By Subrata Majumder
Hitherto, China has been castigated for fueling trade deficit with India. It has been the main force for widening trade deficit by splurging exports to India and importing less. Eventually, it unleashed pressure on balance of payment.
Nonetheless, India-China trade trajectory has made a volte-face. It reversed the gear of trade burden by surging imports from India. China, including Hong Kong, emerged as the third-biggest destination for Indian exports in 2025-26, rising from fourth-biggest destination in 2024-25. It rescued India from the fall in trade trap by US high tariff. Hitherto, USA has been the biggest destination for India’s export.
China’s swelling imports from India counterbalanced a greater part of the fall in growth of exports to USA. According to an estimation, imports by China along with Hong Kong offset nearly 75 percent of the loss of export growth to USA in 2025-26.
Spurt in growth in export to China left behind the traditional major export destinations in the European Union like Netherlands, UK, France, as well as Asian powers like Japan.
While India’s export dependency escalated within Asian nations like China, the erstwhile major export destinations like the USA and EU countries were losing potential for exports.
Growth in exports to USA – the biggest destination for India’s exports – plummeted due to high tariffs. Export to USA registered a slender growth by 0.6 percent in 2025-26, against 11.8 percent in the preceding year.
Following USA, exports to the Netherlands – earlier, the fourth biggest destination for exports – plunged by 23.3 percent in 2025-26, followed by UK with a fall by 7.6 percent in the same year.
The notable feature for turnaround in India’s trade relations with China is that despite security concern looming large, India’s export to China surged in 2025-26. India’s exports to China and Hong Kong increased by 35.97 percent in 2025-26 – the highest growth in export, despite global tariff tensions.
The massive growth in India’s exports to China and Hong Kong underscore a mega relief to India from the tariff-stricken downfall in export growth to USA. Growth in India’s exports to China and Hong Kong by greater margin, counterbalanced the fall in export growth to USA.
In the matrix of trade structure, fall in export growth to USA yielded a loss of 11.2 percent in 2025-26 against the growth by 11.82 percent in 2024-25. In other words, India’s export to USA increased merely by 0.62 percent in 2025-26, compared to 11.82 percent in 2024-25.
In contrast, India’ export to China and Hong Kong increased by 35.97 percent in 2025-26, fetching an export surplus by US $ 7317.1 million. This played a significant role in counterbalancing the export growth loss to USA.
Given the trajectory of trade diversification, it is reckoned that China is no more a trade burden. Instead, it has lately acted as a safety valve for India.
According to Chinese media, larger imports from China are not a trade travesty, but is the pivot to turn “Make in India” a global success. China remains the irreplaceable supply chain for vital industrial components and intermediaries to India.
India is the second-largest manufacturer of mobile phone in the world. Manufacturing of smart mobile phone is mostly a work of assembly operation. They remain heavily reliant on imported component and parts. China supplies 50 to 80 percent of the materials in value terms in the India assembly operation of mobile phones.
The striking success of India’s export to China is led by both non-traditional merchandises and traditional items. They are propelled by electronic goods, such as telecom instruments, petroleum refinery products, non-ferrous metals, marine products, oil meals and gemstones.
Surprisingly, in 2025-26, India’s major items for exports to China were electronic goods and petroleum refinery products. They became the main drivers for surging exports to China. Both these product groups accounted for nearly one-third of India’s total export to China in 2025-26.
India’s electronic goods exports to China increased by 227.8 percent in 2025-26, against 23.2 percent in the preceding year.
The unexpected growth in export of electronic goods to China was driven by shifting of Apple, USA vendor system into India under China+1 strategy. Several Apple’s suppliers in India contributed to shipment to China, such as Foxconn, Tata Electronics, Tata owned Pegatron Technology India, Motherson, among others.
Promulgation of ECMS (Electronic Component Manufacturing Scheme), coupled with PLI scheme (Productivity Linked Incentive), became catalysts for India’s increased capacity for manufacturing high-end mobile phone parts and exporting to sophisticated markets like China and others. According to an estimate, India would reach US$ 3.5 billion export of electronic goods to China in 2026-27, as against US$ 3.2 billion in 2025-26.
These unveils a new trajectory of trade relations between India and China with the happy paradox of interdependence, despite India’s ongoing security concerns. (IPA Service)
