India’s Trade Gravity Shifts Toward China: What $155.6 Billion in Commerce Reveals About a New Economic Reality

# Muna Chand

India–China relations have long been interpreted through the lenses of border disputes, strategic competition and the balance of power in Asia. Yet economic data reveal a parallel reality. Despite periodic political tensions, commercial interdependence between Asia’s two largest economies has continued to deepen.

In 2025, merchandise trade between China and India reached a record $155.6 billion, representing growth of more than 12 percent from the previous year. Although Indian exports to China increased, Chinese exports to India expanded more rapidly. Available figures indicate that India exported approximately $19.75 billion worth of goods to China while importing around $135.87 billion, producing a trade deficit of roughly $116 billion.

It would, however, be too simplistic to interpret these figures merely as evidence that India is becoming dependent on China. The underlying economic relationship is considerably more complex. As the Indian economy expands, significant portions of the capital goods and intermediate inputs required by its manufacturing, electronics, telecommunications, pharmaceuticals, solar energy, electric vehicle, battery, chemical and infrastructure sectors continue to come from China’s industrial system.

India’s major imports from China include machinery, electrical equipment, computers, integrated circuits, telecommunications components, lithium-ion related products and fertilizers. Indian exports to China, by contrast, remain relatively concentrated in commodities and intermediate products, including iron ore, certain petroleum-related materials, chemicals, marine products and agricultural goods.

This imbalance represents both the strength and the vulnerability of the India–China economic relationship.

On one side, China has become an important supply base for India’s industrialization. On the other, the resulting trade deficit has become a major concern for New Delhi. China remains the country with which India records its largest bilateral merchandise trade deficit.

What is particularly significant, however, is that India’s policy response is no longer limited to attempts to distance its economy from China. Recent policy behaviour increasingly points toward managed re-engagement rather than comprehensive economic separation.

Following the 2020 border tensions, India intensified scrutiny of Chinese investment, restricted several Chinese technology companies and tightened controls over certain forms of economic activity. In more recent years, however, restrictions have been eased selectively in sectors such as electronics, capital goods and solar manufacturing. Efforts have also been made to facilitate visas for Chinese businesspeople and expand direct connectivity between the two countries.

This adjustment is not accidental.

One of the central paradoxes of India’s “Make in India” ambition is that efforts to reduce dependence on Chinese finished products can, at least in the initial stages, increase demand for Chinese machinery, components and industrial inputs. A factory may be established in India, but its production equipment, electrical systems, chemicals, battery materials or electronic components may still originate in China.

In this sense, China is not merely an industrial competitor of India. It is also one of the principal suppliers supporting India’s industrial expansion.

New Delhi therefore appears to be pursuing two objectives simultaneously. The first is to maintain stable economic engagement with China and ensure predictable access to essential supply chains. The second is to reduce the trade imbalance by expanding the presence of Indian products in the Chinese market.

India has repeatedly raised questions concerning fair market access, the bilateral trade imbalance and the predictability of supply chains. China, for its part, has signalled willingness to expand high-level engagement, economic cooperation and institutional dialogue.

This increasingly defines the emerging phase of India–China economic relations. New Delhi is not simply attempting to reduce trade with China. It is seeking to change the structure of that trade.

For such a transformation to occur, Indian pharmaceuticals, information technology services, agricultural products, seafood, chemicals, engineering goods and other higher-value products would require greater access to the Chinese market. A structure in which India imports machinery and technology while exporting predominantly lower-value commodities is unlikely to provide a sustainable long-term balance.

China, however, also has substantial economic reasons to deepen engagement with India.

India is one of the world’s largest and fastest-expanding consumer markets. Its manufacturing sector is growing, infrastructure development remains extensive, and major markets are emerging in electric vehicles, energy transition, electronics and the digital economy. For Chinese companies, India could therefore become not merely an export destination but also a potential centre for manufacturing, investment and joint industrial development.

