China pips US to become India’s biggest trading partner with imports valued at $101.7 bn

China has pipped the United States to once again become India’s biggest trading partner with imports crossing over $100 billion in FY24, according to data.

A report released by Global Trade Research Initiative (GTRI), pegged India’s trade with China at $118.4 billion for FY24, stating that imports saw a rise by 3.24 per cent to $101.7 billion and exports by 8.7 per cent to $16.67 compared to FY23.

China was India’s top trading partner in FY21, but the spot was taken over by the US for the next two years.

India’s trade with US

In contrast, India’s trade with the US was calculated at $118.3 billion in FY24, owing to a dip in both imports and exports. While export to the US dropped by 1.32 per cent to $77.5 billion compared to FY23, imports also came down by 20 per cent to $40.8 billion.

However, the past five years, had shown a healthy growth in trade between the two countries. While exports had grown by 47.9 per cent from $52.41 billion in FY19 to $77.52 billion, imports had risen by 14.7 per cent – from $35.55 billion to $40.78 billion. This helped India increase its trade surplus to $36.74 billion from $16.86 billion.

Exports remain stagnant

The report, however, says that despite a surge in imports from China, India’s exports to China from FY19 to FY24 have been stagnant at around $16 billion annually. In the same time frame, imports have surged $70.32 billion to $101.75 billion dollar, recording a 44.7 per cent hike.

This has led to a cumulative trade deficit exceeding $387 billion over the past six years.

The GTRI report said China was the top supplier to India in all the eight industrial sectors including electronics. These are: electronics, telecom and electrical products; chemicals and pharmaceuticals; machinery; products of iron, steel and base metals; plastics, articles; textile and clothing; automobiles and other vehicles; and medical, leather, paper, glass, ships, and aircraft.

The report says China accounts for 30 per cent or $84.5 billion of India’s total import value of $281.5 billion between April 2023 and January 2024.

Top 5 sectors

Here are the top 5 sectors for which India relies on China the most:

1. India is heavily dependent on China for electronics goods and components, with the sector having the highest import value at $67.8 billion and China accounting for $26.1 billion of the same.

Products: Integrated circuits, communication devices including phones and wireless devices, transmission apparatus for radio or TV broadcasting, batteries, microphones and loudspeakers etc.

2. India imports a significant share – $19billion – of its machinery imports, totaling $47.9 billion, from China.

Products: Vacuum pumps, transmission shafts, computers, laptops and automatic data processing machines; machinery for working rubber or plastics; plumbing appliances like taps, cocks and valves etc.

3. China also ships chemicals and pharmaceuticals worth $15.8 billion to India, accounting for 29.2 per cent of the latter’s import needs.

Products: Organic chemicals necessary for production of medicines, fertilisers etc.; fertilisers, dyes, paints, varnishes, and inks; essential oils, perfumery, cosmetic and toilet preparations and soaps, candles and dental preparations.

4. The fourth sector where India banks on China is products of iron, steel and base metals. While Indian imports in this sector comes to $39.2 billion, China contributes $6.9 billion or 17.6 per cent of the same.

Products: Iron and steel products; screws, bolts and nuts; wires, ropes, cables; iron and steel articles used in machinery, construction and manufacturing; handsaws, blades etc.

5. Plastics and articles from China account for 25.8 per cent ($4.8 billion) of India’s $18.5 billion-worth imports in the sector.

Products: Plastic plates, sheets, foils; polymers of Vinyl Chloride, polyesters, acrylic polymers, polyamides in primary forms used in textile industries, and polymers of Vinyl Acetate used in adhesive and paper products among others.

Soaring imports, need for domestic production

According to the report, in FY24 alone, India imported $4.2 billion worth of telecom and smartphone parts, accounting for 44 per cent of total imports in the category.

The report says India’s import of electronics, telecom and electrical products touched a staggering $89.8 billion in FY24 with half of the same being sourced from China and Hong Kong.

“China dominates with a commanding 43.9 per cent share of India's imports in electronics, telecom, and electrical sectors. Collectively, China and Hong Kong represent an overwhelming 56 per cent of India's total imports in these critical areas,” the report says.

Similarly, it imported laptops and Personal Computers (PCs) worth $3.8 billion during the same period.

“Computers, laptops, and automatic data processing machines have seen imports escalate from $1200.7 million in 2007-2010 to $5886.2 million by 2020-2022, an increase of 390.2 per cent. With China's market share increasing from 43.5 per cent to 54.5 per cent, these devices have become the backbone of business operations, governance, and personal computing across India, emphasizing a significant dependence on Chinese technology for digital and administrative infrastructure,” the report says.

India is also heavily reliant on China for lithium-ion batteries necessary for its growing EV market. The same imported from China is valued at $2.2 billion or 75 per cent of imports under the relevant category.

Flagging India’s increasing dependence on China across the eight sectors, the report calls for the need of strategic diversification and strengthening domestic production to protect the country’s industrial autonomy and ensure economic resilience.