India's imports of high-technology goods

Despite the popular belief that Indian markets are flooded with Chinese goods, India has a trade surplus with China. Moreover, the value of manufactured goods exported to China from India ($2.5 billion) is only slightly less than the value of similar items imported into India ($2.9 billion).

  However, when moving up the production line, India's imports of high-technology goods, such as photographic material, scientific apparatus, and so on is higher. While secondary goods dominate in what China exports to India, the latter's exports to China have a large share of primary goods. India's export profile towards China is like a typical developing country.

  With Asean, however, India has a trade deficit. The total trade is worth nearly $10 billion. India's main exports to Asean are primary goods, while the chief imports are secondary goods such as electrical appliances and machinery. China and Asean trade mostly in secondary goods. However, while China exports about $520 million worth of cereal to Asean, it imports about $510 million worth of wood. Thus, some amount of primary goods is exchanged between the two. The total trade between China and Asean is about $12.6 billion.

  Foreign exchange reserves in India ($127 billion) are half of Asean's ($236 billion) and a sixth of China's ($711 billion). Foreign Direct Investment into India is also much lower than that into Asean and China. Asean's FDI inflows amounted to $241.7 billion from 1990 to 2003. China got $475 billion in this period, while India received $28.5 billion. FDI has changed the way China engages its working population, altered its foreign trade outlook and accounts for why it has come to dominate world manufacturing. This is just as Asean did the decade before. India is still ideologically confused about FDI.

  By these trends, India and China will grow faster than Asean and their economic engagement will also rise much more than India and Asean. However, Asean is more closely linked with China than India and will continue to be so. The FDI into India is mostly from developed country MNCs using the country as a manufacturing hub. India's FDI policy needs greater clarity.

  Also India cannot compete for developed country markets for manufactured goods till the concept of Special Economic Zones takes off. As for economic development, India clearly lags behind China and Asean. India is not only a much poorer country, but fares quite dismally in all social indicators also. It remains to be seen if India can translate its potential for a relatively higher growth rate into better standards of living.