India’s merchandise trade deficit with China is just a few million dollars shy of touching a staggering level of $100 billion. Even as the global trade has been subdued, and India’s own imports growth has slowed amid geopolitical tensions, New Delhi’s trade gap with Beijing surged 16.6% on year to $99.2 billion in FY25, according to official data.
This flies in the face of the notion that India has been trying to curb influx of Chinese goods into the country. More accurately, then neighbouring country, whose economy has seen steady and fast ascendancy in recent decades, has not only withstood any restrictions put by India, but managed to keep the pace of growth of its exports to southern neighbour.
To be sure, as per China’s own statistics, It had trade surplus of $103 billion with India in 2024, way higher than the $57 billion reported in 2019.
According to trade analysts, the steady increase India’s trade deficit with China reflects the former’s huge dependence on its northern neighbour for industrial inputs and consumer goods, despite political tensions and barriers to full economic exchanges.
India’s imports from China were up 11.5% on year at $ 113.4 billion in FY25, while exports contracted 14.5% to $ 14.2 billion. Barring small spikes seen in 2020-21 and 2021-22 the exports to China have hovered around $ 15 billion.
The biggest imports from China have been machinery, electronics parts, plastics, chemicals and metals that feed directly into industrial processes as raw materials. In the April-January period of 2024-25 for which product-wise import data is available, around $ 53.2 billion of imports consisted of mechanical and electrical machinery and parts. In the same period imports of organic and other chemicals were $ 10.9 billion while plastics imports were $ 5.3 billion.
Similarly imports of steel, aluminium, copper and nickel were $ 6.33 billion. India’s exports to China comprise machinery ($ 1.6 billion), ores ($ 1.5 billion), marine and animal products.
“Imports from China are driven by rising demand for electronics, EV batteries, solar cells, and key industrial inputs—sectors where China dominates India’s supply chains. China is India’s top supplier in all eight major industrial product categories. The PLI schemes are fueling import growth due to their heavy reliance on imported components,” founder of Global Trade Research Initiative Ajay Srivastava said.
What’s more alarming is that India’s exports to China fell 14.5%, dipping to $14.2 billion, lower than they were in FY14, 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. Without that, the deficit will only grow—and so will our dependency,” Srivastava added.
In FY25 too, the US remained the biggest trade partner and market for Indian exports with shipments growing at 11.6% to $ 86.51 billion while imports grew 7.4% to $ 45.3 billion.
After the US, the United Arab Emirates (UAE) is the second biggest export destination with shipments growing at 2.8% to $ 36.6 billion. The imports from UAE – a major FTA partner – grew 32% on year to $ 63.4 billion. Russia was the second biggest import source growing at 4.3% to $ 63.8 billion. The major item of import from Russia is crude oil and decline in their international prices muted the growth in 2024-25.
The third biggest market for India in the last financial year was the Netherlands with exports growing at 1.7% to $ 22.76 billion followed by the UK with a growth of 12.0% and sales of $ 14.5 billion. The Netherlands takes in large volumes of refined petroleum products and smartphones.