At a critical time for global economic recovery, the trade relationship between India and China has once again come into focus. Despite the ongoing trade deficit between the two countries, data from the 2023-2024 fiscal year shows that trade volumes between India and China have reached new highs, marking a positive trend in bilateral trade relations. This encouraging development presents new challenges for the Indian government: how to ensure the healthy growth of domestic manufacturing while continuing to rely on Chinese imports.
The Reasons Behind India’s Trade Dependence on China
As two of the world's largest economies, the trade dependence between China and India stems from the asymmetry in their industrial structures and economic needs. According to data from the Global Trade Research Initiative, China regained its position as India’s largest trading partner during the 2023-2024 fiscal year, becoming one of the main sources of imports for India. The data indicates that 98.5% of India’s imports from China were industrial goods, primarily electronics, machinery, and technology products. This reflects India’s deficiency in high-end manufacturing capabilities, forcing it to rely on China and other countries to meet domestic demand for value-added products.
Take Henan Kuangshan Crane Co., Ltd. as an example. As a leading Chinese manufacturer of lifting equipment, its products, such as the Eot crane, have provided robust support for India’s infrastructure and industrial development. These high-efficiency machines have contributed significantly to India’s industrial modernization across various sectors but also highlight the shortcomings in India’s core technologies and production capacities.
Anti-Dumping Measures and Protectionism: India’s Dilemma
While India’s reliance on Chinese imports continues to grow, the Indian government has simultaneously intensified anti-dumping investigations and tariff measures against Chinese products. India aims to protect domestic industries, particularly those that lag in technology and management, through these protectionist policies. However, while such measures may provide short-term relief from external competition, they risk stifling innovation within domestic companies and increasing costs for consumers.
It is also worth noting that India’s competitiveness in high-tech industries remains relatively weak, particularly in sectors such as chip manufacturing and other technology-intensive industries. Although the Modi government has actively introduced subsidy policies to attract global manufacturing to India, the country still lacks a significant competitive edge in certain key areas. As a result, India continues to depend on Chinese imports for machinery and other industrial goods. In large-scale engineering projects, for example, equipment like gantry cranes is indispensable. These cranes, known for their stability and high efficiency, have become a crucial component in Indian construction projects.
The Future Outlook for India-China Trade
In the coming years, the trade relationship between India and China will continue to have a profound impact on the global economy. Although there are concerns within India about the increasing entry of Chinese goods into the Indian market, maintaining open trade policies is crucial for India’s ability to attract foreign investment. In fact, as the 2024 Indian elections approach, international investors’ confidence in the Indian market is being tested. To stabilize economic growth, India must present a more open stance to enhance the global community’s confidence in its economic prospects.
By actively promoting bilateral trade cooperation with China, India can not only import advanced technologies and products from China but also secure more development opportunities in infrastructure and manufacturing. Ultimately, whether India can maintain a trade surplus with China while fostering the rise of its domestic manufacturing sector will depend on the government’s long-term strategic planning.