Introduction of International Business
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With the increasing globalisation, the concept of international trade had gained a lot of importance in recent decades. International trade is referred as the cross bordertrade and can be defined as the process of exchanging goods and services between the nations. Due to increasing globalisation, the economies are becoming more interdependent, and the concept of international trade had also become much popular. Businesses are operating at the international level and managing the business operations overseas. While operating at an international level the businesses need to focus on different factors that are having an impact on the international business operations(Carteret. al. 2020). Trade relations between the different nations play a major role in international business.The trade relations among the nations affect the different factors such as trade restrictions, taxes, exchange rates, competition and tariffs.
In the current report, the researcher focuses on explaining the different factors affecting international trading. The researcher would discuss the trade relation of India with China and Bangladesh. The report will highlight the different challenges, barriers and competition faced by India while trading with China and Bangladesh. Along with this, it would also discuss thatwhat are the different measures taken by India for trading effectively with these nations and maintaining better trade relations with them.
TASK 1: THE CHALLENGES, BARRIERS AND COMPETITION INDIA COME ACROSS WHILE TRADING WITH CHINA
Different nations are having a diverse set of resources and with the increasing globalisation, the exchange of goods and services have increased(Liu et. al.2018). India is having abundant resources and exports different goods to diverse nations across the world. India is doing well in the international market as it is one of the largest exporters of some the goods such as diamonds, jewellery, cars, organic products, equipment, pharmaceutical products and steel. India is having trade relations with different nations but among them, their neighbouring nations are also important trade partners. Both China and Bangladesh are important trade partners of India although they are nation faces different issues while trading with them.
Trade relation between India and China
Both India and China are having effective trade relationshipswith one another and doing import and export in an effective manner.Both the nations are having the better economic condition as China is Asia’s largest economy and India is third in Asia. Having a better economic condition China makes better investment in Indian start-upsand especially in the IT firms as they are having bright future. In the year 2017-2018 India accounted for nearly US$ 89.6 billion amount of trade with China(Ismail& Ahmed, 2020). It can be said that they are having effective trade relation between them and both the nations are getting benefitted from it. After the US, China is the second-largest trading partner of India. The trading relation between china and India are offering great financial benefit to both nations and adding value to their economy and promoting better international trade among themselves. Also in the year 2018-19, the trade volume among both the nations have also increased that had made their trade relations more effective.
Challenges and barriers faced by India while trading with China
When the two nations are trading with each other then there are different factors that are having an influence on the trade relation and these factors can affect the trade relationship to a greater extent. India-China is having better trade relations for years but in recent years India is facing issues in trading with China as the border tension is increasing between both nations. The major goods that are imported from China comprise telecom industries, chemicals, electronic components and machinery(Sahni& Sharma, 2018). While doing international trade with any of the nation different factors of the external business environment affect the trade relations to a greater extent. According to the PESTLE analysis model, the factors such as political, social, economic factors, technological factors and legal factors are having a higher influence on trade relations between two nations. The political tension between both India and China have affected their trade relation. India is highly dependent on China for some of the major products that are imported fromChina and due to this reason, they are not in the stage of spoiling the trade relationship with them.
LAC (Line of actual control) issue
The LAC issues between India and China had created a great challenge for India to trade effectively with China. Both the nations are maintaining better trade relations but now China is trying to pull India with the strategic pressure, and this is creating barriers for India to trade effectively with China (Wheeler, 2019). India is dependent on China for major products and due to this China is taking advantage.
Strategic actions made by China
India is having better trade relations with different nations across the globe and now china is focusing on developing trade relations with that nation and become a competitor for India. This is also a significant factor that is creating challenges for India while trading with China. Along with this china is also working effectively for reducing its reliance on India for some of the essential things(Li, 2018). For an instance, China is constructing dams to restrict the flow of water bodies in India as many water bodies of china are a major source of water in India. Also, they are working effectively on projects related to rail and road networks. All such steps by China reflect that is in future they are looking for limiting the trade with India and this is creating a challenge for India to trade with them.
Rising Anti-Social activities in India
In recent decades, the political tension among the political parties of India had increased to a greater extent. Along with this the issues and tension between the two major religious communities had also increasedanti-social activities. The rising issues of the different anti-social activities in India are having a negative impact on their trade relations with all the different nations as it affects the business operations of diverse industries.
