By R. Suryamurthy
India’s trade deficit with China surged to an unprecedented $99.2 billion in FY2024–25, underscoring a structural economic dependency that continues to widen despite diversification and domestic manufacturing efforts.
According to Ajay Srivastava, co-founder of the Global Trade Research Initiative (GTRI), the deficit reflects far more than a trade imbalance—it signals a deeper strategic vulnerability in key sectors of the Indian economy. “This isn’t just about numbers. It’s about control over critical value chains. India’s industrial growth is increasingly tethered to Chinese inputs,” he said.
Total imports from China rose by 11.5% to $113.4 billion, driven by India’s growing demand for electronics, electric vehicle (EV) batteries, solar modules, and a wide range of intermediate industrial inputs—sectors where China enjoys near-monopoly supply positions. China remains India’s largest supplier in all eight major industrial product categories.
Even more concerning is the sharp 14.5% fall in Indian exports to China, which dropped to $14.2 billion, now lower than export levels in FY2013–14, when the Indian rupee was significantly stronger. Srivastava described this as a “competitiveness crisis,” highlighting that Indian firms are losing market share in China despite a relatively low base of exports.
“The latest figures should be a wake-up call for policymakers and industry alike,” Srivastava added. “India must invest aggressively in industrial capacity, innovation, and supply chain security. Without these, our dependence on imports—especially from a single country—will only deepen.”
While India has made progress in boosting its overall exports, with merchandise and services exports estimated at $820.9 billion in FY2024–25 (up 5.5% from the previous fiscal year), the performance is uneven. Merchandise exports remained flat at $437.4 billion, while services grew by over 12% to $383.5 billion.
India’s flagship Production Linked Incentive (PLI) schemes, designed to enhance domestic manufacturing, have so far had a paradoxical effect—fuelling import demand for critical components from China, especially in electronics, EVs, and green energy.
From a business perspective, the growing import reliance raises both commercial and geopolitical concerns. “China is not just India’s biggest trading partner—it’s also its biggest industrial supplier. That concentration of supply poses risks not just to trade balances but to business continuity,” said a senior executive at a leading Indian auto component manufacturer.
The government has acknowledged the challenges. Speaking on condition of anonymity, a senior commerce ministry official said India is accelerating efforts to localise production in high-impact sectors like semiconductors, speciality chemicals, and electronics. However, industry observers say such efforts require long-term commitment, capital, and coordination between public and private stakeholders.
Meanwhile, India’s trade with other key partners shows mixed trends. Imports from the United Arab Emirates, Saudi Arabia, and Russia rose sharply, while exports to the US, Australia, and the UK posted robust growth. Notably, engineering exports hit a record high of $116.7 billion, according to data released by the commerce ministry.
Pankaj Chadha, Chairman of the Engineering Export Promotion Council (EEPC), pointed out that despite global trade disruptions, Indian engineering exports showed resilience. “We have managed to post a healthy 6.74% growth in engineering exports this year, which speaks to the adaptability and global competitiveness of our sector,” he said.
Still, as the deficit with China balloons, the need for recalibrating India’s trade and industrial strategy has become more urgent. Srivastava of GTRI concluded: “Without addressing our internal manufacturing weaknesses, no amount of export growth elsewhere will be enough to offset our growing reliance on Chinese supply chains