India is selling significantly more manufactured goods to China, with electronics emerging as an unexpected bright spot in a trade relationship that nonetheless remains heavily tilted in Beijing's favor, according to a Bloomberg analysis of government data published Monday, September 21.
The Growth Numbers
Indian exports to China rose almost 40% in the five months through August, with electronics and engineering goods among the biggest drivers of that growth. Industry executives in India say demand created by the global AI and data-center build-out is contributing significantly to this increase — suggesting India's electronics manufacturers are finding a genuine niche supplying components or intermediate goods tied to the worldwide AI infrastructure boom, with China as a key buyer.
The Deficit Keeps Growing Regardless
Despite the strong export growth, India's overall trade relationship with China remains structurally lopsided. For the fiscal year ending March 2026, India's imports from China rose 16% to $131.63 billion, while exports jumped 37% to $19.47 billion — meaning even with exports growing more than twice as fast in percentage terms, the sheer scale gap between imports and exports pushed the trade deficit from $99.2 billion the previous year to a record $112.6 billion.
A Deficit That's Grown Dramatically Over Time
The scale of this imbalance reflects a long-running trend: India's trade deficit with China was under $1 billion in the late 1990s, and has since ballooned into one of the largest bilateral trade imbalances India maintains with any country. China briefly overtook the US as India's largest trading partner in FY26, with the combined trade relationship — imports plus exports — surpassing $135-150 billion annually in recent years.
Why India Can't Simply Cut Ties
Analysts note that a full economic break from China isn't currently practical for India, given how deeply Chinese components remain essential to much of India's own manufacturing base — spanning electronics, pharmaceuticals, machinery, and industrial inputs. This dependence helps explain why, even as trade tensions and geopolitical friction between the two countries persist, bilateral commerce has continued to grow on both sides rather than contract.
What India Is Pushing For
New Delhi has been actively lobbying for greater market access for Indian pharmaceuticals and IT products within China — sectors where India holds genuine global competitive advantages but has historically struggled to gain meaningful traction in the Chinese market. NITI Aayog CEO B.V.R. Subrahmanyam previously framed the stakes bluntly: "If you are not able to sell much to China, it is pointless, because it's an 18-trillion-dollar economy." India's ambassador to China, Vikram Doraiswami, has similarly said India would like to "be able to" export more to China, describing the request as entirely reasonable given the scale of the imbalance.
Electronics as a Genuine Success Story
The current export surge in electronics and engineering goods represents a meaningful shift from India's traditionally narrower export basket to China, which has historically leaned heavily on raw materials and basic industrial inputs. If sustained, growth in higher-value manufactured exports like electronics could offer a more durable path toward narrowing the deficit than previous, more limited diversification efforts.
Part of a Broader Recalibration in India-China Ties
This growing trade relationship comes even as India has separately eased restrictions on Chinese investment — including its recent relaxation of FDI rules for entities with limited Chinese shareholding — suggesting a broader, gradual recalibration in economic engagement between the two countries, even as strategic and border tensions between New Delhi and Beijing persist in parallel.
What's Next
With electronics exports showing real momentum and India continuing to push for expanded pharmaceutical and IT market access, the coming months will reveal whether this growth trajectory can meaningfully dent the trade deficit, or whether rising imports continue to outpace India's export gains as they have consistently over the past several years. For continuing coverage, see the full Bloomberg report.