Trade deficit with China widened to $99.2 billion in past fiscal, data show

India’s trade deficit with China swelled to $99.2 billion in the past fiscal year, about 17% higher than the $85.06 billion in the previous fiscal, amid sweeping US tariffs on Chinese merchandise goods that may have led to a surge in imports from that country.

The deficit will only grow unless India fixes internal manufacturing gaps and invests in deep industrial capabilities, analysts cautioned.

The growing imbalance signals more than a trade issue: a competitiveness crisis, Ajay Srivastava, the founder of Delhi-based think tank Global Trade Research Initiative (GTRI) said.

Indian imports from China rose 11.5% to $113.4 billion in the past fiscal, backed by growing demand for electronics, electric vehicle batteries, solar cells, and key industrial inputs—sectors where China dominates India’s supply chains.

The product-linked initiative (PLI) schemes are primarily fueling import growth due to their heavy reliance on imported components, Srivastava said, adding that China is India’s top supplier in all eight major industrial product categories.

Srivastava said that China is India’s top supplier in all eight major industrial product categories, and the record gap in imports and exports reflects deeper structural dependencies, not just trade imbalances.

On the other hand, Indian exports to China in the past fiscal declined 14.5% to $14.2 billion—now lower than they were in FY14 when the rupee was significantly stronger.

The trade numbers are a wake-up call for India, which needs to fix its internal manufacturing gaps and invest in deep industrial capabilities, Srivastava added.

Trade data released by the government on Wednesday showed China emerging as India’s second biggest trading partner in the past fiscal, with two-way trade of $127.7 billion.