India’s new Minister of Commerce and Industries, Nirmala Sitharaman, recently challenged Indian industry to export more to China and so reduce the current US$30 billion trade deficit. After all, it is only 10 years back that India was running a trade surplus with China.
In 2013, India’s exports to China actually fell by close to 30% from 2011 on the back of iron ore export bans (US$9 billion less exported to China in 2013 versus 2010). Beyond releasing this ban, what else might Indian industries focus on to export to China?
1. Play to strengths – Accelerate growth in sectors where exports to China are already growing
Textiles. India’s exports of textiles to China have doubled to almost $5 billion in the last 3 years. This could absolutely grow much, much further. China is exiting basic textile production just as India is embracing it as a source of urban jobs. It is not unreasonable to expect 20-30% annual export growth.
Gems and Jewellery. India’s exports of gems and pearls to China have also doubled in the last 3 years to nearly $2 billion. Jewellery retail in China continues to grow very strongly and relies heavily on imports. India needs to develop design strengths in the types of jewellery China’s consumers want to capture a greater share
Pharmaceuticals. India’s pharmaceutical giants are world leaders in low cost innovation and production. China’s healthcare industry in total could reach US$1 trillion by 2020. The Chinese government, as so many others, is looking to better control the cost of provision and of drugs. Global pharmaceutical companies have large positions in the China market. There is potential for Indian companies to capture greater share although this may take partnerships and quite some time to develop
2. Focus on growing needs in China
China increasingly needs to import agricultural products in order to feed its citizens in the way they desire. China’s imports of cereals, of meat, of dairy and value added foods are growing rapidly. India is already a leading producer and exporter of wheat and of buffalo meat.
India’s wheat exports may reach 8 million to 10 million tons in 2014-2015 which exceeds the previous record of 6.8 million tons in 2012-2013, U.S. government data shows. Most of the exports go to the Middle East and Southeast Asia. Why could more not go to China?
India produced 3.6 million metric tons of beef in 2012, of which 1.7 million metric tons was exported. India ranks 5th in the world in beef production and 1st in exports. Would it not be possible to expand sales of beef to China?
3. Don’t overlook services
India has the opportunity to attract many millions of Chinese tourists a year, rather than the few thousands that come today. Easier visa processes, more effective marketing and many more direct flights are probably all that it would take to create a major upswing
Net net, the Minister may have been right in her challenge. Indian business could do better in exporting to China.
Image credit: Danica / Flickr