If diplomacy were measured in handshakes and press releases, India and China might be on the verge of a golden age. However, if one simply glances at the trade figures, it becomes painfully clear that New Delhi is playing economic cricket with a broken bat. In 2022, India imported a staggering $110 billion worth of Chinese goods while only managing to export $15.3 billion in return. The result? A record-breaking trade deficit of nearly $95 billion, an economic wound that Beijing continues to salt with every passing fiscal year.
Despite military tensions along the Himalayan border, and India’s reluctance to succumb to China’s hegemonic aspirations, commerce between the two nations has surged. While political strategists fret about sovereignty, Indian consumers have been busy filling their homes with Chinese smartphones, machinery, and electronic gadgets.
Shein’s comeback: A Chinese brand wrapped in an Indian package
For a country that banned Shein in 2020 alongside dozens of other Chinese apps, India’s decision to let the ultra-fast fashion giant return in 2024 is, at best, a curious development. This time, however, there’s a twist: billionaire Mukesh Ambani’s Reliance Industries has partnered with Shein to relaunch its Indian operations. The deal requires all Shein products sold in India to be designed and manufactured domestically, creating the illusion of self-sufficiency while keeping the cash registers ringing.
Yet, one must ask: Is this really a victory for India? Shein’s global supply chain remains heavily dependent on China, and while India may see some manufacturing gains, the brand’s re-entry further cements Chinese business interests in the Indian market. Meanwhile, Indian consumers are once again free to fill their wardrobes with Shein’s disposable fashion—without a yuan technically changing hands in customs records.
The numbers don’t lie—India is hooked on Chinese goods
The structural problem remains India’s dependency on Chinese imports. Pharmaceuticals, electronics, and automobile components are the three main sectors that keep Indian businesses tethered to Chinese supply chains. Approximately 70% of active pharmaceutical ingredients (APIs) used in Indian drug manufacturing come from China, ensuring that even the country’s famed pharmaceutical industry relies on its northern neighbor.
Meanwhile, Indian exporters face an uphill battle. While China’s manufacturing ecosystem churns out finished goods at breakneck speed, India primarily exports raw materials like iron ore, minerals, and seafood. Even in sectors where India holds a comparative advantage—such as pharmaceuticals and information technology—Chinese market access remains restricted, leaving Indian businesses at a disadvantage.
A diplomatic handshake, but no economic silver bullet
Against this economic backdrop, Indian External Affairs Minister Subrahmanyam Jaishankar met with his Chinese counterpart Wang Yi in Johannesburg. The two exchanged pleasantries about “restoring mutual trust” and fostering “win-win cooperation,” as if the past five years of geopolitical tensions had been a minor inconvenience rather than a series of military clashes and economic decoupling efforts.
China, ever the master of diplomatic optics, expressed willingness to celebrate the 75th anniversary of India-China diplomatic relations—a move that sounds warm and fuzzy but does little to address the brutal economic asymmetry. Jaishankar, for his part, acknowledged the necessity of improving bilateral ties but stopped short of making any grand economic pronouncements.
Can India break free? Not any time soon
Despite political efforts to diversify trade and reduce dependency on Chinese imports, India’s economic reality remains unchanged. Following the Galwan Valley clashes in 2020, India imposed restrictions on Chinese investments and banned multiple apps, yet its trade deficit only widened.
India’s ambitious Atmanirbhar Bharat (“Self-Reliant India”) initiative, launched in 2020, was supposed to curb reliance on foreign goods, particularly from China. In theory, it would boost domestic manufacturing, support local businesses, and shift supply chains away from Beijing. In practice, however, the results have been mixed. While India has successfully tightened its grip on foreign direct investments from China, it has not been able to replace the essential imports that keep its industries afloat.
The ASEAN comparison: Why India struggles where others thrive
India is not alone in its economic paradox. The ASEAN bloc, despite ongoing territorial disputes with China, continues to deepen trade relations with Beijing. In 2021, ASEAN became China’s largest trading partner, surpassing even the European Union. Unlike India, however, ASEAN nations have leveraged their strategic geographic location and trade agreements to maintain a more balanced economic relationship with China.
India’s reluctance to join the China-led Regional Comprehensive Economic Partnership (RCEP) further isolates it in Asia’s economic order. While India feared that unrestricted trade under RCEP would lead to an influx of cheap Chinese goods, its absence has only strengthened China’s dominance in the region.
Rhetoric versus reality
India’s path to economic equilibrium with China is anything but straightforward. While government policies continue to emphasize self-reliance, the numbers paint a different story. Chinese goods remain embedded in India’s supply chains, and despite a diplomatic thaw, there’s no real indication that trade patterns will change in the near future.
As Shein sets up shop once again and Chinese imports flood Indian markets, New Delhi’s challenge remains clear: it must either find a way to effectively reduce its dependency or learn to navigate an economic relationship where China holds most of the cards.
For now, the trade deficit remains a formidable economic reality—one that no amount of diplomatic pleasantries or rebranded fast fashion deals can erase.