Recent data indicates a promising resurgence in trade relations between India and China, with Indian exports to China experiencing a significant upswing in the first quarter of the fiscal year. This positive trend signals a potential easing of tensions and a strengthening of economic cooperation between the two nations.
The numbers tell the story: Indian exports to China have grown at an annualized rate of approximately 20% in the first four months of 2025-26. This contrasts with a 4.5% year-on-year contraction in the previous period. In the first quarter of the year, exports to China reached $5.81 billion, a notable increase compared to the $3.31 billion recorded during the same period last year. The surge in exports has contributed to a reduction in the trade deficit between the two countries. Overall trade with China has also grown substantially, increasing by about 66% during the same period. These figures have raised hopes of achieving the trade target of $60 billion set by both countries for the year.
Several factors are contributing to this positive momentum. Recent high-level diplomatic engagements have played a crucial role in mending relations. India and China have agreed to reopen border trade through key passes such as Lipulekh, Shipki La, and Nathu La, which is expected to boost cross-border economic activity. Both countries have also agreed to resume direct flight connectivity and ease visa processes for tourists, businesses, media, and other visitors. These measures aim to strengthen people-to-people contact and rebuild confidence. Moreover, there's a commitment to promote trade, investment flows, and exchanges, along with the resumption of bilateral dialogue mechanisms.
China's recent decision to lift export restrictions on certain goods to India further underscores the improving trade dynamics. These goods include fertilizers, rare earth minerals, and tunnel boring machines, which are critical inputs for India's agriculture, manufacturing, and infrastructure sectors. The resumption of fertilizer exports, particularly Di-Ammonium Phosphate (DAP), is expected to benefit India's agriculture sector significantly, ensuring timely distribution for the cropping cycle. Similarly, the availability of rare earth minerals will boost the electronics, automotive, and green technology industries.
Specific sectors have witnessed remarkable growth in exports. India's electronics exports, for instance, have jumped by 47% in the first quarter of the fiscal year, with the U.S., UAE, and China being the top destinations. Furthermore, exports of cotton, yarn, and fabrics have seen a substantial increase, along with exports of copper, precious stones, and metals.
Despite the positive developments, challenges remain. India's trade deficit with China has been a long-standing concern. While the recent surge in exports is a step in the right direction, addressing the trade imbalance will require sustained efforts. Both countries recognize the need to create a more balanced economic relationship and have expressed interest in exploring cooperation in emerging sectors. Regular high-level exchanges and consistent policy implementation will be crucial in translating these principles into concrete actions.
Looking ahead, both India and China are set to host upcoming BRICS summits in 2026 and 2027, respectively. They are also committed to working jointly on events to mark the 75th anniversary of diplomatic relations in 2025. These collaborative efforts, along with a shared commitment to multilateralism and a rules-based trading system, indicate a willingness to foster a stronger and more stable bilateral relationship.
