The widening of India’s trade deficit with China in the fiscal year 2024-25 is driven by a surge in import of electronic goods (E.g. EV batteries, solar cells) and consumer durables.

• Meanwhile, India's exports to China dropped to $14.3 billion in the same period.

Key concerns associated with rising Trade Deficit/Import Dependence with/on China

• Threat to Domestic Manufacturing: Artificially low-priced Chinese imports threaten to undermine Indian domestic manufacturing, particularly in vulnerable sectors like steel, chemicals, and electronics.
• Strategic Dependency Concerns: The widening trade deficit signifies structural dependence on Chinese goods, creating supply chain vulnerabilities.
  • Poses threat over National security. 
    • E.g. China may utilise benefit India’s dependency during negotiations on border disputes or during any other emergency. 
• US Trade Rule Bypass: India could be used to sneak Chinese goods into US markets, risking damage to India-US relationship.
• Market Diversion and Dumping Risk: Chinese manufacturers may divert exports to India due to US tariffs, potentially engaging in price dumping.
• Other: Continuous outflow of foreign exchange, etc.