Chinese premier Li Keqiang today said his country is willing to open talks for a free trade agreement with India even as he offered Indian goods increased access to his country's market, so as to narrow bilateral trade gap.
Keqiang also said his government supported increased investments by Chinese enterprises in India and an expanded trade in services.
"We also understand India's concerns of trade deficit. China is also willing to provide facilitation to India's products to access Chinese markets.
"I am confident that we have the ability to mitigate the trade imbalance between our two counties and China never has any intention to seek trade surplus," Keqiang said in his address at a function organised by FICCI and the Indian Council of World Affairs (ICWA) in Mumbai.
"China is willing to launch negotiations on a China-India regional trading arrangement," he said.
"China and India are huge markets with great potential... India has competitive edge in IT, software and bio-medicines...," he said adding China can also help India in its infrastructure projects.
He said both sides should work together to curb protectionism.
India's trade with China also faces the problem of high transaction cost in this country, according to former FICCI president R V Kanoria.
He said the Indian government should first address domestic problems like high transaction cost.
"Before starting any kind of negotiations with China on FTA, Indian government should address domestic problems like high transaction cost, land problems and implementation of Goods and Services Tax (GST)," Kanoria said.
The Federation of Indian Export Organisations (FIEO) welcomed Chinese investment in manufacturing sector in India as "we can substantially reduce our dependence on Chinese imports".
In March 2005, the two countries had conducted a joint study on how to balance India's trade deficit, which was then around $1.5 billion. This has now grown to over $41 billion.
India mainly imports items like electrical and Industrial machinery, project goods, chemicals and iron and steel from China while China buys mostly iron ore, cotton, chemicals and raw materials.
China accounts for a fifth of India's overall total trade deficit of 190.9 billion.
India's export to China in the 2012-13 financial year stood at $13.52 billion while its imports from that country was four times higher at $54.3 billion.
India-China trade is projected to hit the $100-billion mark by 2015.