INDIA CHINA Connect

India’s exports to the US fell 12.88% in February amid tariff changes, with a temporary 10% duty replacing steep earlier levies. Imports from the US surged, adding trade pressures. Meanwhile, India’s deficit with China crossed $102 billion, as strong exports contrast with heavy reliance on imports. Overall, the merchandise trade deficit widened year-on-year.

Apple boosted iPhone production in India by 53% to 55 million units in 2025, now accounting for about 25% of its global output. The shift diversifies supply chains beyond China amid U.S. tariffs. Despite higher costs, government incentives drive growth. India assembles iPhone 17 and older models, generating $9 billion revenue, with retail and Apple Pay expansion planned.

India’s Union Cabinet eased FDI rules for neighbors by amending Press Note 3 of 2020, relaxing prior approval requirements. The policy covers China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, and Afghanistan. Despite this, China’s FDI share remains low at 0.32% ($2.51 billion). Meanwhile, India’s trade deficit with China widened to $99.2 billion in 2024–25, highlighting ongoing economic imbalances.

India’s chip market is set to double from $52B in 2024 to $103B by 2030, fueled by AI, electric mobility, and defence. Data centres will expand from 1.5 GW to 9 GW. IndiaAI Mission exceeded GPU targets, yet 90% of equipment is imported. With $50M invested in startups, design and fabless models offer immediate opportunities.

Under the PLI scheme (2021–2026), Apple and its partners created over 250,000 direct jobs, with 70% being young women entering the workforce. Tata and Foxconn exceeded targets with 140,000 jobs. Wages rose nearly 80% to Rs 18,000–20,000 monthly. The Apple ecosystem added 750,000 indirect jobs and achieved $23 billion in iPhone exports in 2025.

India’s e-commerce market is projected to rise from $140 billion to nearly $300 billion by 2030, with total consumption hitting $3.7 trillion. Growth will be driven by smaller cities, rural buyers, women, and middle-income groups. MSMEs, quick commerce, and social platforms fuel expansion, while increasing consumer complaints underscore the need for stronger trust and protection measures.

India anticipates over $200 billion in AI investments within two years across the full technology stack, spanning infrastructure, compute, applications, and energy. With 51% clean energy capacity, it promotes sustainable AI growth. Emphasizing responsible, accountable AI and global consensus, India advances reskilling and future-ready education, while AI Mission 2.0 expands research, shared compute, and adds 20,000+ GPUs.

Urban areas are projected to generate 70% of India’s GDP in 2025–26, up from 45% in the 1990s, with the urban population set to reach 600 million by 2036. Urban local bodies have grown 8.56% since 2016. Tier-II and Tier-III cities are rising as investment hubs, backed by ₹5,000 crore allocations, led by Ahmedabad and Pune.

India has become the leading overseas market for Japanese firms, with client inquiries up over 50% in FY2024. Mizuho’s Avendus acquisition signals efforts to strengthen the India–Japan financial corridor, alongside multibillion-dollar investments by major Japanese banks. India’s youthful demographics, digital expansion, and low credit penetration promise long-term growth, while Japan’s saturated domestic market drives overseas diversification.

A proposed India–US trade deal could lift India’s annual trade surplus by $45 billion and boost exports by over $100 billion. Tariff cuts to 18% would enhance competitiveness, potentially adding 1.1% to GDP and saving $3 billion in forex annually. Key sectors include machinery, pharma, textiles, autos, gems, seafood, and agriculture, while reinforcing China+1 manufacturing diversification strategies.

India–China trade hit a record $155 billion in 2025, growing over 12% amid expanding economic engagement. China supported India’s BRICS presidency, while the Modi–Xi meeting in Tianjin revived diplomatic and people-to-people ties. India’s exports to China rose nearly 10%. Relations improved significantly since October 2024.

India’s exports to China climbed 37% to $14.2 billion during April–December, with December 2025 shipments jumping 67%. Imports rose 13.5% to nearly $96 billion, led by capital goods, intermediates, and raw materials. Some sectors, including fertilisers and chemicals, saw declines, while rising electronics imports signaled expanding digital and manufacturing capacity.

The United States reduced additional tariffs on Indian goods from 50% to 18%, improving export competitiveness. Textiles, leather, and seafood are key beneficiaries. The move followed Modi–Trump phone talks signaling warmer bilateral ties. India now enjoys a tariff edge over several Asian peers, while Trump’s energy and Russia-related claims remain unconfirmed by New Delhi, according to recent official statements there.

Global real GDP growth is projected at 3.1% in 2026, led largely by emerging markets. China and India together generate over 43% of worldwide growth, at 26.6% and 17% respectively. Advanced economies are losing influence, with the U.S. and EU contributing about 16%. Asia-Pacific dominates regionally, accounting for nearly 60% of global growth, underscoring shifting economic power in coming years.

Larry Fink calls the next 20–25 years the “Era of India,” naming it his top long-term investment destination. He expects 8–10% growth for the next decade or more. Strong domestic savings, supported by foreign capital, underpin this outlook. Broader market participation and sustained AI investment are seen as critical for India’s future global leadership and economic transformation over the long term.

India’s Index of Industrial Production jumped 7.8% in December 2025, its fastest pace in over two years, exceeding forecasts. Manufacturing, mining, and electricity drove the rebound, with 16 of 23 industries expanding. Infrastructure goods and consumer durables recorded double-digit growth, signaling robust investment and consumption. Overall industrial output rose 3.9% during April–December, pointing to sustained momentum heading into 2026.

India is expected to be the fastest-growing major economy, accounting for roughly 20% of global growth. The World Economic Forum sees a possible India–US trade deal as an added catalyst. Swift reforms have strengthened confidence in India’s medium-term outlook. Davos debates remain shaped by geopolitical uncertainty, while AI is viewed as a powerful growth driver that also raises significant security and governance risks worldwide.

The India–EU FTA provides zero-duty access, aiming to double gems and jewellery trade to $10 billion within three years. Eliminating 2–4% tariffs strengthens India’s competitiveness in the EU’s high-value market. The agreement benefits major export hubs and diverse jewellery segments, supporting employment, improved margins, and broader market diversification for Indian exporters.

India has reduced its US Treasury holdings to a five‑year low of about $174 billion, down 26% from 2023. Treasuries now make up roughly one‑third of foreign reserves, compared with 40% a year earlier. The RBI is diversifying into gold and non‑dollar assets amid geopolitical and sanctions risks, while sales also help support the rupee during trade tensions and high US tariffs.

The historic India–EU FTA, concluded after two decades, strengthens ties amid global trade uncertainty. It grants duty‑free access on over 99% of Indian exports, boosting labour‑intensive sectors and MSMEs. The pact expands access to the $20‑trillion EU market, benefits major states, enhances services trade, mobility, jobs, and Make in India, while reinforcing a rules‑based global trade order.