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December 16, 2010

India Seeks Lower Trade Barriers With China

India wants China to lower trade barriers to ensure a more balanced trade relationship between the two historic rivals. Boosting bilateral trade was one of the top issues discussed during this week's three-day visit of Chinese Premier Wen Jiabao to India.

Before wrapping up his three-day visit to India Friday, Premier Wen and Indian government officials set an ambitious target of doubling trade to $100 billion by 2015.

Analysts say that target is possible to achieve. China is already India's largest trading partner.

But several issues trouble the relationship between Asia's two fastest-growing economies, including India's huge trade deficit with China, expected to reach $20 billion this year.

New Delhi argues that barriers to the Chinese market mean that high-value goods and services, such as pharmaceuticals and information technology, are kept out. As a result, India exports mostly raw materials and other low-end commodities such as iron ore, while China sells a range of finished goods to India.  

In a joint statement Thursday, China promised to address India's concerns and take measures to promote Indian exports. The two governments also sought to increase the size of direct investments in their economies, which currently is very small.  

China could make larger investments in India's infrastructure sector, says Indian Foreign Ministry spokesman Vishnu Prakash.

"[The] government is planning to invest one trillion dollars in development of infrastructure from 2012 to 2017, and India would welcome a bigger role by Chinese companies in development of infrastructure projects particularly in sectors or areas like highways, power sector, metros [mass transit] and so on," Prakash said.

India and China have also agreed to improve the access their banks have in each others economies. Business leaders from both sides also signed some 50 deals valued at about $16 billion in areas such as power, telecommunication, steel and wind energy.

In a bid to boost trade, Chinese Premier Wen Jiabao said the two countries should begin negotiations on a free trade pact.

But trade analysts say New Delhi is unlikely to agree because of concerns this would expose India's manufacturing sector to stiff competition from Chinese manufacturers, who are world leaders in this area.

Premier Wen came to India with a nearly 400-strong business delegation.  He was the latest in a series of world leaders visiting India to seek greater access to its economy, which is growing at around nine per cent.