India–China Trade Deficit At USD 99.2 Bn, USD 161 Bn Export Potential Untapped: ICRIER Study

New Delhi, Aug 22 (KNN) Amid a gradual thaw in India–China relations, a new study by the Indian Council for Research on International Economic Relations (ICRIER) has underlined the persistent imbalances in bilateral trade and called for a calibrated economic engagement strategy. 

The report, titled ‘Calibrating India’s Economic Engagement Strategy with China Amidst the Changing Geopolitical Landscape’, was released this week.

According to the study, India’s trade with China remains highly skewed, with imports worth USD 113.5 billion against exports of only USD 14.3 billion in 2024–25. 

This has resulted in a record bilateral trade deficit of USD 99.2 billion. At the same time, cumulative foreign direct investment (FDI) inflows from China over the past decade stood at a modest USD 886 million.

ICRIER estimates India’s untapped export potential to China at USD 161 billion—nearly ten times the current level of exports. 

Notably, 74 percent of this potential lies in medium- and high-tech sectors, unlike the present export basket which is dominated by primary and resource-based goods. 

Products such as telephone sets, aircraft, turbojets, motor vehicle parts and photo-semiconductor devices were identified as priority areas for diversification.

The report notes that tariff and non-tariff barriers (NTBs) continue to constrain India’s export prospects. It recommends the creation of a joint India–China task force to address NTBs, enhance transparency in testing and certification, and ensure WTO-compliant practices. 

On its part, India should raise quality standards to strengthen export competitiveness and reduce vulnerability to restrictive trade measures.

On the import side, the study acknowledges India’s reliance on Chinese intermediate and capital goods but cautions that full-scale decoupling is unrealistic given China’s central role in global value chains. 

Instead, it suggests encouraging targeted Chinese FDI in manufacturing under India’s Production-Linked Incentive (PLI) scheme—particularly in sectors such as electronics, automobiles and pharmaceuticals—to build domestic capacity, deepen local supply chains and enable technology transfer.

The report further highlights that India imports nearly USD 30 billion worth of products from China that could be sourced more competitively from countries such as Vietnam, South Korea and the UAE. 

These uncompetitive imports are concentrated in machinery, electronics and chemicals, accounting for two-thirds of the import value of the top 50 products.

On investment policy, ICRIER recommends revisiting Press Note 3, which currently requires government approval for FDI from countries sharing land borders with India. 

It proposes retaining restrictions in sensitive sectors but easing entry in non-strategic areas, supported by an inter-agency committee to manage approvals and security concerns.

(KNN Bureau)