India’s Trade Deficit with China Hits Record $99.2bn: Manufacturing Gaps to Blame?

India's bilateral trade with China has become highly imbalanced with exports falling and imports rising. According to data released by the Ministry of Commerce and Industry on Wednesday, exports to China declined nearly 3% in March and dropped over 14% across the financial year.

In contrast, India's imports from China have grown rapidly and reached 25% in March alone to $9.6bn and over 11% year-on-year to $113.4bn, data revealed. As a result, India's trade deficit with China has widened to a record high—reflecting a persistent and growing dependency on Chinese goods—particularly in sectors like electronics, machinery, and chemicals. China is India’s top supplier in all eight major industrial product categories.

"India’s trade deficit with China hit a staggering $99.2bn in FY2025—a record gap that reflects deeper structural dependencies, not just trade imbalances," states Ajay Srivastava, founder of Global Trade Research Initiative (GTRI).

He further notes that the production linked incentive (PLI) schemes are fueling import growth due to their heavy reliance on imported components.

India's exports dipped to $14.2bn in FY25, lower than they were in FY2014, when the rupee was significantly stronger. "This signals more than a trade issue; it’s a competitiveness crisis. These numbers are a wake-up call: India needs to fix its internal manufacturing gaps and invest in deep industrial capabilities," Srivastava cautions.

On the brighter side, India has significantly increased its exports to the United States, rising by over 35% compared to March last year, reaching $10.1bn. Annual exports to the US also climbed nearly 12% over FY25. Imports from the US, while also growing, did so at a more modest pace—just under 10% for March and around 7.4% to $45.33bn in FY25 against $42.2bn in FY25.

India-China Bilateral Trade

India-China bilateral trade grew immensely since 2000, making China as India’s largest goods trading partner by 2011-2012. Between 2016 and 2023, trade between them grew by 66.38%. In 2023, the overall trade with China decreased by 1.66% year-on-year to reach $115.82bn, still crossing the $100bn mark for a third time in a row.

As per the latest data, China emerged as India's second biggest trading partner in 2024/25, with two-way trade of $127.7 billion, after the United States.