India’s trade deficit with China has ballooned to $112bn this year, more than doubling since 2020, as New Delhi struggles to wean its factories off Beijing’s supplies despite years of tariff hikes and political friction.

India's Prime Minister Narendra Modi (R) shakes hands with China's President Xi Jinping before the start of the 18th BRICS Summit in Delhi on 18 September 2026. — Xi and Modi have vowed to address growing trade imbalances

Diplomatic ties collapsed after the 2020 Galwan Valley clashes, prompting Delhi to ban Chinese apps and levy anti-dumping duties. Yet imports have doubled while exports to China stay below pre-pandemic levels. The gap now ranks among the most asymmetric trading relationships globally.

"China now supplies over 30% of India's industrial imports, and India depends on it for more than 100 critical products. And the imbalance is worsening," said Ajay Srivastava of the Global Trade and Research Initiative. If the current import pace holds, the deficit could climb to $134bn, handing Beijing greater leverage over Indian manufacturing.

New Delhi has successfully boosted local assembly in sectors like smartphones, now producing more than a quarter of the world's iPhones. However, factories still rely on imported components for final production. "Yet, production remains largely assembly-based and depends heavily on imported components, particularly from China," Srivastava noted.

Indian traders in Delhi wearing masks hold placards during a silent protest against China and Chinese products in 2020, after 20 Indian soldiers were killed in the skirmish with Chinese troops in the Galwan Valley. — Anti-China sentiment hit a fever pitch post border skirmishes in 2020, but relations have now thawed

The dependency spans industrial machinery, battery inputs, chemicals, and solar cells. Electrical machinery and electronics alone make up 36% of India’s imports, followed by machinery and mechanical appliances at 21.7%, according to the Observer Research Foundation. Experts warn that cutting off these supplies would halt factories rather than just reduce consumer goods.

Global market shifts are accelerating the trend. China faces excess capacity in steel, solar panels, and electric vehicles as its domestic economy slows, pushing manufacturers to sell goods cheaply overseas. Western tariffs on Chinese exports are also redirecting these products toward India, where rapid industrial expansion creates fresh demand.

At the 18th BRICS Summit in Delhi on 18 September 2026, Prime Minister Narendra Modi and President Xi Jinping pledged to tackle these structural trade imbalances. Policymakers face a difficult task untangling decades of embedded supply chains while trying to expand domestic manufacturing.

World Economy

World Economy