The record trade deficit with China of $ 112.16 billion in 2025-26 driven by 16% increase in imports over an already large base is due to further deepening of dependence on the northern neighbour for key industrial inputs with accompanying risks that need to be addressed urgently, according to a report.
Imports from China were $ 131.63 billion last financial year 98.5% of which were industrial products. While China represents about 16% of India’s total imports, its dominance is far more pronounced in industrial goods, where it supplies 30.8% of India’s needs, according to the report by Global Trade Research Initiative (GTRI) .
The concentration within sectors is even sharper. About 66% of India’s imports from China—valued at $82.6 billion—are clustered in electronics, machinery, computers, and organic chemicals.
Decoding India’s import dependence on China in numbers
China accounts for 43% of India’s electronics imports, 40% of machinery and computer imports, and 44% of organic chemicals. These are not discretionary purchases but core inputs that feed directly into India’s manufacturing ecosystem, GTRI founder Ajay Srivastava said.
This dependence is less about consumption and more about weak domestic production. Indian industry relies heavily on Chinese inputs—electronics parts, EV batteries, solar modules, APIs and specialty chemicals—that are hard to replace at scale. As a result, even as India tries to grow exports, its supply chains remain tied to China.
This creates clear risks. Dependence on a single supplier for critical inputs leaves sectors like pharmaceuticals, electronics and clean energy exposed to disruptions, whether geopolitical or commercial. At the same time, India’s exports to China remain limited, keeping the relationship one-sided.
“The policy challenge is clear. India needs to build domestic capacity in key sectors and diversify supply chains. A practical starting point would be to limit dependence on any single country to below 30% of imports in critical sectors,” Srivastava said.
As India eases investment restrictions on China, the Chinese automakers are likely to expand through local assembly and increased EV imports if tariffs fall, putting pressure on Indian firms and reshaping supply chains. Chinese companies may continue sourcing key inputs—such as auto components, batteries, polymers, coatings and adhesives—from China rather than local suppliers. This could reduce domestic value addition and hurt upstream industries. A similar trend has already been seen in Thailand, the report said.
“India needs a clear diversification strategy: build domestic capacity, attract non-China suppliers, and keep single-country dependence below 30% in critical sectors,” Srivastava wrote.