India’s trade relations with China have witnessed notable shifts in recent years, marked by a surge in exports driven primarily by raw materials and minerals, despite lingering concerns over the trade deficit.
According to commerce ministry data, India’s exports to China recorded a noteworthy increase of 8.74% in the fiscal year 2023-24, reaching $16.67 billion compared to $15.33 billion in the previous fiscal year. In contrast, imports from China expanded by 3.29% to $101.75 billion during the same period.
The rise in India’s exports to China comes against the backdrop of efforts to diversify trade strategies and enhance domestic manufacturing capabilities. Key drivers of India’s export growth include electronic goods, pharmaceuticals, engineering goods, iron ore, cotton yarn/fabric, handloom products, and ceramic products & glassware. China’s economic landscape has faced challenges such as declining property investment, increasing debt risks, and sluggish consumption growth. In 2023, China witnessed a contraction in merchandise exports for the first time since 2016, indicating underlying economic pressures. Despite this, India’s exports to China have demonstrated resilience, particularly in sectors such as iron ore, cotton yarn, cotton, quartz, unwrought aluminium, and sanitary items.
India’s merchandise trade deficit with China narrowed to $15.6 billion in March, reflecting ongoing efforts to manage trade imbalances. The Indian government has been actively pursuing free-trade agreements (FTAs) with major economies, including the US, UK, Australia, Japan, Peru, Chile, and Asean countries, aiming to diversify trade partnerships and reduce dependence on any single market. To bolster domestic manufacturing and reduce reliance on imports, the government has introduced initiatives such as the production-linked incentive (PLI) schemes across critical sectors like electronics, pharmaceuticals, white goods, and telecom products. These measures have contributed to a reduction in India’s dependence on imports, exemplified by the decline in mobile handset imports from ₹48,609 crore in FY15 to around ₹6,685 crore in FY23. Overall, India’s evolving trade dynamics with China underscore the significance of strategic initiatives aimed at enhancing export competitiveness, reducing trade deficits, and fostering sustainable economic growth in the region.
