India’s exports to China have increased sharply in the first five months of the current financial year, with electronics and engineering goods driving much of the growth. However, despite the rise in exports, India continues to face a large trade deficit with China as imports remain far higher than the goods India sells to its neighbour.
According to a Bloomberg report based on government data, India’s exports to China rose by nearly 40% between April and August compared with the same period last year. Electronics exports also increased by more than 15% during the period.
The increase comes as India is trying to expand domestic manufacturing and become a bigger part of global supply chains. Electronics, in particular, has become an important sector in this effort.
Electronics exports get a boost from AI and Data centres
Electronics has emerged as one of the stronger areas in India-China trade. India’s electronics exports to China tripled to $3.18 billion in the financial year that ended in March, although the sharp increase came from a relatively small base.
The products included printed circuit board assemblies, smartphones, display modules and telecom equipment. Electronics shipments have continued to grow in the current financial year, rising more than 15% during April-August from a year earlier.
Industry executives said the global expansion of artificial intelligence and data centres is creating additional demand for electronic equipment and components. This could provide opportunities for Indian manufacturers as companies around the world look to diversify their supply chains.
The rise is also important for India’s manufacturing plans, as the government has been trying to increase domestic production and expand the country’s role in global manufacturing.
Engineering goods also see strong growth
The increase in exports is not limited to electronics. Engineering goods have also recorded significant growth in shipments to China.
Engineering exports increased by around 21% during April-August compared with the same period last year. The growth included machinery and parts, auto components and hand tools.
The increase suggests that Indian manufacturers are finding more opportunities in the Chinese market. However, exporters will need to maintain this growth and expand into more product categories if the increase is to make a significant difference to the overall trade relationship.
China still accounts for a small share of India’s exports
Despite the recent rise, China continues to account for a relatively small share of India’s total exports. China made up around 4.4% of India’s exports in the financial year ended March, compared with slightly more than 3% a year earlier.
By comparison, the US remains India’s largest export market and accounts for almost one-fifth of the country’s exports.
The figures indicate that there is considerable scope for Indian companies to increase their exports to China, particularly in manufactured products. At the same time, the much larger volume of imports from China continues to be a major challenge.
India imported goods worth $131.6 billion from China in the financial year ended March, according to Bloomberg News. Chinese products accounted for nearly 17% of India’s total imports.
This means the value of Chinese goods entering India remains several times higher than India’s exports to China. As a result, the recent increase in exports has done little to reduce the overall bilateral trade deficit.
