China has edged out the United States to become India’s top trading partner for the fiscal year 2023-24 (FY24), according to data from the economic think tank Global Trade Research Initiative (GTRI). Total two-way trade between India and China reached $118.4 billion, narrowly surpassing the $118.3 billion in trade with the US.

This marks a shift from the previous two years where the US held the top spot. However, FY24 saw a slight decline in India-US trade, with both exports and imports dipping. Conversely, China’s trade with India grew, driven by a significant increase in imports by India.

Key takeaways:

• China-India trade reached $118.4 billion in FY24, compared to $118.3 billion with the US.
• India’s exports to China grew by 8.7%, while imports increased by 3.24%.
• US-India trade dipped, with Indian exports falling slightly and imports decreasing by 20%.

Reasons for the shift:

The reasons behind this shift in trading partners are complex and likely involve a combination of factors. Some possible explanations include:

• Growth in Chinese imports: India continues to rely heavily on imports from China, particularly in sectors like electronics, machinery, and pharmaceuticals. This dependence on Chinese goods could be a major driver of the increased trade volume.
• Shifting US-India trade dynamics: The decline in US-India trade could be due to various reasons, such as changes in trade policies, global economic factors, or a focus on different sectors of trade.

Implications:

The rise of China as India’s top trading partner has significant economic and strategic implications. While it presents opportunities for increased economic activity, it also raises concerns about India’s trade deficit with China and its dependence on Chinese imports for critical goods.

Looking ahead:

It will be interesting to see if this is a one-time shift or the beginning of a long-term trend. The future of India’s trade relationship with both China and the US will likely depend on various factors, including global economic conditions, trade policies, and geopolitical developments.

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Do you think China will remain India’s top partner in the coming years?