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China Surpasses US as India’s Largest Trading Partner


According to data released by the Global Trade Research Initiative (GTRI), China has emerged as India’s largest trading partner in the fiscal year 2023-24, with two-way commerce totaling USD 118.4 billion. This marks a narrow overtaking of the United States, whose two-way trade with India amounted to $118.3 billion during the same period. The shift reflects a dynamic in bilateral trade relationships, with China reclaiming its position as India’s top trading partner after the US held the position in the preceding two fiscal years.


GS II: International Relations

Dimensions of the Article:

  1. Understanding India-China Bilateral Trade Dynamics
  2. India – US Bilateral Trade
  3. Trade Relations with Other Countries (2019-2024)

Understanding India-China Bilateral Trade Dynamics

Overview of Bilateral Trade:

  • India’s bilateral trade with China in FY24 amounted to $118.4 billion.
  • Imports from China increased by 3.24% to $101.7 billion, while exports rose by 8.7% to $16.67 billion compared to FY23.

Trends in Exports and Imports:

  • From FY19 to FY24, India’s exports to China experienced a slight decline of 0.6%, reaching $16.66 billion.
  • Conversely, imports from China surged by 44.7% during the same period, reaching $101.75 billion.

Major Imports from China:

  • India primarily imports electrical and electronic equipment, engineering goods, chemicals, plastics, and textiles from China.

Major Exports to China:

  • India’s major exports to China include engineering goods, agricultural products, ores and minerals, chemicals, and petroleum products.

Trade Balance Imbalance:

  • The trade balance heavily favors China, with the trade deficit expanding from $53.57 billion in FY19 to $85.09 billion in FY24.
Reasons for High Trade Deficit:
  • India relies on Chinese imports to meet domestic demand and preferences, contributing to the widening trade deficit.
  • India’s exports mainly consist of primary commodities, while Chinese exports are dominated by machinery, chemicals, and technology.
  • India’s pharmaceutical industry heavily depends on China for active pharmaceutical ingredients (APIs), further exacerbating the trade deficit.
  • Limited market access for Indian agricultural and competitive products in China hampers export growth.
  • India’s reliance on critical products from China, such as telecom components and lithium-ion batteries for EVs, contributes to the trade deficit.
  • This dependency on China poses economic and national security risks for India.

Mitigation Measures:

  • India has implemented measures like production-linked incentive schemes (PLI), anti-dumping duties, and quality control orders to reduce dependence on China.

India – US Bilateral Trade:

  • In FY24, India-US bilateral trade reached $118.3 billion, with exports decreasing by 1.32% to $77.5 billion, and imports dipping by 20% to $40.8 billion compared to the previous fiscal year.
  • Over the past five years, trade with the US exhibited positive growth, with exports increasing by 47.9% to $77.52 billion and imports growing by 14.7% to $40.78 billion, resulting in an expanded trade surplus for India to $36.74 billion.

Trade Relations with Other Countries (2019-2024):

  • The UAE emerged as the third-largest trading partner of India in 2023-24, with trade valued at USD 83.6 billion, followed by Russia (USD 65.7 billion), Saudi Arabia (USD 43.4 billion), and Singapore (USD 35.6 billion).

With Russia:

  • Exports witnessed a significant increase of 78.3% from $2.39 billion to $4.26 billion, while imports surged by 952% from $5.84 billion to $61.44 billion, resulting in a widened trade deficit from $3.45 billion to $57.18 billion.

With Saudi Arabia:

  • Saudi Arabia’s exports more than doubled, increasing by 107.9% from $5.56 billion to $11.56 billion. Imports grew by 11.7% from $28.48 billion to $31.81 billion, leading to a slight reduction in the trade deficit from $22.92 billion to $20.25 billion.

With UAE:

  • Exports to the UAE rose by 18.3% from $30.13 billion to $35.63 billion, while imports increased substantially by 61.2% from $29.79 billion to $48.02 billion. This shift turned a marginal trade surplus of $0.34 billion in FY19 into a deficit of $12.39 billion by FY24.

-Source: Indian Express

May 2024