Commerce Secretary calls for a focused approach to increase trade with China

Rajiv Kher stated that there was a need to pursue a more focused effort to promote trade with China.
Commerce Secretary calls for a focused approach to increase trade with China

Rajeev Kher, Commerce Secretary, Department of Commerce, Ministry of Commerce and Industry stated that there was a need to pursue a more focused effort to promote trade with China. Kher was speaking at a Session on “Accelerating Indo-China Economic Engagement” being organised by the Confederation of Indian Industry (CII) in New Delhi. The session was held as a part of the Global Exhibition on Services being organized by CII, the Department of Commerce and the Services Export Promotion Council from April 23-25, 2015 in New Delhi.

Kher stated that for far too long, India had been an exporter of raw materials to China and an importer of machinery and other finished products. To help Indian industry move up the value chain, he stated that the Government of India was following a three pronged strategy. First, there was a need to address specific market access issues in specific sectors of interest to India such as drugs and pharmaceuticals, IT & ITeS, Agriculture and Food Processing and Auto Components among others. Second, Chinese manufacturers of finished goods need to be encouraged to set up a production base in India. Third, Indian Industry needed to enter those sectors where Chinese manufacturing is on the decline and to cater to the Chinese market. He stated that the Government is setting up an SPV to promote investment in Cambodia, Laos, Myanmar and Vietnam (CLMV) region. This SPV would help Indian industry invest in the CLMV region and cater to the Chinese market.

Kher also released the CII Report on “Accelerating Indo-China Economic Engagement”. The report outlines the overall strategy for accelerating economic engagement between India and China, including initiatives required both at the government and industry levels. It also identifies specific sectors for driving increased exports to China as well as sectors where India should attract and leverage investments from China. The report recommends a 4 point action plan to do so.

To leverage India’s Importance – Market and Investment Destination for China.

To push for Market Access in Key Sectors where India can Add Value to Chinese Economy – Pharma, IT, Tourism, Media and Entertainment, Auto Components

To prioritise Chinese FDI in 18 identified industry sectors and a Sovereign Deal to Attract Investment in Indian Infrastructure

To set up an institutional basis (Government cum industry) within the PMO or MOCI to direct and monitor the achievement of Goals

According to the report, bilateral trade between India and China has seen rapid and unbalanced growth since 2008. Bilateral trade crossed $65 billion in 2013. Chinese imports have grown sharply relative to Indian exports resulting in a record deficit of $35 billion in 2013. India has emerged as one of the key markets for China growing at a faster rate than most of its other key trading partners. Today, India’s imports from China continue to be dominated by high-skill and technology intensive manufactured products while exports are mainly primary commodities.

The report recommends that to promote exports and investments, India will need to push for specific actions in certain identified sectors like IT Services, Pharmaceuticals, Auto Components, Tourism and Entertainment. Across these targeted sectors, India has a potential to generate revenues greater than $10 bn in 4-5 years – nearly 80 percent of the exports of India to China in 2013. Indian companies need to change their mindset towards China and invest for the long term by committing resources in terms of technology, capital and senior management and work in close co-ordination with the Indian Government, which has a critical role in enabling market access in China.

In addition, to encourage Chinese FDI in India, India needs to prioritise 18 sectors for Chinese FDI in specific areas under Capital Goods, Specialty Products, Consumer Goods and Infrastructure. India should actively consider a sovereign deal with China for active investment in Indian infrastructure projects which can benefit both countries immensely.

In his address, Dr Pawan Goenka, Chairman, CII Core Group on China & President – Automotive & Farm Equipment Sector and Member – Group Executive Board, Mahindra & Mahindra Limited stated that the needs of the two economies are complementary and the two governments need to work towards rebalancing the flow of trade and investment between them. The business communities of the two countries need to co-operate to enhance investment across borders. It is in this backdrop that CII had constituted a Core Group on China of which he was the Chair. Under the aegis of this Core Group, CII had initiated a detailed study on examining India’s engagement strategy with China.

In his concluding remarks, Sridhar Venkiteswaran, Executive Director, Avalon Consulting stated that there was clearly a need to change the way we engage with China and the Report suggests a possible strategy.

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