As BRICS founding members and active partners in the Shanghai Cooperation Organization (SCO), China and India share interests and ties that transcend a difficult colonial legacy along the 4056 kms of contested borders they call the Line of Actual Control.

BRICS is an intergovernmental organization founded in Yekaterinburg, Russia, on June 16, 2009. It consists of ten members (Brazil, China, Egypt, Ethiopia, India, Indonesia, Iran, Russia, South Africa, United Arab Emirates) and is currently chaired by India’s Prime Minister Narendra Modi.

SCO was formed on June 15, 2001, to serve as a regional cooperation forum focusing on economic, political and security affairs. The original six members (China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, Uzbekistan) expanded the organization by admitting four additional countries (Belarus, India, Iran, Pakistan).

Both organizations deal with vitally important issues where China and India cooperate in shaping economic, political and security relations affecting more than 40 percent of world population. And those two large Asian neighbors also want to play a leading role in the developing world of the Global South.

China is India’s largest trade partner – the key supplier of electronics, machine tools, chemicals and telecommunication equipment.

“Make in India” would stabilize growth and reduce trade deficits

It is, therefore, not surprising to see that the China-India trade in the first five months of this year came in at $74 billion, a 20.3 percent increase from the year earlier. That was one of China’s most rapidly growing bilateral trade transactions.

The business deals still favor China with a $53.6 billion surplus, despite a 36 percent increase in China’s imports from India.

That trade imbalance will be difficult to narrow for two reasons.

First, the two countries would have to broaden the range of Indian products from current offers of mineral and petroleum-based fuels, copper and copper alloys and cotton textiles. China would have to realize that India is also a large exporter of electrical and electronic equipment, pharmaceutical products, machinery and engineering goods, gems and jewelry.

Second, India will continue to run large trade deficits as long as its domestic demand remains on an average annual growth path of 7 percent. Over the last two years, that strong domestic demand triggered an imports surge of 8 percent.

The solution here for India is to attract more Chinese direct investments in local production facilities and to promote India as a tourist destination in China.

India’s foreign trade problems need policy attention. Last year, negative net exports shaved off an entire percentage points from its GDP growth.

This year, India’s economy will slow down as energy-driven inflation continues to accelerate toward 5 percent. That is likely to trigger rising interest rates, declining real incomes, falling household consumption and a significant cooling of economic growth from an unsustainably high GDP advance of nearly 8 percent in 2025.

Partners, not rivals

Indian businesses may, therefore, have to look for growth on foreign markets. China and ASEAN (association of eleven Southeast Asian nations) present the best opportunities for India’s exports because they are the fastest growing segments of world economy.

The changing geopolitical situation could also make that possible. An important part of that change has been a thawing of Sino-Indian relations set in train during last year’s SCO summit in Tianjin, China.

According to China’s readout of the meeting between President Xi Jinping and Prime Minister Narendra Modi, the two leaders agreed that “China and India are partners, not rivals.”

They also agreed that China and India were “each other's development opportunities rather than threats.” Xi assured his Indian colleague that if the two countries moved along that path “matters in the bilateral relations will fall into place and there will be steady and sustained progress in bilateral ties.”

With respect to highly sensitive and unresolved border issues, Modi emphasized that “India is prepared to seek a fair, reasonable and mutually acceptable settlement of the boundary question with China.”

While emphasizing the importance of the “boundary question,” Modi also stated that “the consensus between the two countries far outweighs their disagreement.”

And to underline India’s attachment to its traditionally non-aligned status in world affairs, Modi said that India and China “pursue strategic autonomy and an independent foreign policy … their bilateral relationship is not subject to the influence of any third party” and he thought that the “India-China cooperation will make the 21st century a genuine "Asian century."

The dialogue continues. The latest round took place in early June when BRICS foreign ministers met in India. The stage is set for flourishing business relations and another record year of Sino-Indian trade.