China Overtakes US as India’s Largest Trading Partner in FY26

China has overtaken the United States to become India’s largest trading partner in FY2025-26, with bilateral trade rising to about US$151.1 billion, according to government data reported by PTI and other media outlets on April 15. The shift marks the end of a four-year period in which the US held the top position in India’s trade rankings. India’s trade deficit with China also widened sharply to around US$112.16 billion, underlining how deeply Indian industry remains dependent on Chinese imports even as New Delhi pushes manufacturing self-reliance.

The latest figures suggest that India’s trade relationship with China is growing in scale, but in a highly uneven manner. Reports citing the data said India’s exports to China rose to roughly US$19.47 billion, while imports from China climbed to around US$131.63 billion during the fiscal year. That imbalance is significant because it shows that even when exports improve, import dependence in sectors such as electronics, machinery, chemicals, batteries and industrial components continues to dominate the relationship.

The broader trade backdrop also helps explain why this change matters. Reuters, citing India’s trade ministry data, reported that India’s total goods and services exports rose 4.22% in FY26 to US$860.09 billion, while imports grew 6.36% to US$978.40 billion, pushing the overall trade deficit to US$119.3 billion, up from US$94.66 billion a year earlier. In other words, the China story is part of a larger pattern in which India’s import bill is rising faster than its export earnings.

At the same time, the US remains critically important to India’s export strategy. Reuters reported that exports to the US jumped sharply in March 2026, helped by lower tariffs and stronger shipments of textiles and engineering goods. That means China may now be India’s biggest overall trading partner by total bilateral trade, but the US still matters more as a destination for value-added Indian exports. This distinction is important because it shows the very different roles played by the two countries in India’s external trade structure.

For policymakers, the new ranking is a reminder of a persistent strategic challenge: India wants to reduce dependence on Chinese supply chains, yet many of its fastest-growing sectors still rely on Chinese inputs. The widening deficit suggests that India’s manufacturing expansion, including in electronics and renewable-energy-linked sectors, is still closely tied to imports of upstream components and equipment. That final assessment is an inference based on the trade-deficit figures and the composition trends highlighted in recent reporting.

Sources:
https://www.news18.com/business/economy/china-overtakes-us-as-indias-largest-trading-partner-in-fy26-deficit-swells-to-112-6bn-ws-l-10035207.html
https://economictimes.indiatimes.com/news/economy/foreign-trade/china-surpasses-us-as-indias-largest-trading-partner-in-fy26-trade-gap-swells-to-usd-112-16-bn/articleshow/130288033.cms
https://money.rediff.com/news/market/india-china-top-trading-partner-in-fy26/45369020260415
https://www.reuters.com/world/india/indias-trade-deficit-2098-billion-march-2026-04-15/
https://www.tribuneindia.com/news/china-remains-indias-top-trading-partner-in-early-2026/