What’s behind the huge drop in India’s trade deficit with China?

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India, considered to be a beneficiary of the China-U.S. trade tensions, is seeing record high exports to China this year, which may bring revision to relations between China, India and the United States.

According to the statistics of the Indian Ministry of Commerce, its trade deficit to China was dramatically cut in the nine months from April to December 2018, down to 40 billion dollars from more than 70 billion in the previous financial year.

Atul Aneja, an associate editor at The Hindu, stated that the decline in the deficit was interrelated with the China-U.S. trade tensions as India was an alternative to China in terms of agricultural products.

In addition, Aneja referred to a huge trade potential between China and India on IT products, which are not on the trade agenda yet.

“If that (trade in IT products) comes to the picture, then trade figures would be much more balanced than even what they are today,” added Aneja.

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Besides, Professor John Gong from University of International Business and Economics believes that the trade tensions have had minimal impact on India and the increasing exports in agricultural products to China marked the rigid demand from the Chinese market regarding sunflower seeds, for instance.

Apart from that, China has invested equipment and other products enabling infrastructure on a massive scale in India so far.

Speaking of the future trade relations between China and India, Professor Gong struck a very optimistic tone.

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Robert Koepp, a director at Economist Corporate Network, is very cautious, on the other hand, about over-interpreting the trade figures between two sides, “We also have to be careful about reading too much into a single year's trend or what's happened over the month this year,” he said.

But he agreed that China-India bilateral trade has big potential and could be the future momentum for Asian development.

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