Trading numbers: The sums don't add up for India, China

India and China have differences on many issues, the latest being a disagreement over which country is India's largest trading partner.

India claims that it is the United States while China maintains that it is the South Asian country's largest trading partner.

According to Indian Ministry of Commerce and Industry figures, trade between India and the US was worth US$119.4 billion (S$165.5 billion), while trade with China was worth US$115.4 billion in the financial year to March 31.

But China said trade was actually US$125 billion - putting it ahead of the US - adding that the discrepancy was due to "different statistical measurement scales".

While import duties may account for some discrepancies in trade data between countries, the massive US$9.6 billion difference is mystifying, said experts.

Professor Biswajit Dhar, a trade expert at Jawaharlal Nehru University, said: "China is reporting larger numbers of both exports and imports. This could be a case of over-invoicing and under-invoicing in exports and imports.

"These numbers need to be verified and there has to be a greater extent of Customs cooperation between the countries."

He noted India could have lost out on import duties, should the Chinese data be correct.

India has been trying to reduce dependence on China particularly after border clashes in 2020, when Indian and Chinese soldiers died, and the pandemic disruptions.

India put curbs on investments from China and banned Chinese apps. With pandemic disruptions to the supply chain, it also made efforts to diversify from China.

Border talks are still ongoing.

Experts noted that India is still reliant on China for finished products, as well as intermediate goods for manufacturing such as air-conditioner parts, and active pharmaceutical ingredients like penicillin.

Major imports are electrical products like unassembled solar cells and electric inverters, mechanical products such as air compressors for air-conditioners, and chemicals. India exports mainly raw materials like steel to China.

In financial year 2020, two-way trade between both nations was US$86.4 billion. It was US$81.9 billion in the preceding year.

"I don't think Indian demand for Chinese products has decreased within one year," said Mr Santosh Pai, an international corporate lawyer and honorary fellow at the Institute of Chinese Studies, a New Delhi-based think-tank.

He noted that many Chinese companies operating in India have been impacted by Covid-19 and the curbs imposed on Chinese foreign direct investment following the border row.

Meanwhile, India's trade with the US last year shot up substantially from the preceding year, when it was US$80.5 billion.

While India has a trade deficit, meaning imports exceed exports, with China, the US is among the few countries with which it has a trade surplus.

Prof Dhar said: "India's exports to the US have gone up across the board. Every sector has experienced significant expansion.

"We are also moving from conventional items like apparel to other items like petroleum products in the trade basket, aided by the demand rebound in the US."

Top exports include jewellery, motor vehicle parts and accessories, linen and apparel.

Trade between the two nations is set to deepen, with India recently signing on to the US-led Indo-Pacific Economic Framework for Prosperity, a 13-country initiative to boost trade while reducing dependence on China.

Still, Prof Dhar said, it is too early to tell if India-US trade would stay elevated.

"This phenomenon could be because of the Biden administration's cash to citizens," he said, referring to US President Joe Biden's US$1.9 trillion coronavirus relief package that included sending direct payments to Americans.

"Whether this increase is due to just pent-up demand unleashed in 2021... or whether India has genuinely expanded its presence in the US market remains to be seen."