India's trade relationship with China is experiencing a peculiar phenomenon: a surge in exports that might not be as positive as it seems. While India's exports to China skyrocketed by 90% in November, reaching $2.2 billion, this dramatic spike raises questions about the sustainability and balance of the trade relationship. According to the Global Trade Research Initiative (GTRI), this surge is not a sign of a robust and diversified trade strategy but rather a volatile and narrow phenomenon.
The report highlights that India's exports to China are heavily concentrated in just a few sectors, such as naphtha and electronics, rather than a diverse range of products. This narrow focus makes India's trade relationship with China susceptible to fluctuations in Chinese demand and market conditions. For instance, naphtha exports, which surged by 512% in October, are primarily driven by strong Chinese demand for petrochemical feedstocks. Similarly, electronics exports, including printed circuit boards and mobile phone components, saw significant increases, but these gains are not indicative of a broader, sustainable growth.
The GTRI analysis further reveals that India's imports from China are even more concerning. The country's imports are heavily reliant on machinery, electronics, plastics, and organic chemicals, which account for nearly 80% of the total. This heavy reliance on Chinese imports, especially in sectors like electronics and machinery, contributes to a widening trade deficit. The trade deficit between India and China has been steadily increasing, reaching $94.5 billion in 2024 and projected to reach $106 billion in 2025.
The report also highlights a discrepancy in the data released by China Customs and India's DGCI&S, further emphasizing the skewed nature of the trade relationship. This discrepancy suggests potential under-invoicing of imports to reduce customs duties, an issue that warrants further investigation. The GTRI concludes that India's recent export gains to China are narrow, volatile, and heavily dependent on Chinese demand, rather than a sustainable and diversified trade strategy. To address this imbalance, India needs to focus on expanding competitive manufacturing, reducing import dependence, and strengthening trade monitoring.
