Despite self-reliance thrust, India's trade deficit with China record high in FY26

Despite the government's push towards self-reliance in manufacturing to reduce India’s dependence on import of critical industrial goods, the flow of goods from China into the country continues unabated in several key sectors including electronics, chemicals and machinery. With no corresponding increase in India’s exports to China, India’s trade deficit with China widened 155%, from $ 44 billion (FY2021) to $ 112.1 billion (FY2026), in the last five years, an analysis done by Delhi based Global Trade Research Initiative (GTRI) says.

Imports from China more than doubled to $131.6 billion, up from $65.2 billion, in five years while exports to China remained weak at $19.5 billion in 2025-26, below $21.2 billion in FY2021, it said.

“The imbalance is not merely about trade volumes; it reflects a highly skewed sectoral dependence. According to DGCI&S data for CY2025, 98.5% of India’s imports from China are industrial products, with agriculture, fuels, and gems and jewellery together accounting for less than 1.5%.While China represents about 16% of India’s total imports, its dominance is far more pronounced in industrial goods, where it supplies 30.8% of India’s needs”, Ajay Srivastava, founder, GTRI said. The concentration within sectors is even sharper, he adds.

GTRI analysis shows that about 66% of India’s imports from China—valued at $82.6 billion—are clustered in electronics, machinery, computers, and organic chemicals. “China accounts for 43% of India’s electronics imports, 40% of machinery and computer imports, and 44% of organic chemicals. These are not discretionary purchases but core inputs that feed directly into India’s manufacturing ecosystem”, Srivastava says.

The trade figures clearly show that Indian industry relies heavily on Chinese inputs — electronics parts, EV batteries, solar modules, APIs and specialty chemicals — that are hard to replace at scale. As a result, even as India tries to grow exports, its supply chains remain tied to China. “This creates clear risks. Dependence on a single supplier for critical inputs leaves sectors like pharmaceuticals, electronics and clean energy exposed to disruptions, whether geopolitical or commercial. At the same time, India’s exports to China remain limited, keeping the relationship one-sided”, Srivastava says. “India needs a clear diversification strategy: build domestic capacity, attract non-China suppliers, and keep single-country dependence below 30% in critical sectors”, he adds.