Due to the slowdown witnessed in China’s Economic Activity, India’s exports to its northern neighbour dropped 35% to $6.8 billion during the April-August quarter. At that time, the country’s overall exports rose to 17.1%. China becomes India’s fourth largest export destination during the period as it slipped from the second position a year ago. Multiple factors have affected China’s economy which includes the drag on consumption from the zero-Covid policy, the property sector downturn and declining the country’s export demand, etc have mostly slowed down its economic activity.

While exporting petroleum products such as Naptha to China, the trend rose 81% to $1.2 billion during the April-July period reasoning elevated crude oil prices, shipments of organic chemicals (-38.3%), iron ore (-78.5%) and aluminium products (-84.2%). This resulted in a sharp decline, as per disaggregated data showed the website of the Commerce Ministry.

Besides, China increased its imports of non-Basmati rice (141.1%) and marine products (18.7%) during the period. On the contrary, imports from China were up 28% during April-August when India’s overall imports arouse 45.6% which led to a trade deficit of $37.1 billion in the first five months of FY23.

“The growth of trade deficit with China could be recognised by some factors that are a narrow basket of commodities exported to China, market access obstacles focusing our agricultural products and the competitive sectors such as pharmaceuticals, IT/ITeS, etc. Our major exports have comprised iron ore, cotton, copper, Aluminium and diamonds or natural gems. These raw material-based commodities have been overlooked by Chinese exports of machinery, power-related equipment, telecom equipment, organic chemicals, and fertilisers,” the Indian Embassy in China clarifies on its website.

China’s economy is refreshing for more pain as Chengdu’s lockdown, being the sixth largest city in China’s west. It has damaged business and consumer activity in the area thus hurting sentiments more broadly. Moody’s last week lowered its growth forecasts for China for both years 2022 and 2023 to 3.5% and 4.8%, respectively, showing a sharp downfall from 8.1% in 2021.

The trade data of July showed a surge in China’s trade surplus to a record $101.26 billion, up from $97.4 billion in June. “China’s recovery beyond 2023 will depend on knock-on effects on other sectors resulting from dilemmas in the property sector and measures implemented by authorities to stabilise it, and the impact on households’ balance sheets and their consumption-saving decisions. Strong reinforcement of domestic consumption demand, the increased infrastructure spending undertaken by the government is, will be key to sustaining a solid recovery,” Moody’s said.