Commerce Minister Suresh Prabhu meets counterpart in move to address bilateral trade deficit

In a bid to reduce the huge bilateral trade deficit with China, which, in the last fiscal, was a whopping $51 billion, the Centre has now sought greater investments from Chinese firms including in India’s export-focused Special Economic Zones (SEZ).

In a meeting with his Chinese counterpart Zhong Shan on Saturday the sidelines of the ongoing ASEAN Economic Ministers Meeting (and related meetings) in Manila, Indian commerce minister Suresh Prabhu called for greater Chinese investments in India and “offered facilitating measures including in SEZs”.

Mr. Prabhu’s immediate predecessor Nirmala Sitharaman had informed Rajya Sabha in July 2014 that “trade deficit can be reduced to sustainable levels through more exports from India to China, as well as by China’s investing in building manufacturing capacities in India.”

The aim, official sources said, was to then increase shipments from such manufacturing facilities in India to China by catering to specific demand in that country.

However, Foreign Direct Investment (FDI) from China in India between April 2000 and June 2017 was worth only $1.67 billion — or a minuscule 0.49% of the total FDI inflows of $342 billion during that period.

The meeting between Mr. Prabhu and Mr. Zhong Shan follows an official statement on August 28 on a bilateral agreement regarding an “expeditious disengagement of border personnel at the face-off site at Doklam.” The Hindu had reported on August 24 that China had agreed to send a high-level official team led by Mr. Zhong Shan by December-end to New Delhi to address the issue of trade imbalance with India.

Economic group meeting

Mr. Prabhu and Mr. Zhong Shan have agreed on holding a (bilateral) Joint Economic Group (JEG) Meeting soon. Instructions have been given to the concerned officials of both the countries to do the ground work prior to the JEG meeting, Mr. Prabhu said in a tweet. In this regard, both ministers “agreed to set up product/sector specific Joint Working Groups to promote exports and bilateral trade.”

In September 2014, during the India visit of Chinese President Xi Jinping, the Joint Statement had stated that the Chinese side announced the establishment of two industrial parks in India, one in Gujarat and another in Maharashtra. According to that statement,

“The Chinese side would also endeavour to realise an investment of $20 billion in India in the next five years in various industrial and infrastructure development projects. India welcomes Chinese enterprises to participate in its manufacturing and infrastructure projects.”

The Centre had informed Rajya Sabha in November 2016 that to invite Chinese investment in India, an MoU was inked between India and China in June 2014 on ‘Cooperation on Industrial Parks in India’ with a view to provide a platform for cluster-type development of the enterprises of both countries.

MoUs signed

In this regard, subsequently, MoUs were signed by Indian State Government Agencies and Chinese investors. These include the MoU between Maharashtra government and BeiqiFoton Motors, China for Auto Industrial Park in Pune, the MoU between Industrial Extension Bureau (iNDEXTb), Gujarat government and China Development Bank Corporation for supporting the setting up of Industrial Parks in Gujarat, as well as the MoU between iNDEXTb and China Small and Medium Enterprises (Chengdu) Investment Limited to set-up multi-purpose Chinese Industrial Park in Gujarat.

Besides, there is an MoU between HSIIDC (Haryana Government) and Dalian Wanda Group to develop an integrated Entertainment Park-cum-Industrial township in Haryana as well as an MoU between HSIIDC and China Fortune Land Development to set up an Industrial Park in Haryana.The Indian government’s investment promotion and facilitation wing ‘Invest India’ is also facilitating Chinese investments in India, the Centre said.