Why India’s Trade Gap With China Keeps Growing

Picture Credit: The China Global South Project

India’s trade deficit with China is set to cross $100 billion for the first time, reflecting a widening economic imbalance between the two Asian giants. The growing gap underscores how deeply India’s industries rely on Chinese imports, even as policymakers attempt to strengthen domestic manufacturing and diversify supply chains.

According to data from the Ministry of Commerce and Industry, India imported goods worth $119.56 billion from China between April 2025 and February 2026, compared to $103.77 billion during the same period a year earlier. Meanwhile, exports from India to China reached just $17.54 billion, resulting in a trade deficit of more than $102 billion in the first 11 months of the fiscal year. Analysts estimate the full-year deficit could rise to around $111 billion if current trends continue.

Experts say the imbalance is largely driven by India’s dependence on Chinese manufacturing inputs. Key sectors including electronics, electric vehicle batteries, solar components, machinery, and pharmaceutical ingredients rely heavily on imports from China. While India has expanded manufacturing in areas such as mobile phones, many of the essential components still come from Chinese suppliers, limiting the country’s ability to reduce the deficit quickly.

Economists also point to China’s long-established manufacturing advantages. The country produces goods at massive scale and holds strong positions in specialized sectors such as rare earth materials. As a result, India often exports raw materials like iron ore while importing finished products from China, allowing Chinese manufacturers to capture a much larger share of the value chain.

Despite these challenges, some analysts believe the situation could evolve in the coming years. India has recently begun easing restrictions on Chinese investment in domestic companies, potentially allowing Chinese firms to manufacture within the Indian economy instead of exporting finished goods. With its large population, lower labor costs, and growing industrial base, India still aims to strengthen its position as a global manufacturing hub, though narrowing the gap with China may take time.