For every dollars worth of exports to China, India imports three, leading to a trade deficit of up to $40 billion in the year to March 2012, or about 2% of GDP (see chart). China accounts for a fifth of Indias overall trade deficit with the world, over half if oil is excluded. Given Indias balance-of-payments woesthe rupee has fallen by a fifth in the past yeareven Chinese businessmen worry that the discrepancy in bilateral trade is unhealthy.
And it may grow larger. For a start, the little manufacturing India has tends to be quite high-end. As Chinese firms shift to more complex forms of production, they will make life harder for Indian firms. Saif Qureishi of Kryfs, which makes the metal cores of transformers used in, for example, power grids, says China has won a third of the Indian transformer market and is giving locals a bloody nose.
Meanwhile, India does not produce much that China wants to buy, a hole that British colonial rulers once plugged with exports of Indian opium. Today Indias main exports to China are less iniquitous raw materials, mainly minerals and cotton.