Why Beijing and New Delhi can’t afford to lose each other

India and China, despite their border tensions and tightening investment scrutiny, continue to forge a complex economic relationship. In the fiscal year 2026, bilateral trade reached a record $151.1 billion, with China becoming India's largest trading partner. Indian exports to China increased by 36.6% to $19.47 billion, while imports rose by 16% to $131.63 billion.

This economic interdependence is evident in the range of Chinese goods India imports, including industrial machinery, telecom equipment, solar components, pharmaceutical ingredients, and fertilizers. However, Indian exports to China remain significantly smaller, mainly consisting of raw materials like iron ore, petroleum products, marine products, and chemicals.

Despite this trade imbalance, China's interest in India's market is growing, as Chinese customs data reveals a 12.8% increase in 2025, making it a key market for Beijing amid rising trade barriers elsewhere. As Chinese leader Xi Jinping visits India for the BRICS summit, the paradox of their relationship becomes apparent: India relies heavily on Chinese industrial inputs, while China increasingly values access to one of Asia's fastest-growing consumer and manufacturing markets.

India's dependence on Chinese inputs is primarily in the form of capital goods, components, and intermediate products necessary for domestic manufacturing. The goal is to shift towards deeper localisation, with projections suggesting that Indian electronics manufacturers could cover 50% of the mobile component value chain within six years, and solar manufacturing reaching 90% localisation by 2030.

Nonetheless, decoupling remains a challenging task, with India seeking to increase manufacturing and value addition at home, while China faces competition at home and Western market barriers. Therefore, both nations find themselves in a situation where their economic interdependence creates both opportunities and challenges.