Why China Sells more to India?

Prime Minister Dr. Manmohan Singh during his recent visit to attend BRICS Summit, at Sanya, China, expressed his concern about the trade deficit between India and China and pitched for more Indian exports to China. I don’t understand why he could not take the necessary action as economist prime minister to keep the gap within the right limit. Should it not be his priority and responsibility? Does not his statement provide a hint of helplessness?

India’s trade deficit with China widened 28 times from merely 0.67 billion dollars in 2001 to 19.20 billion dollars in 2010 (includes 7 years of UPA rule that Man Mohan headed). It has been increasing over years. In 2009, it was USD 15.87 billion while in 2008 the trade deficit was USD 11.18 billion.

Interestingly, if India can export to so many of developed countries, why doesn’t it do to China to bridge the gap? In simple word, the Chinese government doesn’t like it and allows it to happen. It wants to project that India doesn’t have high-tech wares that the Chinese need to import. And this is after the world institution considers India as one of the top 10 most industrial nations of the world. Why can’t India emulate at least something from the Chinese that almost everyone understands? Indian companies require the government’s support to compete with and export to China. The companies of the developed countries today have understood that ‘they are competing not with individual Chinese competitors but rather China Inc—an industrial ecosystem consisting of the companies, the government and academic institutions with none playing by the rules, in particular, on intellectual property rights’.

I don’t have the data to prove but I believe that most of the Chinese import by value must be in the government sector. The Chinese takes advantages of the weakness of the corrupt Indian administrative system and pays a lot of bribe to those who assist for the purchases of the Chinese goods. I still remember a Chinese visiting my office for selling an EDM for die sinking. I was stunned when instead of explaining the stronger features of the machine he offered straight the money that he could pay me. I came across the story of electricity boards becoming vulnerable to this attraction in Chinese purchases of items such as household electric meters.

Why can’t Indian government put a condition of setting up manufacturing facilities in India for getting big orders, as the Chinese themselves do?

Recent onslaughts of the Chinese power equipment manufacturers in selling their equipment to new power plants must be looked into for a possible scam involved. The deal serves the interest of few at top of the public and private companies in power business through illicit payments by the manufacturers backed by the Chinese government. The Chinese can go to any extent to sell their goods. The active cooperation and encouragement from its government makes it easy for the Chinese vendors to obtain orders. It would have been interesting to know the actual benefits going personally to Anil Ambani in billion dollars worth of power equipment for his power plants. Interestingly, Ambani could grab the order for the most of ultra mega power projects. Each of them will have 4000MW capacity.

Unfortunately, Indian traders are unscrupulous too. They buy all short of junks rejected by the developed countries at much cheaper prices, and get them in India to sell to the Indian consumers who get easily allured to buy the stuffs. Many of the Indian traders are providing samples of saleable goods of household use and get the fakes produced in China and import. Should it go on in the name of free trade?

It will be difficult if not impossible to bridge the gap if the economist prime minister along with the Indian manufacturers and exporters can’t get a strategy in place to attain the desired goal.

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