India's economic ties with China continue to deepen, marked by a growing trade imbalance despite efforts to diversify supply chains and boost domestic manufacturing. Recent data indicates that India's imports from China are on track to surpass previous records, driven by a combination of factors including the demand for cheap exports and reliance on Chinese components for domestic production.

In the fiscal year 2024-25, India's trade deficit with China reached $99.2 billion, a significant increase from $85.1 billion in 2023-24. This means India imports significantly more goods from China than it exports. During April-July 2025-26, India's exports to China saw an increase of 19.97% to $5.75 billion, while imports also rose by 13.06% to $40.65 billion. For the full fiscal year 2024-25, India's exports to China totaled $14.25 billion, while imports soared to $113.5 billion. This widening gap is a cause for concern, as it exacerbates India's dependency on Chinese goods.

Several factors contribute to this growing trade deficit. China dominates India's import basket in key industrial categories, including electronics, pharmaceuticals, construction materials, renewable energy, and consumer goods. In some critical products, China supplies over 75% of India's needs. For example, China accounts for a significant portion of India's imports in antibiotics like erythromycin (97.7%), silicon wafers (96.8%), flat panel displays (86%), solar cells (82.7%), lithium-ion batteries (75.2%), laptops (80.5%), embroidery machinery (91.4%), and viscose yarn (98.9%).

One of the primary reasons for the continued reliance on Chinese imports is their cost-effectiveness. Chinese manufacturers offer goods at competitive prices, making them attractive to Indian businesses and consumers. Additionally, many Indian industries rely on raw materials, intermediate products, and capital goods from China to produce finished goods for domestic consumption and export. These include auto components, electronic parts, mobile phone parts, machinery, and active pharmaceutical ingredients.

The Indian government has taken steps to reduce dependence on Chinese imports, including Production Linked Incentive (PLI) schemes, import restrictions, anti-dumping duties, and increased quality control checks. These measures aim to protect domestic manufacturers and encourage local production. The PLI scheme, for example, provides financial incentives to companies that manufacture in India, targeting sectors like electronics, mobile phones, solar panels, chemicals, and auto components.

However, despite these efforts, India's dependence on Chinese imports persists. Recently, India's imports from China reached a record $12.5 billion in a single month. This surge was partly driven by Apple suppliers shifting iPhone production to India, but these companies still rely heavily on Chinese parts and tooling. In July 2025, China shipped approximately $1 billion worth of computer chips to India, along with billions more in phones and components to support electronics assembly.

To counter this imbalance, India is also exploring new trade partners in Southeast Asia, the USA and Europe. These regions offer alternative markets for Indian products and alternative import sources.