will be a gain elsewhere....Trade is not sport, no one will continue to lose to keep up appearances...



That is a given but there are not many markets the size of India available and getting shut out might mean losing such a market permanently. There are always alternatives, sometimes expensive but always alternatives. I'm not suggesting a trade war, merely pointing out that unlike what you chaps think, such skewed trade is not without a risk of consequences.



Politicians will do many things, you are seriously naive if you think what I said above is not being considered. After the recent events on the border, the politicians are considering a lot more steps on trade that they were not doing so before because they didn't want a deterioration of ties. Disabuse yourself of any notion that such steps are not being considered or that they are not in the realm of possibility. They are and while not imminent, they remain on the table.

I know you think making a cup is simple, but it's not just that, it's setting up a factory, it's getting the permits, it's getting customers, it's getting the staff, the materials, the funding, the brand name, and a lot of stuff.

You know 80% of the time business is not done for the simple reason I don't like that guy, and more for the reason of I don't know that guy.

China spent the better part of the 4 decades doing business around the world, we got connections, and reputation. India could compete, but it would take time. As our production is way bigger, our cost goes down, so not only can India not compete in quality, but also not price. I know what people say about our quality, but that's Japan and the US, NOT India.




Sell something else? Something else is sold by SOMEBODY else, do you think India is a primitive society where something else is not already being done?



Imports are not investments, but why would companies spent time building their brand and reputation in India when if they succeed Indian government are just going to take it away.

The world is connected. China is everywhere. When we sell to the US maybe our supplier talks about his losses in India to some Americans, and why. The American may think twice about setting up shop in India.

China and India is not independent from the world. People talk, people socialize. People go into markets and sell and buy things because of friends and acquiescence, now do you suppose Chinese businessmen are not taken seriously around the world?



I'm Chinese I know all about the size of market means. China is huge population compare to America, but we are not close in terms of customers. You have to consider a lot of things. Americans have houses, so they want sprinklers, Chinese have apartments so we don't need it. So a simple sprinkler is a luxury item to Chinese not because it is expensive, but because Chinese is poorer.

Same deal in India, but you know, worse.



Anything is possible, but your politicians are also businessmen, that's the beauty of democracy, and guess what Chinese business is big business. Funding may not come from Chinese businessmen, but some does come from Chinese trade.

I'm not saying Indian politicians are being bought, but China is rich enough and being corrupt ourselves, you don't think we don't know how to do this bribing thing do you.

 

[JOEY TRIBIANI]

agree ..

 

[Bang Galore]

You clearly do not understand the incredible damage it will do to the Indian economy and its future growth if India reduces imports from China. You can already see Indian imports from China falling and already hurting Indian growth which is reliant on consumption.
Indian consumers are extremely reliant on affordable goods as well as Indian companies that buy industrial goods from us at affordable prices to upgrade businesses.
You clearly do not understand basic economics and businesses. Consumers and companies buy goods that give them the best bang for their buck and they are highly reliant on us. Without us they will have to buy from western countries and those are very expensive which means consumers and companies cannot afford it and thus stunts economic and technological progress in India as not many can afford them.

There is a reason countries reduce trade barriers to increase economic growth. It's a necessary thing even though it damages domestic industries. Most of our domestic industries have suffered as foreign competition and goods were allowed to enter China but it benefited Chinese consumers and Chinese companies to have a higher standard of living by bringing consumer prices down through competition which makes consumer goods and industrial goods affordable. It allows businesses access to affordable technology to which they didn't have before and allow then to upgrade their business by increasing efficiency and thus contributing to productivity increases and economic growth.

India has no option but to import our goods, if you cut us off, you are committing economic suicide. Where are you going to replace the goods we provide and at what cost? If you buy expensive goods you just reduce the number of Indian consumers and companies that can be successful as vast majority of them are priced out of the market.

Ideally you fully open to global trade and allow the market to determine what consumers and firms buy. India don't have a big manufacturing base and certainly don't have the full supply chain to manufacture everything domestically. Not even we can manufacture every component ourselves even though our manufacturing base and expertise is far greater than India.

