Bridging the Gap: India’s Thoughtful Approach to China Trade in 2025

Image Source: KNN India

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

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.
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?

India relies heavily on Chinese intermediate goods and raw materials, especially for electronics, pharmaceuticals, chemicals, and textiles.
Chinese imports are often cheaper and more varied, thanks to China’s manufacturing scale and global supply chain integration.
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

India is doubling down on its “Make in India” and Production-Linked Incentive (PLI) schemes to boost local manufacturing and reduce import dependence.
The government has imposed anti-dumping duties on several Chinese products and is actively monitoring for dumping and transshipment through third countries.
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

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.
India is cautious but pragmatic—open to fair trade talks if China reciprocates, but firm on protecting national interests and critical sectors.

Looking Ahead

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.
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