China used to be a big buyer of Indian cotton yarn and fabric but due to preferential tariffs, exports from Vietnam, Pakistan and Indonesia to China have been growing and so India has lost almost 50 per cent of its exports this year. Indian exporters want removal of trade barriers for products they ship to China. Also China is exiting production of several goods due to higher labor costs and pollution concerns. This presents an opportunity for India. Pre-approved facilities for manufacturing can tap the opportunity that arises when Chinese companies shift production bases.
On the other hand at a time when Regional Comprehensive Economic Partnership negotiations are going on there are a lot of reservations about opening up the Indian market for China. India largely exports raw materials like steel and cotton, while China sends finished products to India. India wants to protect its manufacturing sector from cheaper Chinese goods and wants to export more value-added products. Similarly a free trade agreement in textiles presents a threat of increased synthetic textile imports from China. Similarly, agri exports present an opportunity as well as a challenge.
