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India rules out retaliation over China’s JeM support

India has a great dependence on China for medical and surgical instruments and bulk drugs.

, ET Bureau|
Updated: Mar 15, 2019, 08.04 AM IST
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“We can’t take any unilateral action because both India and China are members of the World Trade Organization,” an official said.
New Delhi: India has ruled out any retaliatory or unilateral action against China but said it will continue its efforts to correct its burgeoning trade deficit with the country after Beijing blocked the UN Security Council resolution to designate Jaish-e-Mohammad (JeM) chief Masood Azhar as a global terrorist.

China, which is India’s largest trading partner, had a trade surplus of $41.2 billion in the nine months to December 2019 on a total bilateral trade of $66.4 billion.

“Reducing our balance of trade with China is the most important issue and we will continue to work to correct it in regular course,” said an official in the know of the details in the wake of #BoycottChineseProducts trending high on Twitter.

“We can’t take any unilateral action because both India and China are members of the World Trade Organization,” the official said, adding that exporting more to China is the only way out. Global trade norms bar WTO members from imposing country-specific restrictions like customs duties.

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Independent experts also concurred with the assessment. “We can’t do anything to stop imports but the way to mitigate their onslaught is to increase exports and cleverly incentivise them. RCEP fears will also disappear when exports increase,” said Biswajit Dhar, professor at the Centre for Economic Studies and Planning in the School of Social Sciences at Jawaharlal Nehru University.

“Punitive action should be ruled out because raising duties on intermediate imports will make finished goods expensive here. Also, regulating investments will be detrimental to the country,” said another trade expert Besides finished products like electronics, mobile phones and nuclear reactors, India imports huge amounts of organic chemicals, fertilisers, plastics, iron and steel from China.

New Delhi also has a great dependence on Beijing for medical and surgical instruments, and bulk drugs or Active Pharmaceutical Ingredient (API).

In 2017-18, Chinese imports accounted for 16.4% of New Delhi’s total imports while exports to Beijing were only 4.4% of India’s total outward shipment globally. However, India’s exports to China have increased in the first nine months of FY19 to $12.6 billion as against $13.3 billion in the whole of FY18, led by higher shipment of petrochemicals such as mineral fuels, oils and bituminous substances.

The two countries are also negotiating the Regional Comprehensive Economic Partnership (RCEP) trade agreement with 14 other Asia Pacific countries, which is likely to get concluded this year and would lead to India giving duty concessions to at least 80% of Chinese imports over a 20-year period. The two are already members of the Asia Pacific Trade Agreement.
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