India Is Exporting More to China Than Ever—So Why Is the Gap Still Widening?

A striking development has emerged in India–China trade data. Reports indicate that India’s exports to China surged by nearly 90% within a single month. At first glance, this appears to be a remarkable achievement. However, a deeper examination reveals a more complex and less encouraging reality.

Despite the sharp rise in exports, the base value remains very small. In contrast, imports from China are vastly higher—roughly ten times greater. As a result, instead of narrowing, India’s trade deficit with China has widened significantly. This contrast is captured clearly in the headline: India’s exports to China rise sharply, but a multi-billion-dollar trade deficit persists.

To understand this contradiction, it is important to look at both sides of the equation—what has changed in exports and why the deficit continues to expand. The issue lies not in short-term growth figures but in deep structural imbalances between the two economies.

Recent trade data shows that India’s merchandise exports to China increased by approximately 70–90%. Yet during the same period, the trade deficit climbed to nearly $16 billion. This is not a paradox; it reflects the enormous difference in scale, composition, and competitiveness between Indian and Chinese trade flows.

A trade deficit occurs when the value of imports exceeds exports. Even if exports grow, the deficit will worsen if imports rise at an equal or faster pace. For example, if exports increase modestly while imports surge substantially, the gap widens rather than closes. This is precisely what is happening in India–China trade.

In November 2025, India’s goods exports to China rose year-on-year from approximately $1.2 billion to about $2.2 billion—nearly a 90% increase. Similarly, between April and November, exports grew by around 33% compared to the previous year. While these percentages appear impressive, the absolute values remain low.

High growth rates do not automatically translate into large trade volumes. China exports goods worth $10–12 billion to India in a single month, while India’s exports barely cross $2 billion. The gap remains enormous, regardless of percentage growth.

India’s exports to China are largely concentrated in low value-added categories such as refined petroleum products, petrochemicals, naphtha feedstocks, organic and inorganic chemicals, pharmaceutical intermediates, and select electronic components. These goods are price-sensitive, cyclical, easily replaceable, and generate limited strategic leverage.

On the other hand, India’s imports from China are both massive and critical. Annual imports are expected to exceed $120 billion. Over recent years, exports have hovered between $15–18 billion, while imports have climbed steadily—from $87 billion to well over $120 billion. The result is a consistently expanding trade deficit.

China remains India’s largest source of imported goods. Even a $2–3 billion increase in exports makes little impact when import volumes are this large.

The composition of imports explains much of this dependence. India imports high-value and essential items such as electronics, electrical machinery, mobile phone components, displays, batteries, capital goods, industrial machinery, power equipment, solar modules, chemicals, plastics, and polymers. These inputs are vital for domestic manufacturing and are not discretionary in nature.

Several structural factors drive this imbalance.

First, there is a profound manufacturing asymmetry. China operates as a global manufacturing powerhouse with deep, integrated supply chains and massive economies of scale. India’s manufacturing ecosystem is still developing, fragmented, and costlier.

Second, India’s manufacturing depth remains limited. Many products assembled domestically rely heavily on imported components. While imports are fully accounted for, domestic value addition remains low. Without localized component manufacturing, export-led growth remains constrained.

Third, market access barriers persist. Indian exporters face regulatory opacity, non-tariff barriers, and limited entry into Chinese markets, particularly in pharmaceuticals, agriculture, and services. Trade openness remains largely non-reciprocal.

Fourth, export diversification is weak. India does not significantly export advanced engineering goods, high-end machinery, or sophisticated technology products to China. The export basket is dominated by raw and semi-processed materials.

This raises a critical question: can export growth alone resolve the trade deficit? The answer is no. Even under optimistic projections, exports would need to multiply several times over—or imports would need to fall dramatically—to meaningfully reduce the gap. Neither scenario appears realistic in the short term.

The implications are both economic and strategic. Economically, the deficit exerts pressure on the current account, contributes to currency depreciation, increases imported inflation, and exposes vulnerabilities in domestic manufacturing. Strategically, dependence on a geopolitical rival weakens bargaining power and creates risks during global disruptions, as seen during the pandemic.

India has begun addressing these challenges through industrial incentives, production-linked schemes, and efforts to expand domestic manufacturing capacity. Progress is visible in sectors such as electronics and mobile phone assembly. However, the transition toward a fully developed, high-value manufacturing ecosystem remains incomplete.

In conclusion, the headline-grabbing surge in exports tells only part of the story. Behind the impressive percentages lies a persistent structural imbalance that continues to define India–China trade relations. Understanding this reality is essential to interpreting trade data beyond surface-level optimism.

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