Since the time of Jawaharlal Nehru, despite India’s many efforts, China has always remained a political adversary. Yet, trade with this adversary has never stopped. Even during times when China intruded into Galwan Valley in Ladakh, built settlements in Arunachal Pradesh, or pushed into Doklam in Sikkim, India’s trade with China kept increasing. For the common Indian, China is viewed much like Pakistan—an enemy. But the Indian government, at least in terms of trade, does not treat China as an enemy. That is the undeniable reality.
When the NDA government came to power in 2014–15, India imported goods worth $60 billion from China. By 2024–25, imports had risen to $113 billion. In just 11 years, imports almost doubled, increasing by about 88 percent. On the other hand, India’s exports to China were about $12 billion in 2014–15 and have grown to only $14 billion over the same period—an increase of just 17 percent. The gap between imports and exports has widened sharply, posing serious concern for India.
India’s trade deficit with China is staggering. Unlike trade with the United States, where India enjoys a surplus of nearly $40 billion despite tariff pressures under Donald Trump, India runs a loss of nearly $100 billion in trade with China. To put this in perspective, this amounts to around ₹8.88 lakh crore. Back in 2014–15, India’s trade deficit with China stood at $48 billion. In just 11 years, the deficit has more than doubled, making China the country with which India suffers its largest trade loss—not Pakistan, not any other nation. The only way to reduce this deficit is by increasing India’s exports to China, something the government must urgently address.
According to WTO figures, China accounted for 14 percent of global exports in 2023, the U.S. for 8 percent, while India’s share was less than 2 percent—exactly what it was in 2014. While China has grown, India’s share has stagnated. Unless India reduces its trade deficit with China, this imbalance in global trade will persist.
One major concern is the Regional Comprehensive Economic Partnership (RCEP), the world’s largest free-trade bloc led by China, which includes 15 Asia-Pacific nations. India pulled out of RCEP in 2019, fearing that Chinese goods would flood its markets if tariffs were eliminated. That fear still remains. After the Galwan clashes in Ladakh, there was a widespread demand that India cut all trade ties with China. Nothing of the sort happened—on the contrary, trade has only increased. China may now pressure India to rejoin RCEP or reduce tariffs on Chinese goods. If India yields, imports will surge further, worsening the trade deficit. Instead, India must demand that China lower tariffs on Indian products.
On the currency front, the rupee has also steadily weakened against China’s yuan. In 2013, one yuan equaled ₹9.53. Today, it stands at ₹12.33. In 12 years, the rupee has lost about 30 percent of its value against the yuan. Against the U.S. dollar, the fall has been even steeper—51 percent. By comparison, the rupee’s depreciation against the yuan seems moderate. But this fact is largely symbolic, since India’s trade with China is not conducted in rupees or yuan—it is carried out in U.S. dollars. Even Indian travelers to China have to transact in dollars. This underlines the global dominance of the dollar, a reality that even China accepts.
Could deeper India-China cooperation one day make rupee-yuan trade possible? Perhaps—but for now, no such negotiations are on the table.
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*Senior economist based in Ahmedabad
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