India’s growing trade gap with China is no longer just about buying more and selling less, but it is also about how deeply Indian manufacturing relies on Chinese industrial supplies at present.A new report by think tank Global Trade Research Initiative has flagged that while China makes up around 16% of India’s total imports, its grip on industrial goods is far stronger, supplying 30.8% of the country’s industrial needs and playing a critical role in sectors ranging from electronics to pharmaceuticals.In 2025-26, India’s total imports stood at $774.98 billion, with $131.63 billion worth of goods coming from China. Over the past five years, imports from China have more than doubled from $65.2 billion in FY2021 to $131.6 billion in FY2026.During the same period, India’s exports to China have remained subdued at $19.5 billion, still below the $21.2 billion level recorded in FY2021.This pushed India’s trade deficit with China to $112.1 billion in FY2026, marking a 155% rise from $44 billion five years ago.
India-China trade
(Figures in $ billion)
| Year | Exports | Imports | Deficit |
| FY2021 | 21.2 | 65.2 | 44.0 |
| FY2022 | 21.3 | 94.6 | 73.3 |
| FY2023 | 15.3 | 98.5 | 83.2 |
| FY2024 | 16.7 | 101.7 | 85.0 |
| FY2025 | 14.2 | 113.5 | 99.3 |
| FY2026 | 19.5 | 131.6 | 112.1 |
Table credit: GTRI According to GTRI, the issue is not only the widening deficit but also the nature of imports. As much as 98.5% of the country’s imports from China are industrial goods, while non-industrial products account for less than 1.5%.
India’s reliance on Beijing inputs
The report said India’s dependence is heavily concentrated in four sectors, electronics, machinery, computers and organic chemicals, which together accounted for $82.6 billion, or 66%, of total imports from China.China supplies 43 % of India’s electronics imports, 40% of machinery and computer imports, and 44% of organic chemical imports.“These are not discretionary purchases but core inputs that feed directly into India’s manufacturing ecosystem,” GTRI Founder Ajay Srivastava said.The report highlighted that Indian manufacturers rely significantly on Chinese inputs such as electronics parts, EV batteries, solar modules, APIs and speciality chemicals.“As a result, even as India tries to grow exports, its supply chains remain tied to China. This creates clear risks,” he added.
GTRI suggests a way out
GTRI warned that heavy reliance on one country for critical industrial inputs leaves sectors such as pharmaceuticals, electronics and clean energy vulnerable to disruptions, whether geopolitical or commercial.The think tank also raised concerns that easing Chinese investment restrictions could deepen this dependence further. It said Chinese firms, especially in sectors like electric vehicles, may expand through local assembly while continuing to import key components from China, which could reduce domestic value addition and put pressure on Indian manufacturers.To reduce these risks, GTRI said India needs to build stronger domestic manufacturing capabilities and diversify sourcing.“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,” the think tank added.