Trade Intensity between India and China.

DESHRAJ VERMA; Nafees Hashim Rizvi

doi:10.36948/ijfmr.2025.v07i04.50178

Trade Intensity between India and China.

Author(s)	Mr. DESHRAJ VERMA, Dr. Nafees Hashim Rizvi
Country	India
Abstract	Foreign trade serves as a fundamental driver of economic growth and prosperity, facilitating the exchange of goods, services, technology, and capital across borders. As two of the world's most rapidly expanding economies and emerging global giants, India and China present a compelling case study for understanding evolving trade dynamics. Both nations have undergone significant economic liberalization, leading to their deeper integration into the global economy. Despite their historical similarities and large populations, a notable disparity exists in their trade performance, with China emerging as the world's largest exporter and India's share in international trade, though growing, remaining comparatively smaller. This paper investigates the nature, extent, and potential of trade between India and China from 2000 to 2023, employing a structured analytical framework that includes quantitative modeling and key trade indices. The primary objectives of this study are to analyze historical bilateral trade trends, assess India's trade potential with China, and specifically apply the Trade Intensity Index (TII), Export Intensity Index (EII), and Import Intensity Index (III) to determine the relative importance of each country's trade with the other in the context of global trade. The Trade Intensity Index (TII) measures how intensively a country trades with a particular partner compared to the world average, with a value greater than 1 indicating stronger-than-expected trade. The Export Intensity Index (EII) assesses the relative importance of a country's exports to a specific partner, while the Import Intensity Index (III) gauges the importance of a particular country as a source of imports. Analysis of the data from 2000 to 2023 reveals distinct patterns in the bilateral trade relationship. From India's perspective, the Export Intensity Index (EII) with China showed an initial growth phase, peaking at 1.10 in 2005, indicating China's growing importance as an export destination. However, this trend reversed, with the EII generally declining thereafter, reaching its lowest point of 0.29 in 2022 and standing at 0.33 in 2023. This significant reduction underscores a diminished importance of China as an export market for India over time. In contrast, India's Import Intensity Index (III) from China demonstrated consistent growth, reaching 1.25 in 2007 and largely remaining above 1.0 throughout the period, peaking at 1.27 in 2016 and ending at 1.21 in 2023. This highlights India's persistent and increasing reliance on China for imports. The overall Trade Intensity Index (TII) for India with China consistently remained below 1.0, peaking at 0.58 in 2007 and stabilizing in the 0.40s range in recent years. This suggests that despite the absolute growth in trade volumes, the bilateral trade relationship from India's standpoint has been less intense than expected based on their global trade shares, largely driven by the growing import dependence. From China'sperspective, the Export Intensity Index (EII) to India showed a generally upward trend, often remaining above 1.0, and reaching 1.20 by 2023. This indicates that India has consistently been an important, and often more intense than the global average, export market for China. Conversely, China's Import Intensity Index (III) from India exhibited a different trajectory. After an initial surge, peaking at 1.63 in 2004 and 1.55 in 2008, signifying a substantial reliance by China on imports from India, a sharp decline followed. The III consistently fell below 1.0 from 2009 onwards, dramatically dropping to 0.33 in 2022 and 0.38 in 2023. This significant reduction suggests that India's importance as a source of imports for China has considerably waned, possibly due to diversification of China's import sources or decreased demand for specific Indian goods. The Trade Intensity Index (TII) for China with India peaked at 0.66 in 2007 but consistently remained below 1.0 throughout the entire period. This implies that while trade volumes might have increased, the overall trade relationship from China's standpoint has always been less intense than would be expected based on their respective shares in global trade. In conclusion, the study reveals a clear and increasing trade imbalance in favor of China. While China maintains India as a sustained priority for its exports, India's role as a major import source for China has substantially diminished. India's growing import dependence on Chinese goods, coupled with a declining intensity of its exports to China, underscores a complex and increasingly imbalanced trade dynamic. Despite geopolitical tensions, trade volumes have continued to grow, reflecting India's deep manufacturing dependence on China. Addressing this imbalance will require significant structural changes in India's domestic manufacturing capabilities and a strategic diversification of its import sources.
Field	Sociology > Economics
Published In	Volume 7, Issue 4, July-August 2025
Published On	2025-07-05
DOI	https://doi.org/10.36948/ijfmr.2025.v07i04.50178
Short DOI	https://doi.org/g9s9dp

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Trade Intensity between India and China.

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