Analysis of India China Bilateral Trade Relations

Authors : Shubham Joshi

Volume/Issue : Volume 6 - 2021, Issue 12 - December

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This research project is an attempt to examine the Bilateral Trade relationship between the two emerging economies India and China. India and China are the fastest growing economies in Asia as well as in the world which currently account for 30% of world’s population and 20% of world’s GDP. Both economies are classified by many international agencies as emerging markets with scope for rapid economic growth. They play an increasingly crucial role in world economics affair. Even though India and China are low and middle-income countries, but their tremendous size combined with high growth rate indicates that they make a substantial and continuously increasing contribution to the world economic output. Therefore, the success or failure of the each country to maintain their rapid GDP growth rate in the future will have a large impact not only on their own economies but also on the world economy as a whole. In both countries, growth has accelerated in recent decades as trade liberalisation and marketoriented structural reforms have deepened. A glance at both countries’ experience suggests a number of similarities in their reform paths. Despite very different political systems, both countries followed a reform path that markedly reduced the role of the government in economic activity and allowed a greater degree of openness to foreign trade. Reform started earlier in China (in 1980s) than in India (in 1990s). Moreover, the opening to trade has proceeded at a much more rapid pace in China. A stronger private sector has always been an asset for India. Even though the private sector was considerablyregulated on its investment planning, but this was eased in the early 1990s. On the other hand, in China the private sector has only emerged in past decade, as the result of a more favourable legal framework and the sale of government-owned assets. China’s economy has moved from a Soviet-style centrally-planned economy to a market-based economy. Since the market reforms of 1978, it has emerged as a rapid and socially developed country, while India on other hand is developing into an open-market economy post 1991 LPG reforms. Post liberalization of foreign trade, comparative cost advantage replaced the self-sufficiency as the basic tenant of trade policy and both the countries are now pursuing market-oriented and outward-looking policies. China - India trade relations are the most crucial part of bilateral relations between India and China. The India-China Joint Business Council regulates the India-China bilateral trade, which ensures that both the countries freely exchange products and services. The legacy of relations between India and China began to change in the 1980s, with the shift in both countries from an import substitution to an export promotion strategy for both the countries. And with the signing of trade agreement of 1984, India and China provided for Most Favoured Nation Treatment to each other. It was in 1992 that the India and China got involved in a full-fledged bilateral trade relation. The year 1994 marked the beginning of a new era in the India- China economic relationswhen both the countries signed an agreement to avoid double taxation. Major exports of India to China include ores, ash, iron and organic chemicals, etc whereas major Chinese exports to India include electrical machinery and equipment, nuclear reactors and oils, etc. With China replacing USA as the largest trade partner of India for the year 2020, the decoupling of India-China in trade and commerce front seems to be a tough task. With the recent attempts of China in destabilizing the Indian borders, we have seen an increase in the negative sentiments among the Indian consumers regarding the trade with China and an increased debate over the relevance of India-China trade for the economic growth of India. This project attempts to find the relation between Export-Import with the GDP growth. The project investigates the major trends and changes in the Import-Export of India, Total Trade between India and China, Gross Domestic Product (GDP) trends, and the impact of bilateral trade between Indian and China on India’s Gross Domestic Product (GDP) growth. We will be using Exploratory Data Analysis (EDA) along with machine learning technique- Linear Regression. The findings can also be used to draw policy implications and strategy for future trade and economic co-operation between the two Asian developing economics.

Keywords : India-China trade, Indo-China Relations, MFN, Exploratory Data Analysis, Linear Regression, Univariate Time Series Analysis, Strategy, Economy, Economic Cooperation.


Paper Submission Last Date
30 - September - 2023

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