China should invest in India to offset unsustainable trade surplus: Ahluwalia

19 March 2014

Planning Commission deputy chairman Montek Singh Ahluwalia has called for major Chinese investments in India to offset its ballooning trade surplus, which averaged over $35 billion in the last three years.

 Montek Singh AhluwaliaAccording to officials, India's trade deficit with China has reached such levels that it has now to borrow from abroad to finance the trade deficit with that country.

One way to reduce the imbalance is to open up Chinese markets to IT-enabled services, cotton textiles and home furnishings and also in pharmaceuticals, Ahluwalia said, adding that China should step up investments in India, especially in the industrial parks, to offset India; huge trade losses.

He also suggested Beijing's financial and technical collaboration to upgrade India's ageing railway network. Chinese investment in India at present is less than $1 billion.

"I must, at his stage, mention the growing imbalance in our trade which is a cause of concern in India," Ahluwalia said addressing the third meeting of the high level India-China Strategic Economic Dialogue (SED) in Beijing on Tuesday.

"Trade is an important indicator of economic cooperation and we are happy at the remarkable expansion that has taken place," he said, still expressing hope that bilateral trade would reach the official target of $100 billion by 2015.

"We recognise that trade does not have to be balanced between each pair of countries. However, India's trade deficit over the last three successive years has been in excess of $35 billion per annum, which is not sustainable.

"It needs to be reduced to sustainable levels by more exports from India to China, and also by Chinese building manufacturing capacities from India for goods it currently export," he said.

India-China bilateral trade totalled $66.5 billion last year as Indian exports continued to fall due various reasons, including rupee depreciation and reduced iron ore exports.

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