Trade and trust between India and China are at odds

THE trust deficit between India and China has been soaring to worrying heights. But New Delhi's chronic trade deficit with Beijing has declined sharply.

The two deficits are an oddity. After the ferocious border clashes between the two countries in June this year, the trust deficit worsened and had an immediate impact on bilateral economic relations as many Indian trade groups demanded a boycott of Chinese goods.

And as Indian demand for imports weakened and import restrictions on Chinese goods increased, Indian exports to China surged by 78 per cent in June, according to the rating agency Crisil. The rising exports have lowered the Indian deficit, which should spell good news for India, both economically and diplomatically.