India-China Trade Reaches Record $155 Billion | Ankit Agrawal Study IQ

Summary

The video delves into the growing trade relationship between India and China, despite ongoing geopolitical tensions. While trade between the two nations has surged, especially with India’s growing import reliance on China, the imbalance creates a massive trade deficit for India. The script highlights the challenges of dependence on Chinese goods, the economic impact, and strategic concerns. It also touches on India’s efforts to promote domestic manufacturing and diversify its supply chains. The video emphasizes the complexity of balancing economic benefits and long-term national interests in the face of such a significant trade gap.

Takeaways

• 😀 Despite geopolitical tensions, trade between India and China has increased significantly, reaching 155 billion USD in 2025.
• 😀 India’s trade deficit with China has also grown, with imports from China vastly outpacing exports to China, leading to a 116 billion USD trade deficit.
• 😀 India primarily exports low-value goods such as raw materials, minerals, cotton, and pharmaceuticals to China.
• 😀 In contrast, China exports high-value, manufactured goods to India, such as electronics, machinery, and telecom equipment.
• 😀 This imbalance in trade has led to a massive trade deficit, which has been increasing year over year.
• 😀 The growing trade deficit with China has created economic vulnerabilities, including over-dependence on Chinese inputs for manufacturing.
• 😀 India’s economic and industrial competitiveness is at risk as Chinese products are often cheaper, discouraging domestic production.
• 😀 The large trade deficit is also putting pressure on India’s foreign exchange reserves, as more dollars flow out due to increased imports from China.
• 😀 Despite political tensions, China views India as a crucial market and continues to prioritize trade with India to support its economy, especially amid challenges with Western countries.
• 😀 India’s government has introduced initiatives like 'Make in India' and the PLI scheme to boost domestic manufacturing and reduce dependence on Chinese imports.
• 😀 While India is diversifying its supply chain and seeking trade agreements with other countries, the growth of imports from China is unlikely to slow down in the short term.

Q & A

What is the current state of trade relations between India and China?

Despite serious geopolitical tensions, especially after the Galwan Valley incident in 2020, trade between India and China has been continuously increasing. By 2025, bilateral trade reached a record $155 billion, marking a 12% increase from 2024.

What is the trade composition between India and China?

India mainly exports raw materials, semi-finished goods, and some pharmaceuticals to China. On the other hand, China exports high-tech manufactured goods to India, including electronics, telecom equipment, solar panels, EV components, machinery, and chemicals.

How significant is India's trade deficit with China?

India has a massive trade deficit with China. In 2025, the trade deficit stood at $116 billion, the largest ever. India exported only $19.75 billion worth of goods to China, while importing $135.87 billion.

What are the main factors contributing to India's increasing import dependence on China?

India's growing import dependence on China is driven by the availability of cheaper and faster supplies from China. Despite attempts at diversification, China remains the preferred destination due to its scale and cost efficiency in manufacturing.

How does India's trade deficit with China impact the economy?

The trade deficit leads to several issues: economic dependency on Chinese imports, reduced domestic production competitiveness, higher foreign exchange outflows, and increased strategic vulnerability. India becomes heavily reliant on Chinese inputs, especially in sectors like electronics and telecommunications.

Why does China continue to engage in trade with India despite geopolitical tensions?

China values the Indian market due to its large consumption base and export potential. Additionally, with ongoing tensions with Western countries, China sees India as a crucial market for its goods, making it unlikely for China to sever trade ties.

How does the global supply chain affect India's trade with China?

Global disruptions, like the COVID-19 pandemic and the Ukraine war, have led to supply chain issues. China remains the fastest and most cost-effective supplier, making it difficult for India to diversify away from Chinese imports, despite the desire to do so.

What are the strategic risks associated with India's trade deficit with China?

The main risks include reduced bargaining power in crises, strategic vulnerabilities, and the dependency on Chinese inputs for critical sectors. In the event of political or economic disruptions, India's leverage in negotiations with China would be limited.

What is the Indian government's approach to reduce dependency on Chinese imports?

The Indian government is focusing on boosting domestic manufacturing through initiatives like 'Make in India' and the Production-Linked Incentive (PLI) scheme. Efforts are also being made to diversify supply chains with countries like Australia, the US, and European nations.

What is the dilemma faced by India regarding trade with China?

India faces a dilemma between the short-term economic benefits of cheap imports from China, which help control inflation and support MSMEs, and the long-term risks of a growing trade deficit and increased dependency on Chinese goods, especially in strategic sectors.