India’s Trade with China: Running the Race But Who’s Leading

India’s trade with China is one of those stories you can’t summarize in a single line. On paper, trade is booming—billions in commerce, factories humming, consumers enjoying affordable goods. But when you look closer, a widening gap is hard to ignore. In FY 2024‑25, India imported US$113.45 billion worth of Chinese goods, while its exports to China dropped 14.5% to US$14.25 billion. That leaves a record trade deficit of US$99.2 billion. Numbers like that don’t just sit on balance sheets—they ripple across factories, job markets, and policy desks.

Contents

Running Fast, but the Finish Line Moves Navigating Vulnerabilities Thawing Borders and Diplomatic Signals The Real Impact on Indian Industry Behind the Scenes: Companies and Leaders Dollars, Deficits, and Domestic Dollars The Upside and Downside Looking Ahead FAQs

I spoke with a few analysts, and they framed it this way:

“India is running fast, trying to catch up, yet China seems to be leading the finish line. And they’re not wrong. India’s imports are high-value industrial goods—electronics, EV batteries, solar cells—while exports are largely raw materials and low-tech products.”

Running Fast, but the Finish Line Moves

Trade has grown significantly over the last decade. Indian consumers get access to affordable electronics, smartphones, and machinery. Industries rely on Chinese inputs for production, quality, and competitiveness.

But the structural imbalance is glaring. Imports keep surging while exports stagnate. It’s not just about numbers—it’s about strategic dependency. Industries like electronics, renewable energy, and pharmaceuticals rely heavily on Chinese components. Supply disruptions or policy changes in China could hit Indian factories hard.

Navigating Vulnerabilities

India isn’t standing still. The government has rolled out Production-Linked Incentive (PLI) schemes across 14 sectors, tightened quality controls, and is pushing for supplier diversification. The aim: reduce dependency without slowing growth.

Analysts liken it to a relay race. India is sprinting, but it needs to also secure its baton—its industries and supply chains—before the next lap.

Thawing Borders and Diplomatic Signals

Trade isn’t just numbers; it’s politics too. Passes like Lipulekh, Shipki La, and Nathu La were closed after the Galwan Valley clash in 2020. Now, slowly, India and China are reopening these channels. Border trade might be small in volume, but it signals goodwill and lays the groundwork for stability in broader trade relations.

Diplomatic gestures matter too. The Chinese Ambassador to India, Xu Feihong, has expressed support for Indian investments into China. Behind these statements is a recognition: even rivals need each other in the global supply chain game.

The Real Impact on Indian Industry

Here’s where it gets personal. Factories across India are feeling the pressure. MSMEs in electronics, solar equipment, and EV components struggle to compete with cheaper imports. Average wages have slowed in manufacturing hubs, and job growth in some sectors has plateaued.

On the flip side, sales, production support, and non-core service roles are seeing growth—but often at lower pay. Analysts point to rare-earth curbs by China: over 21,000 jobs in India’s audio-electronics sector are under threat.

The government’s PLI schemes are a strategic counter. Incentives in electronics, textiles, and pharmaceuticals are creating new employment hubs, nudging industries toward domestic manufacturing, and slowly rebalancing the labor market.

Behind the Scenes: Companies and Leaders

Trade isn’t just about policy—it’s about people and companies navigating opportunities and constraints. Take Apple, for instance. In FY 2024-25, iPhone production in India surged 60%, reaching ₹1.89 lakh crore. Foxconn, Tata Electronics, and Pegatron are assembling devices in India, partially thanks to government PLI incentives.

Chinese firms like Haier, Shanghai Highly Group, and SAIC Motor are also adapting. Equity restructuring, partnerships, and joint ventures allow them to operate while complying with India’s FDI norms. Senior executives, like Vivo India’s Jerome Chen or Realme’s Michael Guo, are taking more active leadership roles locally, enabled by relaxed visa and work-permit rules.

It’s a delicate dance of corporate strategy and government policy—one misstep could affect billions in trade and thousands of jobs.

Dollars, Deficits, and Domestic Dollars

Financially, the picture is clear. Imports of electronics, EV batteries, and solar cells surged 25% YoY in some months. That puts pressure on India’s foreign exchange reserves while undercutting domestic manufacturers. Exports to China have remained slow, limiting relief from the trade deficit.

India is eyeing anti-dumping duties, tighter import rules, and domestic manufacturing incentives to correct the imbalance. With the right moves, this trade relationship can be recalibrated. Without them, the deficit could erode India’s financial foundations, weaken the rupee, and strain industries.

The Upside and Downside

The benefits:

Affordable consumer goods and industrial machinery for Indian businesses and households.
Critical inputs for pharma, electronics, and renewable energy sectors.
Chinese investments and technology transfers fueling “Make in India.”
Infrastructure projects and potential growth in renewable energy collaboration.

The costs:

Massive trade deficit of US$99.2 billion in FY 2024-25.
Dependence on Chinese imports creates strategic and supply-chain vulnerabilities.
Competition from low-cost Chinese goods challenges MSMEs and domestic industries.
Limited market access for Indian exports restricts economic leverage.

Looking Ahead

India-China trade is a story of contrasts: opportunities intertwined with vulnerabilities. India gains access to technology, affordable goods, and industrial inputs, but the structural deficit, strategic dependence, and competitive pressures are constant challenges.

The government’s policies—PLI schemes, import diversification, stricter certification, and border trade reopening—are steps in the right direction. Yet the finish line isn’t just trade volume—it’s about sustainable growth, industrial capability, and strategic autonomy.

India is running fast. The question is whether it can change the dynamics, narrow the deficit, and even the race. If successful, India could transform from a participant in this trade marathon to a formidable contender—one capable of dictating its pace, rather than chasing someone else’s.

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FAQs

Why is India’s trade deficit with China so high?

High-value imports like electronics and EV components outpace low-value Indian exports, leading to a structural imbalance.

How does India benefit from trade with China?

Access to affordable goods, industrial inputs, technology transfers, and infrastructure investment.

What risks arise from dependency on Chinese imports?

Supply chain disruptions, strategic vulnerabilities, and exposure to geopolitical tensions.

How is India addressing these challenges?

Through PLI schemes, stricter import quality standards, supplier diversification, and trade remedies like tariffs.

Which sectors are most affected?

Electronics, renewable energy, EV manufacturing, pharmaceuticals, and MSMEs exposed to imports.

Are Chinese companies still investing in India?

Yes. Firms like Haier, SAIC Motor, and Shanghai Highly Group are active through partnerships, joint ventures, and infrastructure projects.

Can India reduce the trade deficit?

With strengthened domestic manufacturing, diversified suppliers, and strategic export initiatives, India has a path to narrowing the deficit.