India’s merchandise trade with China reached a record high during the first half of 2026, showing strong economic ties despite ongoing geopolitical tensions and efforts to diversify supply chains. New trade data shows strong growth in both imports from China and exports to the neighboring country between January and June 2026.
According to the new data, India's merchandise imports from China increased to $79.41 billion in January-June 2026, up from $65.2 billion in 2025. This is an increase of 21% year-on-year, pointing to the continuing reliance on Chinese products and services (e.g. electronics, machinery, chemicals, pharmaceuticals, and industrial components).
India also saw good growth in exports. Merchandise exports to China rose to $12.31 billion in the first six months of 2026, up from $8.97 billion in the same period in the previous year. The increase of more than 37 percent year on year was driven by stronger shipments of iron ore, petroleum products, agricultural commodities, marine products, and selected engineering products.
The trade relationship still favors China in terms of exports, but the trade is more heavily skewed. India’s trade deficit with China continued to grow as imports far exceeded exports. In the first half of 2026, the trade deficit was at around $67.1 billion, compared to about $56.2 billion in the same period of 2025.
Economists say the numbers illustrate the challenges faced by India in reducing reliance on Chinese imports. Many Indian manufacturing industries rely on China for raw materials, electronic components, machinery, solar equipment, and intermediate goods. While government projects like the Production Linked Incentive (PLI) scheme and Make in India program have been launched to boost domestic manufacturing, replacing Chinese imports is a slow process.
But we still see the surge in exports as a positive development. The increased demand for Indian commodities and industrial products suggests that bilateral trade activity and the opportunities for Indian exporters are increasing in certain sectors.
Trade experts say the record trade volume also reflects business demand despite periodic diplomatic tension between the two countries. Economic relations have largely worked despite the countries' strategic diversification of their supply chains and promotion of domestic manufacturing.
At present, policymakers should continue to work to reduce the trade imbalance by promoting exports, improving local manufacturing capabilities, and increasing imports from other global markets. China is also one of the world’s largest manufacturing hubs, and businesses are likely to remain close to China.
The current data show that although India is improving its exports, its imports have increased significantly with China as its main buyer. The challenge for the policymakers now will be to reconcile economic growth and supply chain resilience with the persistent trade deficit.
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