India’s goods trade deficit with China surged 13 per cent in the first seven months of the fiscal, underlining persistent dependence on Chinese imports despite efforts to diversify supply chains and curtail imports of certain products.
The potential escalation of the US-China trade war could further exacerbate the issue.As the US imposes higher tariffs on Chinese goods, China may seek alternative markets, including India, to offload its excess production. This could flood Chinese goods into the Indian market, further widening the trade deficit.
The deficit widened to $57.83 billion between April and October compared with $51.12 billion a year earlier, according to government data.
October alone saw a deficit of $8.46 billion, slightly higher than the $8.27 billion reported during the same month in 2023. China retained its position as India’s largest import source, far outpacing Russia and the UAE.
Imports from China reached $65.9 billion during the April-October period, up from $60 billion a year earlier, while exports to China fell to $8.06 billion from $8.89 billion.The growing gap comes as Chinese goods dominate India’s industrial imports, with their share climbing to 30 per cent from 21 per cent over 15 years.
Electronics, telecom equipment and electric vehicles remain critical sectors heavily reliant on Chinese inputs, including lithium-ion batteries essential for India’s green energy ambitions.
“India’s reliance on China is set to deepen,” said Ajay Srivastava, founder of the Global Trade Research Initiative.“Eighty to 95 per cent of inputs for electronics, EVs, and smartphones under India’s production-linked incentive schemes are sourced from China.”
Nomura projects that Donald Trump’s potential re-election could trigger sweeping tariffs, including a 60 per cent duty on all Chinese imports, forcing Beijing to redirect exports.
Two bills in the US Senate — the PNTR Act and ANTE Act — could further escalate the trade war by imposing tariffs on Chinese goods and penalising Chinese-owned factories operating abroad.
