India’s exports to China rose sharply in April-August, led by electronics and engineering goods, but the trade deficit remains wide
India’s electronics exports to China are gaining momentum as demand linked to artificial intelligence and data centres grows globally. Overall exports to China rose nearly 40 per cent in the first five months of the financial year, Bloomberg News reported, but the increase remains too small to significantly narrow India’s trade deficit.
The rise comes as India seeks to expand its manufacturing base and secure a larger role in global supply chains. Electronics has emerged as one of the key sectors in that push.
Electronics exports to China rose more than 15 per cent in the April-August period from a year earlier, the report said, citing government data. That followed a sharp increase in electronics shipments during the previous financial year.
AI demand boosts electronics exports
India’s electronics exports to China tripled to $3.18 billion in the financial year ended March, although the increase came from a relatively low base.
The shipments included printed circuit board assemblies, smartphones, display modules and telecom equipment.
Industry executives said the global expansion of AI and data centres is supporting demand for equipment and components from Indian manufacturers.
The increase is significant for India’s manufacturing ambitions because electronics is one of the sectors New Delhi is seeking to expand as companies diversify their supply chains.
More from BusinessEngineering exports rise too
The increase in shipments to China extends beyond electronics.
Engineering exports rose about 21 per cent in the April-August period from a year earlier, according to Bloomberg News. The increase included machinery and parts, auto components and hand tools.
The broader growth suggests Indian manufacturers are finding new opportunities in the Chinese market. But exporters will need to sustain the momentum and expand into a wider range of products for the gains to have a meaningful impact on the bilateral trade equation.
China remains a small market for Indian exports
Despite the recent growth, China remains a relatively small destination for Indian goods.
China accounted for about 4.4 per cent of India’s exports in the financial year ended March, up from just over 3 per cent a year earlier. The US, India’s largest export market, accounts for almost a fifth of India’s exports.
That leaves considerable room for Indian companies to expand in China, particularly in manufactured goods.
But there is also a significant gap between what India sells to China and what it buys from the country.
Trade deficit remains the bigger problem
India imported $131.6 billion worth of Chinese goods in the year ended March, Bloomberg News reported. Chinese goods accounted for almost 17 per cent of India’s total imports.
The value of imports was therefore many times higher than India’s exports to China, leaving the bilateral trade deficit largely unchanged despite the recent export growth.
There is also some uncertainty over the composition of the increase.
Chinese customs data do not show a comparable rise in imports of printed circuit boards from India. Much of the increase instead appears under smartphones and other telecom products. Industry executives said differences in how the two countries classify goods make it difficult to determine precisely what is driving some of the increase.
A change in direction, not yet a reversal
The rise in exports comes as India and China seek to improve economic ties after relations deteriorated sharply in recent years. Both sides are also looking at trade and supply-chain issues as global trade patterns shift.
For India, stronger exports to China could support its efforts to deepen manufacturing capabilities and gain a larger role in global value chains.
But the latest data do not yet point to a major change in the overall trade relationship.
India is selling more electronics, engineering goods and other manufactured products to China. At the same time, Chinese goods continue to account for a much larger share of India’s trade.
The immediate challenge for Indian exporters is to sustain the recent growth and broaden it across components, sub-assemblies and finished products.
