China becomes India's top trade partner in FY26; deficit widens to $112 bn

• China became India’s top trading partner in 2025–26 with total trade at $151.1 billion.

• Trade deficit with China widened to a record $112.16 billion.

• Exports to China rose 36.66%, but imports remained significantly higher.

• US slipped to second place; India’s trade surplus with US narrowed to $34.4 billion.

• Export and import trends showed mixed performance across major global partners.

China has once again become India’s largest trading partner in the financial year 2025–26, edging past the United States after four consecutive years of American dominance. Official government figures show that total trade between India and China climbed to $151.1 billion, marking a significant shift in India’s global trade landscape.

Despite a sharp increase in exports to China, India’s trade imbalance with Beijing expanded to a record level. The trade deficit reached approximately $112.16 billion, rising notably from $99.2 billion in 2024–25. Imports from China surged to $131.63 billion, reflecting a 16 percent increase, while Indian exports to China jumped 36.66 percent to $19.47 billion. The faster pace of import growth in absolute terms has continued to widen the deficit, underscoring India’s sustained reliance on Chinese goods, particularly in manufacturing inputs and electronics.

Meanwhile, trade dynamics with the United States presented a different picture. Although the US slipped to second place among India’s top trading partners, overall commerce between the two nations remained substantial. India’s exports to the American market rose slightly by 0.92 percent to $87.3 billion during the fiscal year. At the same time, imports from the US grew more sharply, increasing 15.95 percent to $52.9 billion. As a result, India’s trade surplus with Washington narrowed to $34.4 billion, down from $40.89 billion in the previous year.

Commerce ministry data reveals that China previously held the position of India’s largest trading partner from 2013–14 through 2017–18, and again in 2020–21. The United Arab Emirates dominated before China’s earlier rise, while the United States led the rankings from 2021–22 until 2024–25. The latest shift signals a renewed phase in India–China trade engagement, even amid ongoing geopolitical sensitivities.

Beyond its two largest partners, India’s export performance varied widely across other major markets in 2025–26. Shipments declined to countries such as the Netherlands, the United Kingdom, Singapore, Bangladesh, Saudi Arabia, Australia, France, South Africa, and Malaysia. In contrast, exports registered growth in markets including the UAE, Germany, Hong Kong, Italy, Nepal, Brazil, Spain, Belgium, and Vietnam.

Import trends also showed mixed patterns. India reduced its imports from Russia, Iraq, Indonesia, Australia, Qatar, and Taiwan during the fiscal year. However, purchases increased from several other trading partners, including the UAE, Saudi Arabia, Hong Kong, Switzerland, Singapore, Japan, South Korea, Germany, Thailand, and Malaysia.

The evolving trade data highlights both opportunities and structural challenges for India. While export growth to China signals improving market access, the expanding deficit remains a key concern. At the same time, steady engagement with the US and other global economies reflects India’s ongoing efforts to diversify trade relationships amid shifting global supply chains.