India’s growing trade deficit with China—an estimated $27 billion in 2011—has become a source of anguish in Indian policy circles. Bilateral trade between the two emerging giants grew to $73 billion in 2011, up from $63 billion in 2010 and less than $3 billion in 2000. The Indian side, though, is becoming increasingly alarmed over the growing trade balance in China’s favor, which amounted to a Chinese surplus of $23.9 billion last year.
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. Unfortunately, much of the public discussion on this subject has tended to be shallow. Few people seem to understand the trade deficit’s underlying causes, its implications for India’s economy, and what India should do to create a better balance.
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