The growing military power of China
China is having strategic planning for making their military more strong and powerful as compared to all the neighbouring nations and this is having a negative impact on their trade relations. It seems as if China is having intentions to have war with other nations and along with this, they are also involved with the Pakistani terrorist groups and this is a matter of concern for their trade partners. Due to this reason India is having a thread of wars with Pakistani terrorists as they might get benefitted from the strong army of China. It can be said that the increasing political and trade tensions between India and China are increasing long term challenges for India. Because if in the case in future the border tension increases between both the nations then it would affect their trade relations and might let of increase in tariffs and restricts them by doing trading effectively with China(Joshiand Mukherjee, 2019).
Trade relation between India and Bangladesh
Trade relation between India and Bangladesh is getting better and is also increasing. India and Bangladesh are having a bilateral trade relationship and this relationship is developed based on trust, understanding, sovereignty, equality and this is leading to the strategic partnership between both nations. Although the trade relations were not much good earlier now, they are growing continuously (Pant, 2019). Along with this India is planning to enhance trade with Bangladesh by creating better trade relations in the upcoming years. In the past years both the nations are having disputes among themselves but now the Indian government is taking steps for solving these issues and bridging the distance between both the nations.In the present scenario, Bangladesh is India’s biggest trade partner in South Asia, and both import and export from Bangladesh are higher.
Challenges and barriers met by India while trading with Bangladesh
Bangladesh and India are managing better trade relations but the political issues between both the nations are creating several challenges and barriers for both the nations while trading effectively.Along with this, there are different factors that are affecting the trade relation between India and Bangladesh that are discussed below:
The water disputes between both nations are having a significant impact on the trade relationship because it is creating political tension between India and Bangladesh.From the issues related to this issue if in future the disputes between both the nations increased then it will create issues for India for doing trading effectively with Bangladesh.
The new citizenship laws
Recently Indian government had passed a new citizenship law for reducing the level of migration from all the neighbouring nations and this is effective trade relation of India with their neighbouring nations such as Pakistan and Bangladesh (Friedberg, 2020).Due to this reason the political tension and border issues would be increased between India and Bangladesh. This is likely to increase the challenges for India while trading effectively with Bangladesh.
Non-tariff barriers are having a major impact on thetrade relations and restricting both Bangladesh and India from exporting and importing the goods. The imposition of countervailing and anti-dumping duties makes it hard for Bangladeshi traders to conveniently export their goods to India(Hassanet. al.2017). These barriers are having an impact on the export volume of Bangladesh to India. In 2018, the import exceeded US$400 billion(Kapoor, 2020).
Competition faced by India while trading with China and Bangladesh
India is playing an important role global economy by trading effectively with the foreign nations which helps them in doing international trade effectively. The reducing tariffs and low non-tariff barriers help India in gaining competitive advantage in the international market. This allowsIndia to have better flow of imports and exports with different nations across the globe. India is a major exporter of information and technology services, petroleum products, organic products, medicines, equipment and many more(Karim& Islam, 2018). The India’s diaspora is well integrated abroad and this offers competition advantage in developing new export markets and trading with the different nations. Both China and Bangladesh are neighbouring nations and India is having large number of resources that can be easily exported to these nations (Rana, 2018). Along with this the reduces tariff also help them in trading effectively and due to this India does not face much competition by other nations when they are doing international trade with China and Bangladesh.
TASK 2: THE STEPS INDIA HAD ADAPTED TO OVERCOME THE CHALLENGES FACED BY THEM WHILE TRADING WITH CHINA AND BANGLADESH
When the nations are trading and exchanging goods and services between them then they face different issues that create barriers and challenges for them to trade effectively. It is important for the government bodies to look forward for solving such issues and helping the nation in trading effectively with one another. Trade relations are playing a significant role in the economy of every nation and due to this reason, it is essential for the firms to manage positive relations effectively. The Indian government had taken several steps for overcoming the different challenges that are being faced by them while trading with China and Bangladesh. The different initiatives taken by the government are explained below:
Initiatives taken by India to overcome the challenges faced by them while trading with China
The trade relation between India and China is strong enough but the increasing political issues had increased the issues and China is the largest exporter of some of the major goods to India and they are looking forward to taking advantage of this. India is depended on China for some of the important things such as heavy machinery, power, plastic toys, textiles, electrical machinery, cell phones and many more. The imports of these products from China are higher. In the recent decade the Indian government had taken some of the major steps that can help them in reducing the dependence of Chinese imports. The government is taking such steps because the strategic planning of china and the political and border tension between both the nations is affecting the trade relation negatively(Massandet. al.2020).
