In this Mint article, Research Director and Senior Fellow, Niranjan Rajadhyaksha analyses India's trade deficit with China, in light of the larger challenges of trade competitiveness and macroeconomic imbalances. Excerpts:
"Should India be worried about its bilateral trade deficit with China? The International Monetary Fund (IMF) has taken a closer look at the problem of bilateral trade imbalances in its latest World Economic Outlook, based on a study of 63 countries over 20 years.
There are two broad arguments made by the multilateral lender that are relevant to the ongoing problem of India's trade deficit with China. First, bilateral trade imbalances are largely driven by macroeconomic factors rather than tariffs. Second, changes in a country’s overall trade balance tends to affect its trade balances with individual countries, but the opposite is not true since any attempt to change a bilateral trade imbalance through tariffs will only lead to diversion of that trade to other countries..."
Read the whole article here.