Bilateral trade between India and China is growing rapidly and the target of $40 billion by 2010 may be realised earlier. But so has India's trade deficit with China.

Besides, the Chinese renminbi is pegged to the dollar and is not a free floating currency. With an artificially pegged currency and subsidies, many of which are hidden, the government feels merit in the case of the Indian industry that Chinese exports have an unfair advantage, even if the infrastructure situation in India is not factored in.

Earlier, a joint study group, a precursor to a trade pact, had recommended a regional trade agreement. The Indian government, had, however, put the idea on the backburner due to concerns of the domestic industry. It got a fresh lease of life when the two countries decided to seek a second opinion, an unusual development for most trade negotiations that India has undertaken so far.

A report by the National Council of Applied Economic Research (NCAER), which had been tasked by the Indian government to analyze the impact of a trade deal, has found areas of comparative advantage for products from both India and China.

While both countries have advantages when it comes to textiles, silk and iron and steel, China seems to have an upper hand in the manufacturing sector.

The feeling among the industry as well as in government is that NCAER has used the trade data to set out the areas of comparative advantage. The report is seen largely as a mathematical exercise which does not factor in real world factors.

By lobbing the ball into the ministerial court, the government plans to organize breather for the domestic industry and get some more time to convince it to face the competition.

Mr. Neeraj Sharma

Neeraj Electronics

CEO, Neeraj Electronics
Jorhat, India

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