Despite the numbers, India’s imports from China may have increased in 2023

livemint.com:

India’s trade with China slowed down a bit in dollar terms in the first half of 2023. This is probably due more to a decline in commodity prices and the depreciation of the yuan against the dollar than any actual fall in the volume of goods exchanged. Here’s how the numbers stack up.

China’s exports to India, according to China’s customs data, stood at $56.53 billion, 0.9% less than the $57.51 billion registered in the first half last year. India’s exports to China also fell marginally to $9.49 billion from $9.57 billion in H1 2022. (It should be noted that imports from India as recorded by China won’t be identical to the exports reported by India.

That’s because exports are reported on a free-on-board or FOB basis, while imports are reported after adding the cost of freight and insurance to the FOB prices). It is easy to see this as part of the overall decline in global trade and growth. But a closer examination suggests that actual trade volumes between India and China may have grown.

There are two reasons to think so, apart from the fact that India – even its growth for the year is pegged at a conservative 6.2% – is still a growing economy that requires lots of inputs to fuel its expansion. One reason is the global decline in commodity prices. The Economist Commodity Price Index is down 8.9% in dollar terms.

This means the raw-material costs of goods that India has been importing from China will have fallen sharply. In a slowing world with lax demand, it is unlikely that exporters will retain pricing power – they will have to pass on cuts in input costs to the consumer. Another reason is the depreciation of the yuan against the dollar.