Despite India's efforts to reduce dependence on imports from China amid an increased emphasis on self-reliance as well as escalating tensions along the border, bilateral trade grew 43.3 percent in 2021 — a year that marked a record high in exports to and imports from China, according to Chinese government data.

India’s imports from China rose to $97.5 billion in the calendar year 2021, up 46.1 per cent from $66.7 billion in 2020, which was impacted by Covid restrictions, as per data from the China General Administration of Customs. Imports in 2021 were up 30.3 per cent over 2019.

India’s exports to China also grew to a record high of $28.1 billion in 2021, up 34.9 per cent from $20.9 billion in 2020. Exports to China in 2021 were 56.5 per cent higher than in 2019.

According to the data, India’s total trade with China in 2021 was worth $125.7 billion.

The sharp uptick in imports on a large base has pushed India’s trade deficit with China to a record-high $69.4 billion in 2021, up from $45.9 billion in 2020 and $56.8 billion in 2019.

The record-high trade numbers between India and China in 2021 come even as the militaries of both countries have been unable to resolve the protracted boundary dispute despite 14 rounds of border talks.

The widening trade deficit, with India’s imports from China now nearly four times its exports in value terms, is a cause for concern, too, alongside the fact that India’s export basket comprises mainly primary goods while imports from china are dominated by value-added items.

According to data from the Union Commerce Ministry, China was India’s second-largest trading partner in the April-November period, after the US. The UAE, Saudi Arabia, Iraq, and Hong Kong were the other top trading partners for India during the period. India’s official statistics on bilateral trade with China are updated only till November 2021.

The record trade between India and China comes amid a border standoff. Delhi also has an eye on the rising trade deficit: in terms of value, India’s imports from China are nearly four times its exports to the country.

Some of India’s key imports from China include smartphones, components for smartphones and automobiles, telecom equipment, plastic and metallic goods, active pharmaceutical ingredients (APIs), and other chemicals.

The sharp increase in imports has come despite moves by the Centre to hike tariffs on key imports from China, including components for electronic goods such as smartphones. The Government has, in the past two fiscals, hiked import duties on printed circuit board assemblies, mobile charger components, display assemblies and other components used in the assembly of smartphones in India.

Experts have pointed out that players in the Indian electronic goods space were still largely focussed on the assembly of products and did not have much discretion in sourcing of components.

Officials at the Commerce Ministry had said earlier this fiscal that growth in India’s trade with other key trading partners, including the US, UAE and Australia, was even higher than that with China. India is currently in the process of negotiating Free Trade Agreements (FTAs) with the UAE, EU, UK and Australia.

Raw material exports constituted a significant portion of India’s outbound trade with China, with iron ore, organic chemicals and cotton figuring among key export items. Other key exports to China included iron and steel, seafood and engineering goods.

The increase in trade comes despite moves by the Government to reduce India’s dependence on Chinese imports after clashes between troops of both countries along the Ladakh border.

In June 2020, 20 Indian soldiers and several Chinese troops were killed in a violent border clash in Ladakh’s Galwan Valley. Soon after, the Union Power Ministry imposed a de facto ban on the import of power equipment from China, citing cybersecurity concerns. The Government also asked state-owned telecommunication companies, BSNL and MTNL, to exclude Chinese telecom equipment firms, including Huawei and ZTE, from its network upgrading process.

The Centre thereafter blocked social media app TikTok and 58 other Chinese apps in India, calling them “prejudicial” to India’s sovereignty, integrity and national security. Other apps that were banned include We Chat, Alibaba’s UC Browser, Club Factory, and PUBG mobile. The blocks were converted into permanent bans by the Ministry of Electronics and Information Technology (MeitY) in 2021.

The Government also modified foreign direct investment (FDI) rules, making its approval a must for any FDI in Indian firms from neighbouring countries — apparently aimed at preventing opportunistic takeovers of domestic firms by Chinese companies during the pandemic. India has also tightened its watch on the dumping of goods from China in the domestic market. In December 2021, India imposed anti-dumping duties on five Chinese products, including certain aluminium goods and chemicals, for five years to protect local manufacturers.