India–China Trade Surges in 2026, but Deficit Widens Further

• Bilateral trade reached $91.72 billion in H1 2026, up 23.6%.

• China’s exports to India rose 21.8% to $79.41 billion.

• India’s exports to China jumped 37.2% to $12.31 billion.

• Trade deficit widened to $67.1 billion in six months.

• India seeks greater Chinese market access and investment flows.

Trade between Asia’s two largest economies accelerated sharply in the first half of 2026, even as India’s trade imbalance with China expanded to new levels.

According to data released by Chinese customs authorities, China’s exports to India climbed 21.8% year-on-year to $79.41 billion between January and June 2026. During the same period, India’s shipments to China rose an even faster 37.2%, reaching $12.31 billion.

The combined effect pushed total bilateral trade to $91.72 billion in the first six months of the year — a 23.6% increase compared to the corresponding period last year. However, the widening gap between imports and exports left India with a $67.1 billion trade deficit for the half-year.

What Is Driving the Trade Growth?

Chinese exports to India remain heavily concentrated in high-value industrial and technology products. Key categories include telecommunications equipment, mobile phone and printed circuit board (PCB) components, semiconductors, lithium-ion batteries, chargers, servers, industrial machinery, computers, cables, organic chemicals, and plastics.

India’s exports to China are more diversified but remain skewed toward commodities and intermediate goods. These include mineral ores, refined petroleum and fuel products, organic chemicals, electronic components, agricultural and marine products, base metals, finished goods, jewellery, gemstones and pharmaceuticals.

Among the fastest-growing Indian exports to China this year are PCBs, OLED display modules, refined petroleum products and light naphtha — suggesting some expansion in higher-value manufacturing segments.

A Persistent Imbalance

Despite the encouraging growth in exports, the trade deficit continues to dominate the narrative. In 2025, total bilateral trade stood at $151.1 billion, with India’s deficit widening to $112.16 billion.

For the 2025–26 fiscal year, India’s exports to China rose 36.66% to $19.47 billion, while imports from China increased 16% to $131.63 billion. As a result, the annual trade gap touched a record $112.6 billion, up from $99.2 billion in 2024–25.

The figures highlight the structural challenge India faces: while export growth rates appear robust, they are expanding from a much smaller base compared to Chinese shipments into the Indian market.

Calls for Broader Market Access

New Delhi has consistently urged Beijing to open greater access in sectors where Indian companies are globally competitive — particularly pharmaceuticals, information technology and agriculture. Progress, however, has been limited.

Earlier this month, India’s Ambassador to China, Vikram Doraiswami, underscored the importance of expanding Indian exports, especially in pharmaceuticals. Speaking at a panel discussion on protectionism and global economic governance at Tsinghua University’s World Peace Forum on July 4, he emphasised that increasing Chinese purchases of Indian goods would strengthen bilateral ties.

Doraiswami noted that India is a major supplier of pharmaceuticals to advanced markets and argued that similar opportunities in China could generate mutual benefits. He also pointed out that greater Chinese investment in India would positively influence the broader relationship.

Policy Shifts and Investment Openings

The ambassador indicated that India has recently adjusted its policy framework to facilitate increased Chinese investment, reflecting signs of gradual normalisation in economic engagement. Over the past few months, regulatory changes have reportedly been introduced to make it easier for Chinese businesses to invest in the Indian market.

At the same time, Doraiswami stressed the need for structural reforms in trade mechanisms. He highlighted the importance of widening the basket of tradable goods while ensuring consumer protections and fair market access on both sides.

The Road Ahead

The first-half surge in trade underscores the depth of economic interdependence between India and China, even amid geopolitical complexities. While export growth offers a positive signal, the expanding deficit remains a central concern for policymakers in New Delhi.

Whether the current momentum evolves into a more balanced trade partnership will depend on expanded market access, diversified exports and sustained policy coordination between the two nations.