If India wants to increase manufacturing and increase exports to reduce the trade deficit, the best way is to reduce regulations and bureaucracy and reduce taxes. Indian jingoism is the main reason India will never catch up to us. Indians are far too nationalistic to allow the kind of open economy that have.

The only ones not understanding anything are the likes of you.I have some knowledge of business and it is not theoretical. Will India be hurt if it restricts imports from China? Absolutely. Is there a possibility that inspite of that, restrictions may be be employed? Absolutely. You obviously didn't see what was posted earlier.

In December, India’s National Security Council Secretariat, the apex agency responsible for economic and strategic security, even circulated a note to various ministries detailing its concerns and backing a possible move by the country’s Department of Commerce to start restricting imports from China

Do you understand now that I'm not some lone ranger suggesting the possibility , not advocating, of such action? Your assumption that India cannot & will not consider such a move is quite clearly wrong.

 

[Armstrong]

That's exactly right.

Be that as it may - Maybe China should accelerate her switch from being a 'Cost-Effective' competitive advantage based economy to one that incorporates greater Differentiation in that brands like Lenovo that can compete with the best out there are, increase in numbers & the existing such brands look towards taking the relevant steps to become market leaders who are the 'trend setters' as opposed to ones who can come up with the same product at the same (or better) quality & lesser prices !

 

[armchairPrivate]

^^^

I just watched a 1970's movie. In it, a character bemoaned cheap Japanese radio.

Does this address your concerns?

When I went to school in the 70's, my professor was saying the same thing. Motorola was the king.

And driving a Honda was a shame.

IT TAKES TIME! Get it?

 

[Chinese-Dragon]

Be that as it may - Maybe China should accelerate her switch from being a 'Cost-Effective' competitive advantage based economy to one that incorporates greater Differentiation in that brands like Lenovo that can compete with the best out there are, increase in numbers & the existing such brands look towards taking the relevant steps to become market leaders who are the 'trend setters' as opposed to ones who can come up with the same product at the same (or better) quality & lesser prices !

Exactly buddy, that is in fact our current direction at the moment. Or at least, that is the official intention of our Government, to move up the value chain. In fact, we are in the middle of a very large economic transition right now, the slowing down of growth to around 7.5%, and the switch from our economy from being investment-driven to consumer-driven.

Financial Times - China unlocks the right kind of growth

China unlocks right kind of growth

By Simon Rabinovitch in Beijing

China has never lacked for growth over the past decade but it has suffered from the wrong kind of growth, developing a dangerous reliance on investment.

Tucked into its latest economic data was evidence that the country has finally started to address this problem. Consumption clearly surpassed investment as China’s biggest growth engine, reinforcing a trend that emerged earlier this year – and something that has rarely happened over the past decade.

In the first three quarters, consumption accounted for 55 per cent of growth, while investment contributed 50.5 per cent.

With external demand weak, net exports actually subtracted 5.5 per cent, according to data from the national statistics bureau.

Though slowing growth may be a misnomer. In fact, 7.5% growth of an $8.3 trillion economic base, is a LOT more than 12% of $2.3 trillion economic base.

 

[Lightningbolt]

Too many silly rants here, economic policies are not based on foolish notions like this. If a trade deficit with China becomes unmanageable, it will have consequences. Simple.



This is not a D-measuring contest, that may be used in a different thread. In this case, why would India need China more? You think 2.33% or whatever has no value, do you believe you can replace those exports elsewhere? India can replace those imports but can you? Use your brains without rushing in with a "we are greater" rant. That is irrelevant in this discussion. We need you...?

2.33% exports barely makes a dent to our economy. India cannot import the things we produce at affordable prices.

A poor country like India needs affordable goods.

While if we lose 2.33% of our export market, nothing will happen to us. While by stop imports from China, you destroy your consumer based economy that's extremely reliant on goods that are affordable to consume.

You need us a million times more than we need you.