Chinese Premier Li Keqiang on Tuesday offered to initiate talks for a free trade agreement with India and said the world's second biggest economy was willing to give more market access to Indian products to bridge widening trade deficit.
Addressing the Indian business community in New Delhi, he emphasised on the need for enhance bilateral trade and investments between the two nations.
"We also understand India's concerns of trade deficit. China is also willing to provide facilitation to India's products to access Chinese markets.
"I am confident that we have the ability to mitigate the trade imbalance between our two counties and China never has any intention to seek trade surplus and only a dynamic trade balance is a sustainable trade relations," Li said.
While India's export to China stood at only $13.52 billion in 2012-13, its imports from that country aggregated $54.3 billion, leaving a trade deficit of $40.78 billion during the last fiscal.
Both the sides have aimed at taking the two-way trade to $100 billion by 2015.
At different fora the government and the domestic industry have flagged concerns over the ballooning trade imbalance with China and has demanded greater market access for Indian products like pharmaceuticals, IT and agriculture.
"We need to reduce trade imbalance.
"Our two-way trade is less than $70 billion and we need to enhance the dynamics of trade balance," Li said.
Although Li expressed willingness to launch negotiations for a free trade agreement, Indian industry is wary of any such move due to the competitive disadvantage and high trade gap with the neighbouring country.
"China is willing to launch negotiations on a China-India regional trading arrangement," the Chinese Premier said.
On the issue, former Ficci President R V Kanoria said that before initiating any such talks with China, the government should address domestic problems
"Before starting any kind of negotiations with China on FTA, Indian government should address domestic problems like high transaction cost, land problems and implementation of Goods and Services Tax (GST)," Kanoria said.
Apex exporters body FIEO said that if Chinese companies invest in India in manufacturing sector, "we can substantially reduce our dependence on Chinese imports".
On investments, Li said that his government supports Chinese enterprises to increase investments in India and expand trade in services.
"China and India are huge markets with great potential. . . Our industrial structure are highly complimentary. India has a competitive edge in IT, software and bio-medicines, while China is seeing rapid expansion in machinery, textiles and emerging industries," he added.
Both the countries had completed a joint study in March 2005, when India’s trade deficit with China was $1.5 billion, to examine the potential benefits of greater trade and economic cooperation.
The joint study group in its report had recommended that the governments appoint a joint task force to study in detail the feasibility and benefits of a possible China-India regional trading arrangement, and also give recommendations on the contours of such a pact.
The JTF subsequently finalised its draft report covering trade in goods, trade in services, bilateral investment, trade facilitation and economic cooperation.
However, the proposal was kept on back burner due to the strong opposition by Indian industry which feared dumping and flooding of Indian markets by Chinese firms.
The top five items of imports from China are electrical machinery; mechanical machinery; project goods; chemicals and iron and steel. Also, in the past few years, imports of power and telecommunication equipment have seen a huge surge.
India’s exports to China comprised largely ores, cotton, chemicals and raw materials. China accounts for a fifth of India's total trade deficit of $190.9 billion with the world.