Although China and India's trade volume and mutual investment are not as high as they should be, their growth rates are incredible, which is laying a solid grounding for the world's two fastest-expanding economies to come closer together, according to an Indian economist and industry leader.

Amit Mitra, secretary-general of the Federation of Indian Chambers of Commerce and Industry (FICCI), says the two counties' business sectors are pushing to become more intertwined and make up for lost time. "We have wasted 50 years," exclaimed the secretary-general, accounting for the poor level of economic exchange between the two countries in the past.

There was very little trade volume and almost zero mutual investment before 1999.

Fortunately, the ice between the countries' business sectors has thawed thanks to a better political climate and industries' improved knowledge on each other.

"The two-way trade is expected to hit US$20 billion in 2010," Mitra predicts. "Depending on how it goes it could reach US$25 billion."

The two neighbours notched up a record trade volume of US$7.6 billion in 2003, up 53.6 per cent year on year.

Their mutual investment still remains very low, but it is starting to rise, paving the way for breakneck growth in the future, Mitra said.

Currently, total investment by Indian companies in China has hit about US$300 million.

And a growing number of Chinese firms have stepped up their efforts to explore the potential of the vast Indian market.

Mitra predicts that mutual investment will reach US$5 billion in the next two to three years.

"When the figure exceeds US$5 billion, the mutual investment will soar very rapidly," he says.

Mitra believes China and India have huge potential in many fields such as the manufacturing, health, textile, telecom and tourism sectors on a complementary basis, which has not been utilized effectively.

The information technology sector appears to be one of the most promising, as China and India are good at manufacturing hardware and software programming, respectively.

The economist wants the two countries' information technology investors to directly engage and invest in each other's projects, which will take advantage of the two nations' different strengths.

Moreover, "the two countries' business sectors can join together to explore a third market," he said.

Currently, China and India have a joint venture on oil and gas exploration in Sudan.

"It is a good starting point, and we hope more such co-operation can come," he says.

The current biggest problem hindering co-operation, according to Mitra, is that they do not know enough about each other.

Mitra and his 77-year-old chamber are attempting to solve this bottleneck.

"The FICCI is working with its Chinese counterpart, the China Council of the Promotion of International Trade, to bridge the business communities between India and China by accelerating direct exchanges and providing business information."

China's WTO commitments

Mitra also believes China has honoured its World Trade Organization (WTO) commitments and will continue to do so.

"Our feeling is that China has never gone back, in its history, on commitments it makes," he said, adding some criticism from the United States and the European Union (EU) is too harsh.

India also gets complaints and criticism from the West when fulfilling its WTO pledges, Mitra said.

The US and EU complained about India's delayed implementation of its intellectual property rights (IPR) regime, but the country was soon on the right track and has now moved ahead of its commitments.

Mitra believes the two largest developing countries can merge to play a larger role within the WTO.

They could strengthen their co-operation in terms of IPR and the protection of local brands.

For example, China and India both have many local products, such as traditional herbal medicines and teas that are welcome on the international market.

"The two countries should jointly promote the protection of products with destinations, origins and geographic indications to safeguard our legitimate rights," Mitra says.

The neighbours can also play a larger role in fuelling regional integration by working together.

China and India both signed free trade agreements (FTA) with the Association of Southeast Asian Nations (ASEAN) to realize free trade in 2010 and 2012, respectively.

Mitra hopes the FTA programmes will not be manipulated to cause trade diversions.

"We have to work together to avoid China and India's products from clashing by using ASEAN as a way to escape tariffs," he said.

Mitra declined to comment about the possibility of building an FTA between China and India. "It is too premature for me to comment on an Indian-China FTA. We could firstly enhance our economic integration on the basis of the Bangkok Agreement."

Under the agreement, China and India will offer each other special tariff treatment, which will be more preferential than their most-favoured-nation tariffs.