India-China Trade and Investment

India’s trade relationship with China is highly skewed, with imports significantly outpacing exports. In 2017-18, India’s exports to China stood at $13.33 billion, while imports reached $76.38 billion, creating a $63.04 billion trade deficit—accounting for 39% of India’s total trade deficit. The report underscores the urgent need for expanding domestic manufacturing, increasing export competitiveness, and attracting foreign investment to address this imbalance. While China remains India’s largest trading partner, the lack of market access, regulatory hurdles, and weak industrial capacity limits India’s ability to compete effectively. India must adopt a strategic approach to trade and investment, ensuring that Chinese investments benefit domestic industries rather than increasing dependency on imports.

China dominates the global manufacturing sector, whereas India faces multiple challenges, including high production costs, outdated infrastructure, and difficulty in integrating into international supply chains. Many Chinese imports, especially electronics, machinery, and pharmaceuticals, enter India through indirect channels such as Hong Kong and Singapore, further inflating the trade deficit. The absence of strong industrial policies, limited access to Chinese markets, and regulatory complexities makes it difficult for Indian businesses to compete on equal footing. The lack of technology transfer from Chinese firms and restricted investment in critical industries also weaken India’s position.

To balance trade, India must focus on strengthening domestic manufacturing and leveraging Chinese investment to enhance industrial capacity. The government should promote joint ventures, develop manufacturing clusters, and improve ease of doing business. Sectors like electronics, textiles, auto components, and pharmaceuticals offer strong potential for local production.

India needs a long-term strategy that prioritizes sector-specific export policies, infrastructure development, and investment incentives. Strengthening MSMEs, attracting foreign technology, and negotiating better trade agreements will help India reduce its trade deficit and establish a stronger global presence in the coming years.

Keywords: India-China Trade, Investment, Trade Deficit, Manufacturing Sector, Export Promotion, Foreign Direct Investment (FDI), Economic Policy, Bilateral Relations, Supply Chain, Market Access, MSME, Trade Agreement