PM Modi met Chinese President Xi Jinping at an informal summit in Tamil Nadu's Mamallapuram.
China and India will build a new mechanism to discuss trade, investment and services and this was one of the key areas of discussion between Prime Minister Narendra Modi and Chinese President Xi Jinping, the foreign ministry said today.
President Xi had arrived on Friday for the second informal summit with PM Modi in Chennai. Since then, the two leaders had more than five hours of one-one meetings.
"The two leaders spoke about trade and investment between the two countries. The trade deficit was also spoken about and it was concluded that there will be a new mechanism in place for trade and investment between the two nations," foreign secretary Vijay Gokhale said.
The new initiative will be headed by the Vice Premier of China Hu Chunhua and India's Finance Minister Nirmala Sitharaman, he added.
The growing trade and investment between India and China despite the political tension has seen a slant in China's favour, resulting in a trade deficit that has ballooned to over $57 million.
In 2016, India was the 7th largest export destination for Chinese products, and the 27th largest exporter to China.
In 2017, India's trade deficit with China increased by 7.64% year-on-year to $ 33.90 billion. While India's exports to China was to the tune of $10.60 billion, the import of goods from China grew to $ 44.50 billion.
In 2018, according to official Chinese data, the trade deficit climbed to $57.86 billion in about $95.54 total bilateral trade, reported news agency Press Trust of India.
"The 16-member RCEP (Regional Comprehensive Economic Partnership, a proposed free-trade agreement between 16 nations) was also discussed in detail... and it was agreed that the balance of the RCEP must be maintained," Mr Gokhale said.
Last month, India said it has reservations about joining the RCEP with the ASEAN countries and its six FTA partners due to concerns, including the "enormous" trade deficit with China, which has ballooned to over $57 billion.
Speaking at the India-Singapore Business & Innovation Summit in Singapore, foreign minister S Jaishankar said India was concerned over the "unfair" market access to Indian products and the "protectionist policies" of Beijing.
The RECP deal, which would require lowering of tariffs, would lead to Chinese goods flooding Indian markets but not assure India of equal access to Chinese markets, which would further widen the trade deficit, Mr Jaishankar had said.