The widening trade gap between India and China has emerged as a serious challenge to India’s economic security. The biggest concern is that India’s trade deficit with China has surged to a massive $100 billion. This means India imports far more goods from China than it exports.
Experts, including the Global Trade Research Initiative (GTRI), have raised warnings, stressing that the issue requires urgent attention.
Let’s break it down and see how India is planning to curb it.
What’s Happening?
The India-China trade imbalance has reached an alarming level. In 2024-25, India’s trade deficit with China surged to a record $99.2 billion. According to official data, India’s imports from China touched $113.5 billion in 2024-25.
India’s trade deficit with China is close to $100 billion, reflecting a significant gap between imports and exports.
In contrast, India’s exports to China were only $14.3 billion, showing a 14.5% decline compared to the previous year. Among these, iron ore exports fell by nearly half, while products like spices and organic chemicals made only limited contributions.
Furthermore, bilateral trade stood at $127.7 billion, making China India’s second-largest trading partner after the US.
India’s Dependency on China
According to a GTRI report, more than 70% of India’s essential needs are met by China, highlighting a serious imbalance in the country’s economic structure.
Data reveals that China contributes 57.2% of India’s telecom and electronics imports, 44% of machinery and hardware, and 28.3% of chemicals and pharmaceuticals.
All the products and sectors showcased above reflect India’s dependence on China of over 50%, which is the main concern.
It is not just industries; even everyday items like embroidery machinery and viscose yarn are imported in large quantities from China. The most concerning fact is that India’s share in bilateral trade has fallen sharply from 42.3% two decades ago to just 11.2% today.
Additionally, imports of low-tech consumer goods such as ceramic tiles, plastic furniture, lighting products, and even headgear have surged by more than 150%.
Government Initiatives
The Government of India has approved a PLI (Production-Linked Incentive) scheme worth Rs 18,100 crore to reduce import dependence and boost domestic cell production. The target is to develop 50 GWh of ACC capacity, out of which 40 GWh has already been allocated to Hyundai Global Motors, Ola Electric, Rajesh Exports, and Reliance New Energy Solar. This will be useful across sectors such as e-vehicles, energy storage, electronics, railways, and defence.
Additionally, the initiative is expected to attract nearly Rs 45,000 crore in investments and reduce India’s oil import bill by up to Rs 2,00,000 crore. The remaining 10 GWh capacity has been reserved for grid-scale stationary storage (GSSS) in the power sector.
Furthermore, Madhya Pradesh Chief Minister Mohan Yadav announced the discovery of a large reserve of Rare Earth Elements (REEs) in the Singrauli district on August 19, 2025. He said the discovery would reduce India’s dependence on China and help establish the state as a hub for critical minerals.
What’s in it for Investors?
For investors, the current situation presents mixed signals. On one hand, the increasing dependence on China raises geopolitical risks; on the other, government policies are actively promoting domestic manufacturing. This is not just a trade concern but a competitiveness challenge.
The current data serves as a wake-up call for India to bridge its manufacturing gaps and build strong industrial capabilities. Without this, the trade deficit will widen, and dependence on China will deepen. For investors, this is a moment to carefully weigh both risks and opportunities and make well-informed strategic decisions.
What’s Next?
As mentioned in Deccan Chronicle, Ajay Srivastava, Founder of GTRI, believes that India will need to adopt a dual strategy to reduce its growing dependence on China. First, by running reverse-engineering programs in collaboration with IITs and CSIR labs to deconstruct imported products and prepare open-access blueprints for them. Second, by promoting deep-tech manufacturing and building a domestic ecosystem in critical sectors like chips, PCBs, sensors, and batteries, which can be supported by the recently announced Rs 10,000 crore Innovation Fund.
Srivastava also suggested that India should conduct strict screening of Chinese investments in sensitive sectors such as telecom, power equipment, fintech, and logistics, while simultaneously deepening partnerships with Japan, Taiwan, and the European Union.
*The companies mentioned in the article are for information purposes only. This is not investment advice.
*Disclaimer: Teji Mandi Disclaimer
