The High-Stakes Game of Trade and Tactics
India’s economic relationship with China in 2025 is a balancing act—marked by record trade, a stubborn deficit, and a push for self-reliance. As both countries navigate global headwinds and shifting alliances, India is recalibrating its approach to protect its interests while keeping the doors open for opportunity.
Trade Deficit Nears $100 Billion
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India’s trade deficit with China hit a record $99.2 billion in FY 2024–25, driven by a surge in imports of electronics, batteries, and solar components.
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Imports from China reached $113.5 billion, while exports to China fell to $14.3 billion, making China India’s second-largest trading partner after the US.
Why the Gap?
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India relies heavily on Chinese intermediate goods and raw materials, especially for electronics, pharmaceuticals, chemicals, and textiles.
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Chinese imports are often cheaper and more varied, thanks to China’s manufacturing scale and global supply chain integration.
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India’s exports to China are mostly low-value raw materials, while Indian firms face regulatory barriers and limited demand in China’s market.
Policy Moves and Pushback
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India is doubling down on its “Make in India” and Production-Linked Incentive (PLI) schemes to boost local manufacturing and reduce import dependence.
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The government has imposed anti-dumping duties on several Chinese products and is actively monitoring for dumping and transshipment through third countries.
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India is also working to diversify its supply chains, sign new free trade agreements, and attract investment as part of the global “China+1” strategy.
Diplomatic and Strategic Dimensions
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While border tensions persist, there’s been a partial thaw, with both sides agreeing to revive some cross-border trade and ease select investment restrictions.
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India is cautious but pragmatic—open to fair trade talks if China reciprocates, but firm on protecting national interests and critical sectors.
Looking Ahead
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The trade tug-of-war is set to continue, with India aiming to narrow the deficit, strengthen domestic industry, and leverage its position as a top investment destination.
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Experts say the path to a more balanced relationship will be gradual, requiring sustained reforms, innovation, and assertive diplomacy.
Sources: Economic Times, Reuters, Cybex Exim, Business Standard, Vision IAS, China Briefing
