China’s Components Remain Central to India’s Export Momentum

• India’s merchandise exports rose 17.04% in April-July 2026, but imports grew faster at 19.27%.

• China remains a key supplier of electronics components used in Indian smartphone manufacturing.

• Smartphone exports reached USD 9.855 billion in the first quarter.

• Pharma exports rely heavily on Chinese APIs.

• India is reassessing Chinese investment rules.

India’s recent strength in merchandise exports, especially in smartphones and pharmaceuticals, is closely linked to a less visible but crucial factor: the continued import of parts, components and ingredients from China.

While India has emerged as a major exporter of smartphones and continues to maintain its position in global generic pharmaceuticals, both sectors remain deeply connected to Chinese supply chains. Several components used in smartphone production saw imports from China rise by more than 50% in the first three months of the current financial year compared with the same period a year earlier.

During the first four months of FY 2026-27, India’s merchandise exports expanded by 17.04% over the corresponding period of the previous year. However, the increase in imports was even sharper. Goods imports rose 19.27% in the same period, according to the latest data released by the Ministry of Commerce and Industry.

India’s merchandise imports for April-July 2026 stood at about USD 292.38 billion, compared with USD 245.14 billion in the same months last year. Petroleum products and gems and jewellery continue to account for a major share of imports. The higher petroleum import bill is also linked to elevated global crude prices after the US war with Iran.

Even after excluding petroleum products and gems and jewellery, the rise in imports remains significant. India’s non-petroleum and non-gems-and-jewellery merchandise imports increased by roughly USD 30 billion, reaching USD 192.03 billion in the first four months of the current year, compared with USD 160.95 billion a year earlier.

Part of this increase reflects growing demand for imported components used by India’s manufacturing sector. Monthly trade data from the Commerce Ministry shows that imports of electrical components from China, including printed circuit boards used in smartphones, rose sharply between April and June 2026.

Imports under HS Code 8517 from China climbed 78% in the first quarter of the fiscal year compared with the same period last year. India imported around USD 4.122 billion worth of these electrical components from China, up from USD 2.311 billion in the first three months of the previous financial year.

Overall imports under HS Code 8517 stood at USD 6.090 billion during the first quarter. China accounted for about 67% of these imports, showing its continued dominance in the supply of components required for India’s electronics manufacturing ecosystem.

A similar pattern is visible in integrated circuits. Imports of integrated circuits under HS Code 8542 from China rose 63.59% in the first three months of the current financial year compared with the same period last year. India imported approximately USD 3.634 billion worth of integrated circuits from China between April and July 2026, compared with USD 2.22 billion a year earlier.

India’s overall integrated circuit imports increased 61% to USD 11.6 billion. Imports from countries such as the United States, South Korea and Malaysia also grew, suggesting that India is gradually diversifying some sources of supply. Even so, China remains the single largest supplier of integrated circuits to India. These microchips are critical for electronic products including smartphones, computers and other connected devices.

Lithium-ion batteries, another vital component for modern electronics, have also seen a surge in imports from China. India imported USD 1.433 billion worth of lithium-ion units under HS Code 850760 from China in the first three months of this year, compared with USD 774.28 million in the same period last year.

That represents an 85.11% increase in lithium-ion imports from China. India’s total imports of these goods rose to USD 1.660 billion from USD 946 million in the first quarter of the previous year. The data also shows how concentrated the supply chain remains, as India imported less than USD 300 million worth of these products from all other countries combined.

These imports have become an essential part of India’s own export expansion. India exported around USD 9.855 billion worth of smartphones in the first quarter of the current financial year, a 23% increase from USD 7.97 billion in the corresponding period last year.

For the full FY 2025-26, India’s smartphone exports under HS Code 85171300 stood at USD 29.3 billion. The United States was the largest destination, receiving more than USD 19 billion worth of smartphones manufactured in India. New Delhi expects smartphone exports to continue rising, but the supply chain for many critical inputs remains strongly dependent on China.

A similar reliance is visible in pharmaceuticals, one of India’s most important export sectors. India’s generic drug industry depends heavily on imported Active Pharmaceutical Ingredients, or APIs, and China continues to be the most important supplier.

The latest quarterly trade watch report by NITI Aayog, published in June, identified China as the key source of APIs for India. India’s API imports in the 2025 calendar year were around USD 7.4 billion, with the top five product categories making up about USD 6.2 billion.

These categories include nitrogen heterocyclic compounds, antibiotics, amino compounds, oxygenated carboxylic acids and heterocyclic compounds with oxygen. China supplied nearly three-fourths of India’s imports across these major API groups.

The dependence is especially high in antibiotics, where 86.1% of India’s imports came from China. China also accounted for 76.4% of nitrogen heterocyclic compounds, 73.1% of amino compounds, 65.9% of oxygenated carboxylic acids and 72.6% of heterocyclic compounds with oxygen imported by India.

In the first quarter of the current financial year, covering April-June 2026, India imported about USD 496 million worth of nitrogen heterocyclic compounds from China, a rise of 7.18% from the previous year.

Antibiotic imports, however, declined during the same period. India’s total imports of antibiotics fell from USD 445 million last year to around USD 368 million this year. Imports of antibiotics under HS Code 2941 from China also declined from USD 381.8 million to approximately USD 308.81 million. Despite the fall, China remained the leading supplier of antibiotics to India.

China also continued to dominate India’s supply of amino compounds, oxygenated carboxylic acids and heterocyclic compounds with oxygen during the first quarter of the current fiscal year. The figures point to an ongoing dependence on Chinese APIs despite policy discussions around diversification and supply-chain resilience.

India’s pharmaceutical exports have grown only marginally so far this fiscal. Between April and July 2026, pharma exports increased by less than 1%, according to Commerce Ministry data. Exports stood at USD 10.785 billion in the first four months of the current financial year, compared with USD 10.25 billion during the same period last year.

The government has also taken steps to reconsider its approach to Chinese investment. Earlier this year, India amended Press Note 3, easing some restrictions as it explores the possibility of attracting foreign direct investment from China.

The case for a more flexible approach had been raised earlier by Chief Economic Advisor V. Anantha Nageswaran in the 2023-24 Economic Survey, where he argued for examining potential investment from China. That view helped set the stage for a broader rethink on how Chinese capital could fit into India’s economic and manufacturing ambitions.

India’s export performance continues to show strength, especially in high-profile sectors such as smartphones and pharmaceuticals. But the latest trade data also makes clear that the country’s manufacturing growth remains closely tied to imported Chinese inputs. As New Delhi seeks to expand exports and build domestic capacity, reducing supply-chain vulnerability while maintaining growth will remain one of its most important policy challenges.