IGI Logo

Government think tank NITI Aayog has initiated a study to develop a comprehensive action plan to bridge India's trade deficit with China over time and align trading strategies with emerging geopolitical situation and potential risks to safeguard supply chains. The Aayog has invited bids from consultants to lead the two studies in areas of reducing trade gap with China and boosting local manufacturing. The move also comes against the backdrop of simmering tensions between India and China since the Galwan clash in June 2020.

The centrality of China to India’s supply chain in certain industries raises dependency and vulnerability of the Indian supply chains and production networks particularly during crisis situations such as the COVID-19 and geopolitical conflicts. The terms of reference of study includes analysing the trends in India-China trade (at product category level) over the recent years to discern patterns of trade dependency and underlying reasons for the same. The study will analyse the supply chains of India-China trade and also comparable supply chains of India's trade with other Asian countries to derisk India's trade. It will also examine product categories where India has comparative advantage and a sizeable market in China to scale up exports to China.

According to the Aayog, the study should recommend key policies to boost domestic production and productivity in sectors comparable to the global economy not only to reduce the trade deficit with China, but also to capitalise on global supply chain shifts. The study should analyse the type and quantum off foreign investment which may bridge the technology gap and utilise the abundant domestic manpower for competitive products. The study will also have to examine tariff, non-tariff barriers, regulatory ecosystem and market access concerns for Indian exports to China.