India's merchandise trade deficit with China soared to a record $99.2 billion in the fiscal year ending March 2025, driven by a surge in electronics, batteries, and industrial inputs, despite government rhetoric aimed at curbing Chinese imports and improving self-reliance.
Official trade data released Wednesday by India's commerce ministry showed imports from China reached $113.5 billion in FY25, up 11.5% from the previous year. In contrast, India's exports to China declined 14.5% to $14.3 billion, marking the sharpest annual fall in more than a decade.
The record gap comes as Chinese exporters face stiff tariff headwinds in the United States, prompting fears that surplus goods are being diverted into other major markets such as India. In March alone, Chinese imports to India surged 25% year-on-year to $9.7 billion.
"Imports from China are driven by rising demand for electronics, EV batteries, solar cells, and key industrial inputs-sectors where China dominates India's supply chains," said Ajay Srivastava, founder of the Global Trade Research Initiative. "The PLI schemes are fueling import growth due to their heavy reliance on imported components."
Imports of mechanical and electrical machinery alone totaled $53.2 billion in the April-January period. Organic and other chemicals added $10.9 billion, followed by $6.33 billion in metals including steel, copper, and aluminum, and $5.3 billion in plastics.
India's exports to China-comprising machinery, ores, marine, and animal products-have stagnated around $15 billion over the past several years. Srivastava noted that FY25 exports were lower than in 2013/14, despite a much stronger rupee at the time. "This signals more than a trade issue, it's a competitiveness crisis," he said. "Without deeper industrial capabilities, the deficit will only grow-and so will our dependency."
China remained India's second-largest trading partner in FY25, with total bilateral trade at $127.7 billion. The United States remained India's top trading partner, with exports up 11.6% to $86.5 billion and imports rising 7.4% to $45.3 billion.
The UAE was the second-largest export destination with shipments rising 2.8% to $36.6 billion, though imports from the Gulf nation surged 32% to $63.4 billion. Russia, now India's second-largest import source, supplied $63.8 billion in goods, largely crude oil.
India's widening trade gap with China is drawing increased government scrutiny. Officials said Tuesday that a new monitoring unit will be established to track the surge in low-cost imports, especially as concerns rise that Chinese exporters may be attempting to bypass U.S. tariffs through other countries.
