India’s Trade with US and China: Exports Surge, Trade Deficit Widens

What’s in Today’s Article?

• India Trade Deficit Latest News
• Overall Trade Snapshot (FY25)
• India–US Trade Registers Strong Growth in FY25
• China Remains India’s Second-Largest Trading Partner
• Conclusion
• India Trade Deficit FAQs

India Trade Deficit Latest News

• In 2024–25, the US remained India’s largest trading partner for the fourth consecutive year, with bilateral trade reaching $131.84 billion. China retained its position as the second-largest partner, with trade growing to $127.7 billion.
• However, India’s trade deficit with China widened significantly to $99.2 billion, a 17% increase from the previous year. 
• Historically, China was India’s top trading partner between 2013–14 and 2017–18, and again in 2020–21. The US has held the top spot since 2021–22.
   

Overall Trade Snapshot (FY25)

• Goods exports remained flat at $437.42 billion (vs $437.07 billion in FY24).
• Imports rose by 7% to a record $915.19 billion.
• Services exports grew 12.45% to $383.51 billion, maintaining a healthy surplus with imports at $195.95 billion.

Sector-Wise Performance

• Coffee exports surged 40% to a record $1.8 billion, driven by global shortages and high prices.
• Electronic goods exports jumped 32% to $38 billion, boosted by iPhone manufacturing in India.
• Drugs, pharmaceuticals, fruits & vegetables, cereal preparations saw 5–10% growth.
• Exports of gems & jewellery, handicrafts, chemicals declined by 2–10%.
• Engineering goods exports grew 6.74% overall, but dipped 4% in March.

Challenges Ahead for Engineering Exports

• US tariffs on iron & steel and auto components may reduce annual engineering exports by $4–5 billion.
• Increasing competition from Chinese exporters in global markets like Latin America, Africa, and the Middle East may erode profit margins for Indian firms.

India–US Trade Registers Strong Growth in FY25

• India’s exports to the US rose by 11.6%, reaching $86.51 billion in 2024–25 (up from $77.52 billion in FY24).
• Imports from the US increased by 7.44% to $45.33 billion (up from $42.2 billion).
• Resulting trade surplus for India stood at $41.18 billion, an increase from $35.32 billion in the previous year.

Top Indian Exports to the US in 2024–25

• Drug formulations & biologicals – $8.1 billion
• Telecom instruments – $6.5 billion
• Precious & semi-precious stones – $5.3 billion
• Petroleum products – $4.1 billion
• Gold & precious metal jewellery – $3.2 billion
• Readymade garments (mostly cotton) – $2.8 billion
• Iron & steel products – $2.7 billion

Major US Exports to India in 2024–25

• Crude oil – $4.5 billion
• Petroleum products – $3.6 billion
• Coal & coke – $3.4 billion
• Cut & polished diamonds – $2.6 billion
• Electric machinery – $1.4 billion
• Aircraft, spacecraft & parts – $1.3 billion
• Gold – $1.3 billion

Future Outlook: Targeting $500 Billion by 2030

• India and the US are negotiating a trade agreement aimed at boosting bilateral trade.
• The shared goal: increase total trade to $500 billion by 2030, up from the current $191 billion.

China Remains India’s Second-Largest Trading Partner

• In 2024–25, India–China bilateral trade rose to $127.7 billion, up from $118.4 billion in 2023–24.
• China continues as India’s second-largest trading partner, after the US.

Trade Deficit with China Widens Sharply

• India’s exports to China fell by 14.5%, dropping to $14.25 billion (from $16.66 billion).
• Imports from China surged by 11.52% to $113.45 billion (from $101.73 billion).
• This caused India’s trade deficit with China to widen by 17%, reaching $99.2 billion, up from $85.07 billion in the previous year.

Historical Trade Dynamics

• China was India’s top trading partner from 2013–14 to 2017–18 and again in 2020–21.
• Prior to China, the UAE held the top spot.

Analysis

• Experts noted that India’s growing trade deficit with China reflects structural dependency, not just trade imbalance.
• They termed it a "competitiveness crisis", as exports to China have fallen below FY14 levels despite a weaker rupee.

Conclusion

India’s trade landscape is undergoing a steady transformation, marked by deepening economic ties with the US and persistent trade challenges with China. 

While the US has emerged as India’s largest trading partner, offering significant export growth and a widening trade surplus, China continues to dominate as a key supplier, leading to a growing trade deficit. 

As India seeks to bolster its global economic standing, strategic partnerships with nations like the US and UAE are becoming more crucial. 

India Trade Deficit FAQs

Q1. What is India’s trade deficit with China in FY25?

Ans. India’s trade deficit with China reached $99.2 billion in FY25, a 17% increase from the previous year.

Q2. Which country is India’s largest trading partner?

Ans. The US has been India’s largest trading partner for the fourth consecutive year, with $131.84 billion in trade.

Q3. How did India’s exports to the US perform in FY25?

Ans. India’s exports to the US increased by 11.6%, reaching $86.51 billion in FY25.

Q4. What are India’s top exports to the US?

Ans. Top exports include drug formulations, telecom instruments, precious stones, and petroleum products.

Q5. Why is India’s trade deficit with China increasing?

Ans. The trade deficit with China is widening due to a decrease in exports and an increase in imports.

Source: IE | TH | BS