(Yicai) Aug. 28 -- India's trade deficit with China likely widened in the first half due to a high dependence on Chinese imports in some key industries and despite the Modi's government’s emphasis over the past decade on strengthening domestic manufacturing and cutting the nation’s reliance on such imports, according to an Indian think tank.

China remains India's top source of imports, with shipments rising 8.4 percent to USD50.1 billion in the six months ended June 30 from a year earlier, pushing the trade deficit to USD41.6 billion, the New Delhi-based Global Trade Research Initiative said in a report published on Aug. 23. By contrast, India’s first-half imports from the United States fell 3.7 percent to USD20.9 billion.

According to data from China’s General Administration of Customs, exports to India rose 2.8 percent to USD68.3 billion in the first seven months of this year, while imports jumped 6.6 percent to USD11.6 billion.

India has been importing more large manufacturing equipment, raw materials, and semi-finished products from China in recent years, leading to annual business growth rate of about 5 percent to 10 percent and even 12 percent last year, Zou Zhenhua, senior sales manager of China at Krish Shanghai International Logistics, told Yicai. 

Chinese shipping companies are also planning to open routes to the east of India from Shandong, further supporting expectations of growing trade between the two nations, Zou noted.

Last month, Zou shipped more than 120 ultra-wide and ultra-high containers of solar gear to India, with over 90 other containers to go. Given the vigorous growth in Chinese exports of electric vehicles, lithium batteries, and solar products, India is also imitating and increasing the procurement of related equipment and raw materials, following a made-in-India instead of made-in-China course, Zou pointed out.

China’s trade surplus with India will go on widening in view of the international political and economic situations and the direction of India's trade policy, Wang Jia, assistant researcher at the Shanghai Academy of Social Sciences' Institute of Economics, said to Yicai.

China's manufacturing supply chain is complete, while India's is relatively weak, so it has to rely on the Chinese supply chain to secure technologies and parts to develop its manufacturing industry, Wang noted. In addition, India's business environment still needs improvement and government policy remains unfriendly to China, hampering Chinese investment, Wang added.

Still, as India's manufacturing sector develops and its position in the global market improves, the expansion of its trade deficit with China will slow and its dependence on the Chinese supply chain will ebb, according to industry experts. Mutual trade will likely expand considering the two countries' population, market size, and rapid economic and social development, they added.

Editor: Martin Kadiev