Modi-Xi thaw masks widening China trade gap
Narendra Modi and Xi Jinping met at the BRICS summit in New Delhi and agreed to resolve the border issue amicably. However, the economic track was less promising, with trade between China and India reaching a record high. India imported over $130 billion worth of Chinese goods, while exporting under $20 billion, resulting in a deficit above $112 billion, the highest on record.
For every dollar India sells to China, it buys back $6-7 worth. Indian consumers benefit from cheaper Chinese goods, but the widening trade deficit is largely due to Chinese firms' competitive pricing and technology. India relies heavily on China for inputs in various sectors, including rare earths, which China controls significantly.
Despite some easing of restrictions in August 2025, new restrictions on 5 more elements and a requirement for product approval were introduced soon after, covering 12 elements in total. India is exploring alternatives like Australia, Japan, and South Korea, but building domestic manufacturing capacity for critical minerals and electronics will take years.
While targeted measures to reduce dependency on China may be beneficial, a complete decoupling is unlikely in the near future.
Written by urgent.news from The Economic Times's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
