India’s Trade Deficit with China Hits $99.2 Billion on import surge

India’s trade deficit with China hit $99.2 billion in 2024/25, driven by surging imports of electronics, solar cells, and batteries. Exports to China dropped by 14.5%, highlighting an imbalance. Analysts cite India’s reliance on imported components as a key issue, warning of further import increases as Chinese firms redirect goods from the U.S. market. China became India’s second-largest trading partner, with bilateral trade reaching $127.7 billion. Experts urge India to strengthen domestic manufacturing and reduce dependency on foreign supply chains.

India faced a record trade deficit of $99.2 billion with China during the 2024/25 fiscal year that ended in March, as revealed by official trade data. This significant gap was driven by a sharp rise in imports, particularly in electronics, consumer durables, and renewable energy components like solar cells and batteries.

The timing of this development coincides with a global shift in trade dynamics. Last week, U.S. President Donald Trump announced a 90-day pause on tariff hikes for key trading partners, including India, while imposing stricter levies on Chinese goods. This move has raised concerns that Chinese firms might redirect their exports to alternative markets, including India, to offset losses from the U.S. market.

March Sees a Surge in Imports from China

In March alone, imports from China surged by over 25% compared to the same period last year, reaching $9.7 billion. Electronics, electric batteries, and solar cells were among the top contributors to this increase. Over the fiscal year, total imports from China climbed to $113.5 billion, underscoring India’s growing reliance on Chinese goods.

Meanwhile, India's exports to China have been on a downward trajectory. In March, exports fell by 14.5% year-on-year to $1.5 billion. For the entire fiscal year, total exports to China stood at $14.3 billion, reflecting a stark imbalance in the trade relationship.

Experts Highlight Structural Challenges

Trade analysts have expressed concern over this growing trade deficit, pointing to deeper structural issues within India’s economy. Ajay Srivastava, founder of the Delhi-based think tank Global Trade Initiative, noted that India’s dependence on imported components for its burgeoning electronics, pharmaceutical, and engineering sectors has been a major factor driving imports from China.

Srivastava also highlighted an alarming trend: India's exports to China are now lower than they were in the 2013/14 fiscal year, despite the Indian rupee being significantly stronger at that time. He warned that India could see a further 20% rise in imports from China in the current fiscal year, as Chinese companies increasingly reroute their goods to alternative markets, including India, to counter U.S. trade restrictions.

China Becomes India’s Second Largest Trading Partner

In 2024/25, China solidified its position as India’s second-largest trading partner, with bilateral trade totaling $127.7 billion. The United States remained India’s top trading partner during the same period.

The Indian government has taken note of the increasing influx of cheaper imports from China and other countries. Officials announced plans to establish a monitoring unit to track and manage these imports. Additionally, the government has issued warnings to domestic firms against facilitating foreign exporters in circumventing U.S. tariffs.

A Call for Economic Resilience

India’s growing trade deficit with China serves as a wake-up call for policymakers and businesses alike. The imbalance underscores the need for India to reduce its dependence on imports by bolstering domestic manufacturing and diversifying supply chains. Without structural reforms, the country risks deepening its reliance on foreign markets for critical components, leaving it vulnerable to global trade shifts.

As India navigates the complexities of international trade, addressing these challenges will be crucial to achieving long-term economic resilience and sustainable growth.