‘We can’t be splurging money’: Sitharaman on India’s growth, China trade gap

India’s growth outlook remains strong, but its dependence on imported crude oil and fertilisers, along with its widening trade imbalance with China, exposes the economy to external shocks. Finance Minister Nirmala Sitharaman said that infrastructure investment, fiscal prudence and new trade agreements are key to sustaining growth in an increasingly fragmented global economy.

Speaking during the IMF-World Bank annual meetings in Bangkok on Friday, Sitharaman defended the government’s approach of directing public borrowing towards infrastructure creation while maintaining spending discipline and protecting vulnerable sections of the population.

Her remarks come as the IMF’s October 2026 outlook projects India’s economy to grow 7 per cent this year, compared with global growth of 3.1 per cent.

The finance minister also called for greater market access for Indian exporters in China, a review of India’s trade agreement with the Asean and changes to the representation of emerging economies at the International Monetary Fund.

Why Sitharaman is defending infrastructure-led growth

Sitharaman said public investment in infrastructure has helped sustain economic activity by generating a multiplier effect across the economy.

“We are conscious that we have a responsibility with the public money, and therefore keeping a very clear understanding that we can’t be splurging money,” she said, adding that the government must also take care of vulnerable sections of the economy.

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The finance minister argued that infrastructure investment can put money into people’s hands through economic activity while creating productive assets for the future.

“Borrowing goes for asset creation, and as a result, the economy has benefited,” she said.

The government has budgeted capital expenditure of around Rs 12.2 lakh crore and pegged the fiscal deficit at 4.3 per cent of GDP.

India’s exports rise, but the trade deficit remains a concern

India imports large quantities of crude oil, leaving its import bill exposed to fluctuations in international prices. Fertiliser imports also remain important because domestic production is insufficient to meet the requirements of Indian agriculture.

India’s merchandise exports rose 23.04 per cent year on year to $44.40 billion in September 2026, while merchandise imports increased to $74.61 billion. The merchandise trade deficit stood at $30.21 billion, compared with $33 billion in September 2025. However, it widened from $26.86 billion in August 2026.

Total exports of goods and services rose 10.99 per cent to an estimated $80.75 billion in September, while total imports increased 8.19 per cent to $94.05 billion, according to the Commerce Ministry.

Sitharaman said Indian exporters and farmers had responded to tariff pressures and disruptions in global supply chains by finding alternative markets. She also credited digital public infrastructure with helping businesses and producers in remote areas access international markets.

China trade imbalance

“With China, I think our trade balance is against us, and it is growing exponentially,” she said.

She identified generic medicines, bovine meat, vegetables and perishable goods as products in which Indian businesses could potentially expand their presence in China. However, she said non-tariff barriers had restricted access despite years of discussions between the two countries.

Such barriers can include sanitary and phytosanitary requirements, technical standards and regulatory procedures.

Sitharaman said India had repeatedly raised its concerns over market access but had seen limited progress.

Unlike countries that use tariffs to pressure trading partners into correcting trade deficits, she said, India prefers negotiations.

“We sit and talk,” she said, describing the process as sometimes tiresome but preferable to countering trade barriers with further restrictions.

India-China trade rose to around $91.76 billion in April-September 2026, with Indian exports at $11.41 billion and imports at $80.34 billion. This implies a merchandise trade deficit of nearly $68.93 billion for the six-month period.

India-US trade deal

Asked about recent positive signals from both sides, she referred to comments by a US congressman and India’s commerce minister indicating a desire to conclude the agreement.

“I hope, in the interest of global trade and in the interest of trade between the two partners, India and US, the trade agreement gets concluded at the very least,” she said.

The US remains a crucial market for Indian exporters. Merchandise exports to the country reached $50.81 billion during April-September 2026, up from $45.82 billion a year earlier, according to the latest trade figures reported by Reuters.

India is also pursuing agreements with several other trading partners as it seeks to diversify its export destinations and secure more predictable market access.

Sitharaman cited agreements with the United Arab Emirates, Australia and New Zealand, the concluded agreement with the European Free Trade Association countries, and negotiations with Canada. She also referred to the trade agreement with the European Union and the UK deal that has entered into force.

Bilateral agreements, she said, can help countries accelerate negotiations that have remained stalled for years and create opportunities for the movement of goods and services.

Why India wants changes at the IMF

Beyond bilateral trade, Sitharaman called for reforms to the governance of multilateral financial institutions, particularly the IMF.

She said that quota reform must address both the resources available to the institution and the representation of its members.

As economies grow, she said, their contributions to international institutions may need to increase. But financial contributions alone should not determine how much influence a country has over decisions.

“Paying up is just not sufficient,” Sitharaman said, arguing that countries must also have a meaningful platform to express their concerns.

Sitharaman also argued that multilateral financial institutions need to respond more quickly to countries facing debt distress and balance-of-payments pressures.

She said countries that run short of hard currencies can struggle to pay for essential imports, even when they need those goods to keep their economies functioning.

India is exploring rupee and local-currency settlements as one way to facilitate trade with countries facing such constraints.

“Rupee and local currency settlements is something which we like to do for the benefit of countries which are starved of hard currencies, but yet need to import some goods,” she said.

Reforms must reach local governments

Sitharaman linked India’s ambition of becoming a developed country by 2047 to continued structural reforms and greater participation by private and foreign capital.

She said reforms that open markets, listed companies and government-owned businesses to investment could help bring in fresh capital and support expansion across sectors.

India’s municipalities and village-level institutions, she said, need better capabilities to plan local development, including waste management, roads, last-mile connectivity, electricity transmission and water restoration.