India-China trade: The numbers behind the relationship as Xi visits Delhi
China's growing footprint in India's foreign trade was highlighted around President Xi Jinping's visit to New Delhi for the BRICS Summit.
Bilateral goods trade between India and China reached about $151 billion in FY 2025-26, with China overtaking the US as India's largest trading partner.
India's imports from China rose to roughly $131.6 billion, while exports to China stood at about $19.5 billion, producing a record trade deficit of over $112 billion.
Chinese-origin industrial inputs — including active pharmaceutical ingredients (APIs), electronics components and solar cells — remain deeply embedded in India's critical manufacturing supply chains.
This trade imbalance forms the economic backdrop against which India-China diplomatic engagement, including within BRICS, is taking place.
Balance of Trade and Trade Deficit
Balance of Trade (BoT) is the difference between the monetary value of a country's exports and imports of goods over a period; a trade deficit occurs when imports exceed exports. It is a key component of the Current Account within India's Balance of Payments (BoP), compiled and reported by the RBI and the Ministry of Commerce (DGCI&S data).
Key Details
- India's trade deficit with China widened to a record ~$112.6 billion in FY 2025-26, up from $99.2 billion in FY 2024-25.
- China displaced the United States to become India's single largest trading partner in FY 2025-26 by total bilateral trade value.
- India's exports to China are dominated by raw materials/commodities (e.g., iron ore, cotton, organic chemicals), while imports are concentrated in manufactured intermediate and capital goods — a structural asymmetry that widens the deficit even when volumes are similar.
The reported $151 billion bilateral trade figure and the sub-$20 billion export figure against $131-plus billion in imports illustrate how India's trade deficit with a single partner (China) can be large enough to influence its overall current account dynamics.
Import Dependency in Critical Manufacturing (APIs)
Active Pharmaceutical Ingredients (APIs) are the biologically active components of a drug; India, despite being the "pharmacy of the world" for generic formulations, imports a large share of its APIs and Key Starting Materials (KSMs) from China, a vulnerability exposed sharply during COVID-19 supply disruptions.
Key Details
- China's share in India's API/bulk drug imports has consistently stayed around 70-74% in recent years (FY2023-24 and FY2024-25 data cited by the government in Parliament).
- For specific categories such as certain paracetamol derivatives and penicillin-related compounds, China's share exceeds 90-95%.
- The government's Production Linked Incentive (PLI) scheme for bulk drugs/APIs, launched in March 2020 with an outlay of ₹6,940 crore (part of a broader ₹15,000 crore pharma PLI push through 2029), aims to build domestic capacity for 41 identified critical APIs/KSMs/Drug Intermediates.
The "critical manufacturing" import dependency flagged in the news — APIs, electronics, solar cells — is precisely the vulnerability the PLI scheme for bulk drugs was designed to reduce; the persistence of a ~70% China-import share shows import substitution remains a work in progress even as overall trade with China deepens.
India's Non-Membership of RCEP and Absence of a China FTA
India has no Free Trade Agreement (FTA) or Comprehensive Economic Partnership Agreement (CEPA) with China, and in November 2019 India opted out of the Regional Comprehensive Economic Partnership (RCEP) — the mega Asia-Pacific trade bloc that includes China and ASEAN — citing concerns over the trade deficit and safeguards for domestic industry and agriculture.
Key Details
- RCEP (signed 2020, in force 2022) includes ASEAN's 10 members plus China, Japan, South Korea, Australia and New Zealand — the world's largest trading bloc by population/GDP.
- India's decision to stay out was driven substantially by the existing large trade deficit with China and fears of further import surges without reciprocal market access gains.
- India has instead pursued bilateral FTAs (e.g., with UAE, Australia, and an agreement-in-principle with the UK) rather than the China-inclusive RCEP route.
The continuing widening of India's China trade deficit — now over $112 billion — is often cited to validate India's 2019 RCEP opt-out decision, since RCEP membership would have required India to cut tariffs on Chinese goods without an FTA-level safeguard mechanism.
- India-China bilateral goods trade, FY 2025-26: approximately $151 billion.
- India's imports from China, FY 2025-26: approximately $131.6 billion (up ~16% year-on-year).
- India's exports to China, FY 2025-26: approximately $19.5 billion (up ~36.7% year-on-year, off a small base).
- India's trade deficit with China, FY 2025-26: approximately $112.6 billion (record high; was $99.2 billion in FY 2024-25).
- China's share of India's API/bulk drug imports: ~70-74% (FY2023-24, FY2024-25).
- India exited RCEP negotiations in November 2019; RCEP (16-nation grouping minus India) came into force in 2022.