India’s Trade Deficit with China Touches $99.2 Billion

1. India’s trade deficit with China soared to $99.2 billion in the fiscal year 2024–25, raising concerns over growing dependency and strategic vulnerabilities.
2. This sharp increase is primarily due to a significant surge in imports of electronic goods, such as EV batteries and solar cells, along with other consumer durables.
3. Meanwhile, India’s exports to China declined to just $14.3 billion during the same period, further widening the gap.

Key Concerns Arising from Rising Trade Deficit with China

1. Pressure on Domestic Manufacturing: Low-cost imports from China put Indian manufacturers, especially in sectors like steel, chemicals, and electronics, at a serious disadvantage.
2. Strategic Supply Chain Dependence: Persistent reliance on Chinese goods exposes India to external shocks and vulnerabilities, especially in critical sectors.
3. National Security Implications: China could potentially leverage India’s dependency during border tensions or diplomatic negotiations, posing a strategic risk.
4. Risk of Trade Diversion: Owing to high US tariffs, Chinese goods could be redirected towards India, increasing the risk of dumping at unfair prices.
5. Bypassing US Trade Barriers: India could unintentionally become a transit point for Chinese goods into US markets, damaging India’s strategic ties with the US.
6. Economic Impact: A continuously rising deficit leads to a sustained outflow of foreign exchange, impacting India’s external account stability.

Key Steps Taken by India to Address Trade Deficit with China

1. Boosting Domestic Production: Through initiatives like the Production Linked Incentive (PLI) scheme and Make in India, India aims to strengthen local industries and reduce import dependence.
2. Building Local Supply Chains: Creation of Bulk Drug Parks and support for indigenous production in pharma and electronics to reduce reliance on Chinese inputs.
3. Export Promotion Measures: Incentives like the RoSCTL (Rebate of State and Central Levies and Taxes) and the Interest Equalisation Scheme (IES) aim to make Indian exports more competitive globally.
4. Trade Remedies and Regulatory Actions: Use of tools like Anti-Dumping Duties, Safeguard Measures, and the Market Access Initiative (MAI) scheme to protect domestic industries and ensure fair trade practices.

 

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