Indian Council for Research on International Economic Relations

Completed Details

China and India’s Economic Engagement in SAARC: Lessons for India – Pravakar Sahoo (External Consultant)

Project Leader: 
Research Team: 

June 2008

Commencement:  June 2008
Completion:  August 2010
Funded by: Department of Commerce, Ministry of Commerce & Industry, Government of India, 27 months

In recent years, China has increased its trade and investment in India’s South Asian neighbourhood considerably. This study examines the extent to which China has increased its trade and investment in the region compared to India and identifies reasons for it. The study also suggests how India can increase its presence in the region. The study uses both secondary data and data from primary field surveys. The study finds that China’s trade is much larger than India’s in the Bangladeshi and Pakistani market while India’s trade is much larger than China’s with Sri Lanka and Nepal. The study finds that China has performed better than India in Bangladesh in manufactured goods and capital goods due to its price competitiveness and higher trade complementarities. Further, China exports products in which Bangladesh has offered concessions under the Asia Pacific trade agreement. China’s trade with Pakistan is much larger than India’s for different reasons, the main one being that India can export only a limited number of items to Pakistan; the remaining items are banned from entering Pakistan. China has an added advantage because of the tariff concessions it receives under the China-Pakistan FTA. On the investment front, while China’s overall investment is larger than India’s in the last few years, it dominates India only in Pakistan where Indian investments are not allowed. The study suggests that India can improve its market access in the region by focusing on increasing competitiveness in some sectors, reducing transaction costs and making SAFTA more effective. 

Research

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