India’s trade deficit with China is a matter of concern as it has been increasing over the years. In 2010-11 to 2013-14, India was a net exporter of textile and apparel products to China. However, after that India’s trade deficit with China started widening.

Among the few items where India is more competitive than China is cotton based textiles like yarn, fabric and made-ups. However, competing countries such as Vietnam, Indonesia, Pakistan and Cambodia enjoy duty free access to the Chinese market while Indian products carry 3.5 per cent, 10 per cent and 14 per cent duty on yarn, fabric and made-ups respectively.

India is a market leader in cotton yarn but lost almost 50 per cent of its market to Vietnam over the last three years, creating excess capacity in the system. India’s cotton yarn exports to China have decreased 53 per cent from 2013 to 2017 while Vietnam’s exports of cotton yarn to China have increased by 88 per cent during the same period. Moreover the profit margins in cotton textile industry are thin, in single digits. Therefore, the industry is sensitive to even small changes. If a level playing field is given to India, like its competitors, it can double its exports plus reduce its trade deficit with China.