Prime Minister Narendra Modi’s return from the Shanghai Cooperation Organisation (SCO) Summit has reignited debate at home, particularly after his bilateral meeting with Chinese President Xi Jinping — the first in nearly eight years. Optimists celebrate it as a breakthrough, critics denounce it as weakness, while realists see a pragmatic reopening of dialogue. But behind the political noise lies an unavoidable truth: India’s economic imbalance with China is growing ever starker.
A Ballooning Trade Deficit
India’s trade deficit with China touched $99.2 billion in FY 2024–25, with imports of $113.5 billion dwarfing exports of just $14.25 billion. Nearly a third of India’s total trade imbalance comes from one country. While officials frame the summit as a chance to unlock Chinese markets for Indian goods, the reality is that “Make in India” still struggles to compete with “Made in China” — on cost, scale, and quality.
Why ‘Make in India’ Isn’t Breaking Through
When launched in 2014, Make in India promised to raise manufacturing’s GDP share to 25%. Instead, it has slipped below 16%. India’s factories remain dependent on Chinese inputs: more than 70% of imported manufactured goods are intermediates and capital equipment. In renewable energy, over 70% of PV modules and cells still come from China. Even the iPhone story illustrates the imbalance — India now produces 20% of global units, but China continues to make more than 70%.
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Lessons from China’s Scale
China’s ability to dominate lies in scale. In 2024 alone, Chinese consumers bought 287 million smartphones, 20 million vehicles, and spent $470 billion on pharmaceuticals. Global fashion houses from Gucci to Prada source from Chinese factories, while Chinese EV maker BYD has overtaken Tesla in European sales by offering affordable, mass-produced models. Against this backdrop, Indian firms — from Tata Motors to Raymond — cannot yet match the efficiency or cost base of Chinese rivals.
The Silver Lining
There are certainly sparks of progress. Apple’s expanding India operations, the Production-Linked Incentive (PLI) schemes for semiconductors and electronics, and rising foreign direct investment — $81 billion in 2024–25 — show momentum. Policymakers hope that as China climbs the value chain, it might leave space for India in lower-end manufacturing. Yet with a 600-million-strong workforce, Beijing has little incentive to abandon mass-production industries.
What India Must Do
To close the gap, India must think ahead. Along with building integrated supply chains, reforming labor and land policies a focus on moving from cost-driven to quality-driven production are critical. Joint ventures and co-production could also embed Indian firms into global value chains rather than competing head-on.
PM Modi’s handshake with Xi may signal renewed dialogue, but reducing the yawning trade deficit requires more than diplomacy. Without scale, competitiveness, and innovation, India will remain a consumer of Chinese goods rather than a supplier to China’s vast market.
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