India is changing its export mix and is realigning exports to China.
While its northern neighbor is its largest trading partner, only 3.68 per cent of India’s exports find their way to China.
Apart from finding it difficult to bridge the whopping trade deficit, India is also looking to upgrade its current basket of exports to China.
Raw materials like cotton, iron ore and copper were long a hallmark of Indian exports to China.
But now there is a move to shift exports towards value added products in a bid to cap the growing trade deficit. Raw materials like iron and iron ores, which constitute more than 70 per cent of India’s exports to China, are subject to volatile global commodity prices. So there is a need to shift toward products higher in the value chain.
So India has shifted focus from raw materials to key sectors such as hardware, electronics, pharmaceuticals, textiles and auto components in a bid to realign and boost exports.
A changing consumer pattern has led to a greater demand for consumer goods in China, where overall demand in the first half of 2017 was driven by solid growth in industry and even stronger growth in services.
So India is looking to harness its strengths in labor intensive sectors where India enjoys a significant advantage over other developing nations.