India’s trade deficit with China increased more than twofold from 2007 to 2017. India’s imports from China were six times its exports in 2017, making rising trade imbalance a major concern.

While Chinese exports to India rely strongly on manufactured items to meet the demand of fast expanding sectors like telecom and power, India’s exports to China are primary and intermediate products. India’s major exports to China include ores, slag and ash, cotton, organic chemicals, mineral fuels/oils, copper and its articles. Imports include telecom instruments, electronic components and instruments, computer hardware, organic chemicals, plastics and plastic items.

Cotton has been one of India’s leading exports to China, but volumes have shrunk considerably in the past few years. China is the largest market for India’s cotton yarn, yet exports have halved from 2013 to 2016. The decline is attributed to China’s increasing import of cotton yarn from Vietnam, which registered an 88 per cent increase over the same period.

However, recent trade war between the US and China has sparked a ray of hope for Indian exports such as cotton, soya bean and maize. As China imposes tariff barriers on US products, Indian exports are expected to increase.