The government of India (GoI) had banned some of the Chinese applications in India as a security concern. In the late 2020 the GoI had banned around 58Chinese apps that includes Ticktok, Shien and some other popular application (Wang, 2020). With the increasing political issues, the GoI had decided that the Chinese government can make use of these application for stealing the information or any of the personal data of their Indian users. Along with this the Indian government had decided to reduce the dependence on china for imports such as textile, machinery products and many more. As a result of it the GoI had restricts the low-quality Chinese imports.GoI is planning effectively to increase the import duty on around 300 commodities which are been imported mainly from China and other neighbouring countries. This step is taken by the nation as it would help them in encouraging domestic businesses and domestic traders which would led an positive impact on their economy(Chen& Bui, 2020).
With the increasing border tension between China and India the country is focusing on reducing the dependence of India on China for some of the goods that are exported from china. In the context of technology India had banned their application. The decision made by the government for restricting the application and ban of different Chinese apps in India had made a significant major impact on the economy of China. And this might affect the trade relations to a greater extent. But the increasing concern for the border tension among both the nations is also affecting their trading relationship due to this reason the nation had taken such action.
The concept of vocal for local is also a major initiative taken by the Modi government for reducing the imports from other nations especially from china. Along with this the campaigns of self-reliance have been announced by the government for the purpose of advertising and promoting the domestic and local items(Dharmshaktu, 2020). The concept of vocal for local had gained a lot of importance in India and this had also reduced the imports from china, and this would have a positive impact on the Indian economy in a long term.
India is focusing on the concept of enhancing the use of the local products as compared to the imported products so that they can add value to their economy. For example, they are focusing their own e-commerce platforms for shopping instead of focusing on using the clothing and e-commerce platforms for shopping. India is looking forward to initiate import substitution for essential and non- essential imports. India is having enough potential to manufacture those products and now they are working on it. These steps taken by the Indian government would help them in adding value to their economy in a long run.
The dispute and controversies related to the spread of covid-19 had affected the image of Chinese government in the entire world and this is affecting their trade relations as well. Due to this dispute most of the some of the international firms are looking forward to shift their manufacturing unit and the offices from China to India (Gruszczynski, 2020). This is an important opportunity for India and when this will happen then it will affect the trade relation between both the nations to a greater extent. From this point of view it can be said that the GoI is making better initiatives that are good for their long-term benefits. India can take advantage of this and can apply an competitive business strategy for using this opportunity (Nandy, 2020).It can be said that the Indian government was managing the trade relation in an effective manner, but the certain initiates taken by the Chinese government had made it essential for the Indian government to look forward for taking the initiatives that can help them in their individual development. The initiatives such as ban of Chinese application, reducing the dependency and vocal for local are important initiatives made by Indian government.
Although India is facing different issues while managing the trade relation with china but then also China is a major trade partner of the nation. The nation is focusing on resolving the issues because china is a major importer of India and their better trade relations are important for both the nations.
Initiatives taken by India to overcome the challenges faced by them while trading withBangladesh
Although the Indian government is facing some of the issues while trading with Bangladesh, but they are not much important as both the nations are looking forward to making strategic planning that can help them in trading effectively. The GoI is taking new initiatives for improving the trade relations between both the nations so that both of nations can do trade effectively. For solving the issue related to the water war the Indian government had made initiative to work together for solving the issue relate to hydroelectricity.The GoI had proposed a new regulatory system that is helping the Indian government in improving the trade relations with Bangladesh(Kumar, 2020).
The challenges developed due to the trade disputed is reducing after the new regulatory system and helping the nations in trading effectively. Also, the government is looking forward to using the single window and electronic data interchange mechanisms at the borders that will help the nation in limiting the trade dispute between the two country. This initiative made by the government would help in reducing the border tension and enhancing the trade relation and permitting cross border trade efficiently. Along with this the Indian government is also looking forward to making the relation strong with Bangladesh that can help them in making better decisions for better economic benefit for both the nations(Kabiret. al.2019). It can be said that the steps taken by GoI are effective in solving the challenges and barriers and developing positive trade relation among both the nations.
Based on the above report can be said that different factors such as political issues, border tension and other issues are having a major impact on the trade relations between two nations. India is facing issues while trading with china and Bangladesh, but they are making better and effective initiatives for solving those issues. It can be concluded that the GoI is making strategic decision for both Bangladesh and China according to their response towards these challenges and barriers. It can be said that India had developed effective strategies for managing the challenges and overcoming them managing the trade relations with Bangladeshand China in an effective manner.
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