India-China trade gap: Deficit widens to $99.2 billion in 2024-25; how New Delhi plans to reduce dependence

India-China bilateral trade has expanded steadily over the years, but the trade gap remains heavily skewed in China’s favour, raising long-standing concerns in New Delhi.Prime Minister Narendra Modi, during his recent statement on August 29, said it is vital for India and China to work together to stabilise the global economic order.

He emphasised that India is prepared to advance bilateral relations from a strategic and long-term perspective, based on mutual respect, mutual interest, and mutual sensitivity.Here’s a closer look at the trade-related issues shaping the India-China economic relationship:Bilateral trade figures and the widening deficitDuring April-July 2025-26, India’s exports to China rose 19.97% to $5.75 billion, while imports increased 13.06% to $40.65 billion.

In the 2024-25 fiscal year, India exported goods worth $14.25 billion to China, while imports reached $113.5 billion, according to PTI.The trade deficit—calculated as the difference between imports and exports—has expanded from $1.1 billion in 2003-04 to $99.2 billion in 2024-25. China accounted for around 35% of India’s total trade imbalance, which stood at $283 billion last fiscal. The deficit was $85.1 billion in 2023-24.

Why the trade deficit is a concernExperts note that the trade gap is not just large but structural. China now dominates India’s import basket across multiple industrial categories, including pharmaceuticals, electronics, construction materials, renewable energy, and consumer goods, according to think tank GTRI.GTRI analysis shows that in certain key products, China supplies over 75% of India’s needs. For example:

GTRI Founder Ajay Srivastava warns that such overwhelming dependence gives Beijing potential leverage over India, making supply chains a possible tool of pressure during political tensions.India’s share of bilateral trade has declined to 11.2% today from 42.3% two decades ago. However, the commerce ministry clarifies that most imports from China are raw materials, intermediate products, and capital goods—including auto components, electronic parts, mobile phone parts, machinery, and active pharmaceutical ingredients—which are later used to produce finished goods for domestic consumption and exports.

The dependence largely reflects the gap between domestic supply and demand.Measures to reduce import dependenceIndia has taken several steps to curb dependence on Chinese imports. Production-linked incentive (PLI) schemes have been introduced for more than 14 sectors to boost domestic manufacturing. Stricter quality standards, testing protocols, and mandatory certification are also being enforced to prevent substandard products from entering the market.The government encourages Indian businesses to explore alternative suppliers to diversify supply chains and reduce reliance on single sources. Authorities continuously monitor import surges and take corrective action when necessary.Additionally, the Directorate General of Trade Remedies (DGTR) is empowered to recommend trade remedial measures against unfair practices. India has imposed anti-dumping duties on several Chinese goods, ranging from chemicals to engineering products, to protect domestic manufacturers from cheaper imports.Implications of the rising trade deficitThe ballooning trade deficit exerts pressure on foreign exchange reserves and increases dependence on external suppliers. While cheaper imports may benefit consumers in the short term, they can hurt local manufacturers. Over-reliance on imports could also lead to currency depreciation, driving up the cost of imported goods and fuelling inflation.Experts warn that such dependence reduces incentives to build domestic manufacturing capacity in strategic sectors, potentially slowing long-term industrial growth and innovation.