Between Scylla and Charybdis: India’s Trade Balancing Act with China and the U.S.
Published on CLAT Gurukul – Best Online Coaching for CLAT Aspirants
Introduction
In a rapidly globalizing world, India finds itself caught between two major economic powers: China and the United States. In his widely circulated article “Between Scylla and Charybdis,” published in The Indian Express on April 27, 2025, former Finance Minister P. Chidambaram metaphorically describes India’s trade conundrum as being stuck between two mythical dangers — both of which pose serious risks to the economy.
This article is essential for CLAT 2026 aspirants, especially for the General Knowledge, Legal Reasoning, and Current Affairs sections. Students from our Best CLAT Coaching in Patna and those enrolled in our online coaching for CLAT programs can refer to this structured analysis to enhance their understanding of India’s international trade policy, economic strategy, and foreign affairs.
Why in News?
- On April 15, 2025, IMD predicted a “normal” monsoon, relieving agricultural concerns.
- Meanwhile, India’s trade figures released around the same time highlighted growing economic stress:
- A surplus with the U.S. ($41.21 billion)
- A massive deficit with China ($99.20 billion)
- India faces pressure from U.S. protectionist policies and growing dependency on Chinese imports, putting policymakers in a tough spot.
Understanding the Metaphor: Between Scylla and Charybdis
- Derived from Greek mythology, Scylla and Charybdis were sea monsters located on either side of a narrow strait.
- In this context:
- Scylla = China (massive trade deficit)
- Charybdis = USA (surplus under threat due to tariffs)
- India must navigate carefully to avoid economic harm from either side.
India’s Trade at a Glance (2024–25)
Country | Exports | Imports | Balance |
U.S. | $86.51 bn | $45.3 bn | + $41.21 bn (surplus) |
China | $14.25 bn | $113.45 bn | – $99.20 bn (deficit) |
World | $437.42 bn | $720.24 bn | – $282.82 bn (deficit) |
India’s Trade Relations with the U.S.
- India enjoys a surplus with the United States, exporting:
- Gems and jewellery
- Pharmaceuticals
- Engineering goods
- However, this surplus is at risk due to:
- Proposed U.S. tariffs on Indian goods
- Mr. Trump’s return to protectionism
- Temporary halts on pharmaceutical exports
- The loss of this surplus could worsen India’s current account deficit.
India’s Widening Trade Deficit with China
- India’s largest trade deficit is with China.
- Imports from China include:
- Electronics, telecom equipment
- Steel, organic chemicals, plastics
- Indian industry is highly dependent on these imports.
- Domestic manufacturing contributes just 13-14% of GDP, making India vulnerable.
- India lacks scalable, competitive substitutes for many Chinese goods.
The QUAD Factor and Diplomatic Calculus
- QUAD (Quadrilateral Security Dialogue) includes India, the U.S., Japan, and Australia.
- The U.S. wants to use QUAD as a strategic counter to China.
- India, however, prefers pragmatic engagement with both sides.
- Active alignment with QUAD may provoke economic retaliation from China, while non-alignment may strain U.S. ties.
- India’s policy challenge: balance national interests with global diplomacy.
What’s at Stake?
- If India loses U.S. surplus:
- The current account deficit will rise sharply.
- Loss of forex reserves and investor confidence.
- If China continues trade dominance:
- Manufacturing in India will stagnate.
- Local industries may collapse due to cheaper Chinese goods (risk of ‘dumping’).
- If India antagonizes either:
- Strategic partnerships and FDI inflows may get jeopardized.
- Political instability in trade policy would worsen the economic outlook.
Possible Strategies for India
- Boost domestic manufacturing under Atmanirbhar Bharat.
- Expand free trade agreements (FTAs) with ASEAN, EU, and Africa.
- Diversify imports away from China and build reliable supply chains.
- Engage with the U.S. on mutually beneficial defense and tech deals.
- Curb the import of non-essential goods to control the trade deficit.
Notes: Key Terms Explained for CLAT Aspirants
Term | Meaning |
Current Account Deficit (CAD) | When a country’s total imports exceed total exports. A persistent CAD can devalue the currency. |
Dumping | Selling goods in a foreign market at prices lower than in the domestic market or below production cost. |
Trade Surplus/Deficit | Surplus = Exports > Imports; Deficit = Imports > Exports. |
Tariffs | Taxes imposed on imported goods to make domestic goods more competitive. |
QUAD | A strategic alliance aimed at countering China’s influence in the Indo-Pacific. |
Atmanirbhar Bharat | A campaign to make India self-reliant by boosting local production and innovation. |
For CLAT 2026 Aspirants
- Legal Reasoning: Can India challenge U.S. tariffs at the WTO?
- Logical Reasoning: Evaluate India’s diplomatic strategy — should it lean more toward the U.S. or maintain equidistance?
- Current Affairs: Keep track of India’s trade policies, QUAD developments, and FTA negotiations.
- General Knowledge: Understand terms like trade deficit, current account, and economic diplomacy.
Conclusion
India’s trade dilemma truly places it “between Scylla and Charybdis.” The path forward demands careful negotiation, smart diplomacy, and robust domestic policy reforms. For students preparing for CLAT, this issue is a classic case of economic reasoning, diplomatic balancing, and legal strategy — all of which are crucial components of a modern legal education.
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