The potential impact of China - India free trade agreement on Chinese and Indian industries

ABSTRACT The world’s two largest developing economies, China and India are considering positive negotiations on the Free Trade Agreement, which would pave the way for more trade and a new breakthrough in ties. In this context, the present paper using trade indicators explore, that India and China are in between the ideal trading partners and perfect competitors and the trade relationship between the two economies is more intense than the world average for the partner. A partial equilibrium approach based on highly disaggregated trade data shows that in a scenario where China and India completely open up its markets, there could be huge potential to create an impact on trade and welfare in their specific areas where they enjoy a comparative advantage.