India’s trade relationship with China has witnessed a significant shift, with exports surging by 90% in November to reach $2.2 billion. However, this surge conceals a more complicated reality, as outlined in a recent report by the Global Trade Research Initiative (GTRI). The report indicates that while exports have grown substantially over the past year, they are focused on a narrow range of products, prompting concerns about India’s increasing reliance on Chinese imports.
Driving Forces Behind Export Surge
The notable rise in India’s exports to China can be attributed mainly to key products, especially naphtha and electronics. Ajay Srivastava, founder of GTRI, noted that naphtha exports have increased dramatically, soaring by 512% in October alone, and 172% from April to October, totaling $1.4 billion. This surge is primarily driven by strong demand for petrochemical feedstocks in China. Moreover, the electronics sector has experienced unprecedented growth, with printed circuit board exports climbing to $296.5 million in October, reflecting an astounding 8,577% year-on-year increase. Shipments of mobile phone components increased by 82% to $362 million, despite India’s significant imports of these components from China. In contrast, traditional exports like iron ore have seen a downturn, declining by 1.2% in October and 30% from April to October, highlighting a shift in the dynamics of India’s trade with China.
India’s Import Landscape
India’s imports from China are predominantly concentrated in four major categories: machinery, electronics, plastics, and organic chemicals, which together comprise nearly 80% of total imports. From January to October 2025, electronics topped the list with imports amounting to $38 billion, including substantial quantities of mobile phone components, integrated circuits, and laptops. Machinery imports closely followed at $25.9 billion, revealing India’s dependency on Chinese capital goods for various industrial projects. Organic chemicals, particularly antibiotics, accounted for $11.5 billion, showcasing China’s dominance in the pharmaceutical intermediates sector. The data indicates that India’s import expenditures from China primarily stem from sectors that are difficult to replace quickly, contributing to a persistent trade deficit despite ongoing efforts to diversify supply chains.
Mounting Trade Deficit Concerns
The GTRI report raises alarms regarding India’s escalating trade deficit with China, which is approaching unprecedented levels. The trade relationship remains significantly imbalanced, marked by weak exports and escalating imports. Exports are projected to decrease from $23 billion in 2021 to an estimated $17.5 billion in 2025, contrasted by imports, which are expected to surge from $87.7 billion in 2021 to approximately $123.5 billion in 2025. This widening gap is anticipated to create a trade deficit of $106 billion for 2025. Furthermore, discrepancies in data between China and India complicate the situation, with Chinese estimates suggesting an even larger trade deficit. The report underscores the need for urgent attention to the imbalanced nature of trade between the two nations and a reevaluation of strategies aimed at enhancing India’s export capabilities and reducing reliance on imports.
Digihunt is not a financial advisor and this is not investment advice.