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India-China bilateral trade remains below the target of $100 billion that both sides were aiming to achieve in 2015.
India-China bilateral trade remains below the target of $100 billion that both sides were aiming to achieve in 2015.

IMF Says India-China Coop. Vital for Global Growth

Well-implemented trade agreements can contribute to economic prosperity for all concerned

IMF Says India-China Coop. Vital for Global Growth

A strong partnership between India and China, which are currently responsible for half of the global growth, is important for the world, the International Monetary Fund has said.
"Global cooperation and pursuing the right policies can help achieve strong, sustained, balanced, and inclusive growth," Tao Zhang, deputy managing director of the International Monetary Fund, told PTI in an interview.
"India and China are currently responsible for half of the global growth, so a strong economic partnership between these two large economies is very important—for their people and for the world," he said.
Well-implemented trade agreements can contribute to economic prosperity for all concerned, the top IMF official said. "The IMF has always supported an open trade system, as trade has been an engine of growth for the global economy. The objective of open trade conducted under fair rules that are well enforced is a shared objective," he said.
Under the G-20 framework, China and India, among others, have committed to strengthening the contribution of trade to economies. "It is an important reaffirmation of the common sense of direction," he noted.
Zhang said economic integration has been an important source of global economic growth, poverty reduction, and welfare gains, especially for Asia.
Yet integration and technological change have at times been accompanied by dislocations for some groups, which have been accentuated by the sluggish post-crisis recovery.
Protectionism Gaining Ground
"More inward-looking policies in major global economies could significantly impact Asia given its heavy reliance on trade," he said when asked about the fact that protectionism is increasingly gaining ground globally in particular among the developed world.
"Maintaining openness to trade is very important, especially for Asia," he said. At the same time, it is important to put in place policies to share the gains from trade more broadly and help those burdened with the cost of adjustment, he added.
"Workers should be equipped to help themselves through active labor market policies and education. For more vulnerable groups, fiscal policies can be deployed. Broader access to credit will also help. Smoother social integration of migrants can increase their economic contributions," he said.
Zhang said the multilateral system has supported economic integration and the gains it has delivered should be protected.
"International cooperation is needed to reduce excessive external imbalances, promote policy frontier issues such as services and digital trade, strengthen the global financial safety net, mitigate capital flow volatility, and prevent tax avoidance/evasion," he said.
EMs Growth Outlook
According to Zhang, the emerging markets near-term growth outlook remains broadly stable despite external pressures, reflecting stronger growth prospects in the US and a rebound in some commodity prices from last year's lows.
Still, emerging markets remain vulnerable to tighter global financial conditions and capital flow reversals, he opined.
"Emerging economies need to reduce financial vulnerabilities by strengthening corporate and banking system health, while using the exchange rate as a shock absorber.
"Commodity exporters should continue adjusting to lower prices. Structural reforms are needed to boost potential growth," Zhang said.
"Multilateral cooperation and policy coordination is needed not only among major emerging markets, but all economic players in the world to preserve the global economic expansion, including by preserving an open trading system, safeguarding global financial stability, achieving equitable tax systems, and mitigating and adapting to climate change," said the top IMF official.
The fact that the Indian economy is now the fastest-growing has had a positive signaling effect in China. Also, China is "losing competitiveness" to India in several light engineering-related industries, which is attracting Chinese investors to India.
Meanwhile, India's deficit in trade with China bloated to $46.56 billion last year. Bilateral trade remains below the target of $100 billion that both sides were aiming to achieve in 2015. At $70.08 billion in 2016, bilateral trade was 2.2% lower than the $71.63 billion in 2015.

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