India is still swinging around like it is a big power and calling the shot, that it can manage the geopolitics and international affairs to its advantage, and set a trend or tone on its own. The reality is that India is just all talks and no substance. I have many issues to discuss about India but will just touch on the Sino Indian trade here. India's angst is that the trade imbalance is skewed too much to China's favour, just like Sino American trade. Both India and America are having huge trade deficits in their trades with China, and this is a bad thing. Is it so?
What is trade in a free wheeling international economy, it it supply and demand. Without the artificial interference of the govt and people, countries buy and sell according to their needs. India and America are simply buying more from China and selling less to China. Why? Did China point a gun at the Americans and Indians to buy more from China? No. The act of trade, of buying and selling, is all voluntary.
It is true that trade imbalance is not a good thing to those that are having a trade deficit. The logical thing to do is to buy less and sell more. But it is not that simple, and neither trade deficit is that simple. The overall trade of a country may see deficits against some countries and surplus against others. It is the overall picture that counts. In the case of India, India needs all the tools, parts and components, raw materials and intermediate ingredients from China to produce the goods and products to sell to the world to make profits. Without the inputs from China, India cannot produce the finished products to make profits from the world. Without China's cheap intermediate products, tools and parts, India cannot find alternative suppliers. Period. India cannot look at the equation just on trade with China. Can India afford not to import from China? If so, India would have done that to cut down its trade deficit.
The alternative is to make the intermediate parts and material themselves. Another big option is to sell more goods and products to China. Caveat, India can produce them efficiently and cheaper than China to be attractive for China to want to buy them. India cannot even make its gods and idols for worships, and toys cheaper and better than China and has to import them from China. What did these meant?
India is a price taker in trade, like little Singapore. India needs cheap oil and gas from Russia. India needs all the machine parts, tools, raw materials, substrates, intermediates from China to feed its factories. India needs high tech, chips etc from America, advanced military equipment etc etc. India is heavily dependent on imports to sustain its economy. India cannot call the shot. India cannot stop importing from China or other countries. India will have trade deficits from some countries like China, but have trade surpluses from other countries.
Stop complaining and telling China to sell less to India. India can only do that on its own. Try to stop imports from China and it will cut down on India's trade imbalance with China. Just do it...if India can.
