India’s trade deficit with China surges to a record $99.2 billion

By Admin

17 Apr, 2025

Introduction
India's trade landscape witnessed a major shift in FY25 as its trade deficit with China widened to an unprecedented $99.2 billion. This record-breaking figure has stirred discussions among policymakers, trade experts, and industrial stakeholders, raising fresh concerns about India’s over-reliance on Chinese imports, despite efforts to boost domestic manufacturing and diversify supply chains.

China Remains India’s Top Import Source
According to provisional data released by the Ministry of Commerce, China remained India’s largest import partner in 2024-25, with imports soaring to $113.46 billion—an 11.5% increase over the $101.74 billion imported in FY24. In stark contrast, India's exports to China dropped sharply by 14.5%, falling from $16.67 billion in FY24 to just $14.25 billion in FY25. This imbalance culminated in the highest-ever trade deficit between the two nations.

Sectoral Dependence & PLI Scheme Impact
Experts attribute the widening deficit not merely to trade policies but to deeper structural dependencies. China dominates India’s supply chains across all eight major industrial product categories, particularly in sectors like electronics, EV batteries, solar cells, and essential industrial inputs. As Ajay Srivastava, founder of the Global Trade Research Initiative, points out, India’s reliance on Chinese imports has been exacerbated by the Production Linked Incentive (PLI) schemes, which, while aimed at boosting domestic production, have simultaneously increased the demand for imported components due to a lack of indigenous alternatives.

March 2025 Highlights: Imports Surge, Exports Dip
The month of March 2025 highlighted the growing gap vividly. Imports from China surged by 25% to $9.67 billion, while exports dipped by 2.99% to $1.51 billion. This monthly data further underlines India’s growing import bill and falling export figures with its northern neighbor.

India Eyes Opportunity Amid US-China Tensions
Amid these growing concerns, India sees an opportunity in the escalating US-China trade war. The United States, which continues to be India’s top export destination, imposed retaliatory tariffs of 245% on Chinese goods. In light of this, India’s exports to the US saw a remarkable rise—from $77.52 billion in FY24 to $86.51 billion in FY25. Notably, March 2025 saw a 35% surge in Indian exports to the US, reaching $10.14 billion, up from $7.5 billion the previous year.

Monitoring Dumping & Trade Imbalances
India’s government is already alert to the potential risk of goods dumping by countries like China, Vietnam, and Indonesia, especially as US tariffs reroute supply chains. In response, an inter-ministerial committee has been set up to monitor import surges. This committee includes officials from the commerce ministry, Directorate General of Foreign Trade, Central Board of Indirect Taxes and Customs, and the Department for Promotion of Industry and Internal Trade.

Conclusion: Bridging the Gap
The $99.2 billion trade deficit with China is more than a statistical marker—it’s a call to action. India must urgently address its internal manufacturing bottlenecks and invest in self-reliance, especially in high-tech and industrial components. While export opportunities to markets like the US are promising, reducing dependency on Chinese imports through strategic industrial policies and infrastructure investment remains crucial for a balanced and sustainable trade ecosystem.