Future India–China economic relations consequently cannot be measured by import and export figures alone. The more consequential question will be how Chinese capital, technology and manufacturing capabilities are integrated with India’s expanding industrial base.

New Delhi’s gradual easing of selected restrictions on Chinese investment reflects this practical economic requirement. Indian industry needs competitive costs, reliable supplies and access to technology if it is to compete effectively in global markets. China possesses one of the world’s deepest and most comprehensive manufacturing supply chains. Geopolitical disagreements do not eliminate that economic reality.

Does this mean India’s commercial priority is shifting away from the United States and the West toward China?

Such a conclusion would be premature.

The United States remains one of India’s most important export markets and is highly significant in technology, services, investment and higher-value economic sectors. India is simultaneously expanding economic relations with Japan, the European Union, Gulf countries, ASEAN economies and the United States. America and China therefore occupy different structural positions within India’s trade system: the United States is a major destination for Indian exports, while China is a critical source of imports and industrial inputs.

The emerging pattern should therefore not be interpreted as India abandoning the West in favour of China. It is more accurately understood as part of a multipolar economic strategy through which India is seeking to diversify its commercial options.

Rising protectionism, tariff pressures and uncertainty in global trade have further encouraged India to diversify economic engagement with China, Russia, Japan and other major economies. This reflects a broader strategic principle.

India does not appear willing to anchor its foreign and trade policies exclusively to a single centre of power. It may cooperate with the United States and Japan in security, maintain deep energy relations with Russia, and simultaneously expand trade and manufacturing links with China. These relationships are not necessarily contradictory. They represent the economic expression of India’s wider multi-alignment strategy.

Improved political dialogue between China and India has also created additional space for economic normalization. With border-management mechanisms becoming more active again, both sides have increasingly emphasized the importance of maintaining peace and stability along the frontier as a foundation for broader bilateral relations.

If political stability continues, the next stage of economic engagement may increasingly move beyond trade toward investment and joint manufacturing.

For India, the most advantageous model would not be simply to import more finished goods from China. A more strategic approach would be to connect Chinese capital and technology with Indian manufacturing capacity. Joint production in electronics, solar energy, batteries, industrial machinery, electric vehicles, pharmaceuticals and emerging technologies could allow India both to substitute selected imports and strengthen its export capabilities.

For China, such a model could provide durable access to India’s enormous market. For India, it could provide access to capital, industrial technology and manufacturing ecosystems that would otherwise take much longer to develop independently.

The sustainability of such cooperation, however, will depend heavily on improving the trade balance.

A bilateral trade volume of $155.6 billion is significant, but a deficit of around $116 billion is equally significant as a structural warning. A durable China–India economic relationship will require broader Indian exports, improved market access, greater reciprocity in investment and expanded cooperation in higher-value sectors.

The real story, therefore, is not that India’s trade has simply shifted “from America to China.”

The more consequential development is that New Delhi appears to be reassessing the assumption that China can be treated solely as a strategic competitor while being economically separated from India’s growth trajectory. The realities of trade, manufacturing and supply chains are pushing India toward a more pragmatic form of economic coexistence with Beijing.

At a time when the global economy is being reshaped by protectionism, tariff disputes and the restructuring of supply chains, the $155.6 billion in China–India trade represents more than a bilateral statistic. It is an indicator of Asia’s growing economic gravity.

If the world’s two most populous major economies can manage their strategic competition while expanding pragmatic cooperation in trade, investment and manufacturing, the consequences will extend far beyond their bilateral relationship. Such a development could influence Asia’s industrial structure, strengthen the economic weight of the Global South and contribute to a broader shift in the centre of global commerce.

India’s commercial gravity is increasingly being drawn toward China. Yet the long-term significance of that trend will not be determined by dependence alone. It will depend on whether growing interdependence can be transformed into reciprocal benefit, balanced market access and productive industrial partnership.

That will be the decisive test of the next phase of China–India economic relations.