India’s efforts to reduce its mounting trade deficit with China are hitting roadblocks, with the gap widening further in the last financial year despite import curbs and a push for domestic manufacturing.
Data shows India’s imports from China jumped to USD 101.75 billion in the financial year 2024, up sharply from USD 70.3 billion five years ago.
Exports to China, however, remain stagnant around USD 16.67 billion, consisting mainly of raw materials.
The lopsided trade has resulted in a cumulative USD 387 billion deficit over the past five years for India.
Experts warn the reliance on Chinese imports, especially for clean energy, electronics and electric vehicle components, is likely to increase.
“Many Chinese companies in India prefer buying supplies from China,” said Ajay Srivastava of the Global Trade Research Initiative. “India’s import dependence is expected to rise due to solar, electronics and EV materials coming from China”, he said.
While India has made headway in mobile assembly and solar panel production, analysts say addressing long-standing structural issues is key to reducing the trade gap through robust domestic manufacturing capabilities, which takes time to build.
The government has raised tariffs on some Chinese imports like mobile phones since 2018 and launched production-linked incentive schemes.
But Biswajit Dhar of the Council for Social Development noted success so far is limited to the electronics sector.
“Businesses will continue sourcing from China if Indian alternatives are not competitively priced,” said Nisha Taneja of the Indian Council for Research on International Economic Relations.
India’s trade deficit with China remains a major economic challenge with no easy solutions in sight.
