The modest rise in exports to China offers some relief to India, which faces high tariffs – and threats of even higher penalties – from the US, its main trading partner. - AFP
NEW DELHI: India is selling more goods to China, buoyed by increased trade in mobile phone components and other products.
This provides some relief to the South Asian country that is facing high tariffs – and threats of even higher penalties – from the US, its main trading partner.
Though the modest increase has done little to reduce the massive trade imbalance in favour of China, any bump in exports is a positive sign, analysts and officials said.
From April to December 2025, exports rose 36.68 per cent to US$14.25 billion (S$18.4 billion).
While this is a sizeable increase, there is a long way to go to bridge the trade imbalance. Imports increased from US$84.57 billion the previous year to US$95.95 billion for the same period in 2025, underlining India’s continued trade dependence on China.
“The China growth (in exports) is welcome growth. There was a dip in the recent past, and it is picking up,” Indian Commerce Secretary Rajesh Agrawal said at a briefing on Jan 15.
He added that the “overall recalibration of supply chains across the world is helping India boost exports to the Chinese market”.
US President Donald Trump’s imposition of tariffs on many countries in 2025 triggered a scramble to find new markets. The US doubled import tariffs on Indian goods to 50 per cent in August as punishment for India’s heavy buying of Russian oil.
Earlier in January, Trump threatened to raise tariffs again on Russian oil purchases.
For now, Indian exports to the US have held steady amid exemptions for electronics and pharmaceuticals. But concern is growing that failure to clinch a trade deal with the US will hurt exporters.
While an uptick in trade with China remains a small bright spot, analysts are still cautious.
“China is looking to increase its imports from diverse sources. India is also looking to diversify its exports after the US tariffs,” noted Dr Amitendu Palit, senior research fellow and research lead (trade and economics) at the NUS Institute of South Asian Studies.
“While it is still too early to confirm, this could be the early signs of a trend.”
A detailed analysis of trade data by the Global Trade Research Initiative (GTRI), a research group focused on climate change, technology and trade, found that exports of naphtha went up 172 per cent from April to October, reaching US$1.4 billion and “reflecting strong Chinese demand for petrochemical feedstocks”.
But unusually, the report found that, for the same period, electronics also registered an increase, with mobile phone component exports to China rising 82 per cent to US$362 million, and printed circuit board exports jumping more than 2,000 per cent to US$418 million.
The increase in electronics from a small base coincides with India’s growing role in global electronics value chains, as companies such as Apple shift elements of their supply chains from China to India.
Electronics exports, which are exempt from US tariffs, have continued to grow. Phones, laptops, mobile components and earbuds, for instance, are being made in India, with overall exports jumping eight times over the past decade, to US$38.56 billion in 2024-2025, according to government data.
“As India continues to deepen its integration into global value chains and improve manufacturing competitiveness, China can emerge as a significant export opportunity for Indian-made electronics,” said Pankaj Mohindroo, chairman of the India Cellular and Electronics Association.
“With the right scale, quality and cost efficiency, China has the potential to become one of India’s most important export markets over the next decade.”
Mohindroo said that India should aim for US$100 billion in merchandise exports, with electronics contributing US$20 billion to US$30 billion within the next 10 years.
Exports of shrimp to China have also gone up, said exporters, due to disruptions from the US market.
“The increased exports to China are good in the short term because it helps us tide over the crisis (caused by the US tariffs), but in the long term, we would prefer the export of processed and more value-added products,” said Dr K.N. Raghavan, chief executive of the Seafood Exporters Association of India.
He noted that China buys unprocessed shrimp, while the US buys headless, veined and peeled shrimp, which are more labour-intensive and have a higher value.
“This year, because of disruptions, markets were there (in China). They import, reprocess and export. They may not necessarily be exporting to the US but to other countries,” he added.
The increase in trade also comes amid a recent thaw in ties with China, after a near five-year chill caused by a deadly border dispute in 2020.
During that period, India restricted foreign investment from China, banned Chinese apps and imposed visa restrictions on Chinese nationals. Restrictions on business and work visas have since been eased.
Indian Prime Minister Narendra Modi and Chinese President Xi Jinping met in Tianjin on Aug 31, 2025, to discuss ways to improve trade ties.
Recent Indian media reports said the government was contemplating easing restrictions on Chinese foreign investment next.
There is a line of thinking in government and policy circles that the issue of the trade deficit is also best served by liberalising foreign investments from China to some extent, despite security concerns in areas considered sensitive, such as telecommunications.
In 2025, NITI Aayog, a policy think-tank, proposed that Chinese companies should be able to take a stake of up to 24 per cent in an Indian company without any approval from the government.
Dr Palit said: “There is a strong possibility of India modifying existing restrictions and allowing more Chinese investment. These, though, are likely to happen selectively in sectors where there are minimal security concerns.”
India remains a major importer of Chinese products such as bulk drugs, fertilisers, machinery and solar panels. Allowing Chinese investment that increases production of these and other products in India would help reduce the trade deficit, he added.
For now, India remains deeply dependent on Chinese imports in the manufacturing sector.
For antibiotics such as erythromycin, for example, 97.7 per cent of raw materials are sourced from China, while 80.5 per cent of laptop parts are imported from there.
Indian exports are dominated by raw materials, including iron ore.
“Overall, India’s export growth to China is not broad-based. It is concentrated mainly in naphtha and a few atypical electronics products, rather than across India’s traditional export basket,” said the GTRI report on the recent export increases.
It added that the import figures reinforced “supply chain dependence”.
Still, some argue that structural change is possible in the trade relationship, in part due to rising labour costs in China.
Sudesh Rao, managing director of Leo Integrated Technologies, a manufacturer of electronic products, reckons labour-intensive parts of the electronics supply chain, for instance, will shift to India in the coming years.
“It will happen in the next few years because Chinese labour costs have gone up,” he said, underlining how India’s skilled labour costs were less than half those in China.
“Labour-intensive work will happen in India,” he added.
India has rolled out production-linked incentive schemes and other measures to boost manufacturing, particularly in electronics, but it remains to be seen whether the country is able to push manufacturing to 30 per cent, from the current 25 per cent, of gross domestic product by 2030.
Analysts noted that India’s bigger challenge lies in improving competitiveness and pushing companies to look beyond the domestic market.
“The baseline (of exports) is so low. There is nothing to celebrate,” said Dr Biswajit Dhar, a trade economist.
He added that there needs to be a deeper look into issues that plague Indian exporters, including non-tariff barriers such as stringent sanitary and phytosanitary measures, which hinder Indian agriculture and seafood products.
“Trade is still too imbalanced (between India and China),” he said. - The Straits Times/ANN
