INDIA-CHINA TRADE RELATIONS: POLICY IMPACTS AND PATHWAYS TO ECONOMIC RESILIENCE
Abstract
India–China trade relations are defined by deep economic interdependence and persistent asymmetries that pose both opportunities and challenges for policymakers. China remains one of India’s largest trading partners, supplying critical goods such as electronics, pharmaceuticals, and renewable energy components, while India exports raw materials and limited manufactured products. This imbalance has contributed to a widening trade deficit, reaching a record USD 99.2 billion in FY 2024–25, underscoring structural vulnerabilities in India’s external sector. Heavy reliance on Chinese imports for active pharmaceutical ingredients, technology inputs, and energy equipment exposes India to risks arising from geopolitical tensions and supply-chain disruptions. At the same time, opportunities are emerging through global supply-chain diversification. Notably, multinational firms such as Apple have expanded production in India, illustrating the potential of the “China+1” strategy. India has also introduced policy measures including Production-Linked Incentive schemes and the Semiconductor Mission to strengthen domestic manufacturing and reduce import dependence. Foreign direct investment remains tightly regulated, especially from Chinese sources, yet selective approvals reflect a pragmatic balance between economic security and market needs. Recent diplomatic engagements in 2025 further suggest cautious cooperation within multilateral forums despite ongoing rivalry. This paper argues that India’s policy responses must focus on fostering industrial self-reliance, diversifying trade partners, and strategically engaging with global supply chains while managing the competitive dynamics with China. By combining resilience-building with pragmatic engagement, India can transform vulnerabilities into opportunities and position itself as a stronger player in the evolving global trade order.
Key Words: India, China, Trade Relations, Economic Interdependence
