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Trade: How India became dangerously addicted to Chinese imports
Overview
Despite political and security tensions, India's trade deficit with China has ballooned from $44bn in 2020 to $112bn, driven by deep reliance on Chinese industrial inputs, raw materials, and components. While India has successfully reduced dependence in isolated sectors like toys through higher tariffs, its broader manufacturing economy remains heavily dependent on Chinese supplies, and Indian exporters continue to face tariff and non-tariff hurdles in the Chinese market.
Key points
- India's trade deficit with China increased from $44bn in 2020 to $112bn.
- China supplies over 30% of India's industrial imports and over 100 critical products.
- India's toy sector successfully reduced imports and dependence on China through higher tariffs and quality standards.
- India remains heavily dependent on Chinese components for assembly-based manufacturing, including electronics, machinery, and solar equipment.
- China's excess industrial capacity and slowing domestic economy have driven cheap exports to overseas markets like India.
- Indian companies continue to face significant tariff and non-tariff hurdles when trying to access the Chinese market.