India's growing trade imbalance with China and restrictions on Indian products entering the Chinese market have become major concerns for the Indian government. Finance Minister Nirmala Sitharaman has identified China's non-tariff barriers as one of the biggest obstacles to improving trade relations between the two countries. Speaking to the Atlantic Council on the sidelines of the International Monetary Fund and World Bank meetings in Bangkok, Thailand, on October 16, Sitharaman said India's trade deficit with China was expanding rapidly. She argued that Indian exporters were facing difficulties accessing a market with considerable potential for Indian products. Her remarks have brought renewed attention to India-China trade relations, particularly the challenges surrounding market access, export opportunities and the widening gap between imports and exports.

Why Is China a Concern for Indian Exporters?

Sitharaman said non-tariff barriers were a major hurdle for Indian businesses seeking to sell their products in China. Unlike conventional tariffs, which are taxes imposed on imported goods, non-tariff barriers can include regulatory requirements, product standards, licensing procedures and other restrictions that affect access to a market. The finance minister specifically referred to phytosanitary rules, which are designed to protect plants and agricultural products from pests and diseases. Such requirements can affect the ability of agricultural exporters to enter foreign markets. According to Sitharaman, Indian products with significant commercial potential in China include generic medicines, beef and vegetables. She argued that restrictions on market access prevent Indian businesses from fully exploring these opportunities. For Indian exporters, access to China's large consumer market could create opportunities to expand sales. However, regulatory requirements and differences in trade policies remain important factors in determining whether businesses can compete effectively.

India's Trade Deficit With China Crosses $100 Billion

One of the central concerns highlighted by Sitharaman is India's growing trade deficit with China. The deficit occurs when the value of goods India imports from China exceeds the value of goods it exports to the Chinese market. The report stated that India's trade deficit with China had crossed $100 billion so far in 2026. Sitharaman said the imbalance was growing substantially and remained a serious concern for the country's trade position. A persistent trade deficit can create challenges for domestic manufacturers and exporters, particularly when imported goods account for a substantial share of market demand. The implications, however, depend on the types of goods being traded, their role in domestic production and the value generated by exports. For India, the issue is not limited to the overall volume of trade. The government is also concerned about whether Indian businesses receive sufficient access to the Chinese market and whether trade can become more balanced over time.

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Will India Retaliate Against China's Trade Restrictions?

Sitharaman said India had not responded to the growing trade imbalance by imposing similar non-tariff barriers or countervailing duties against China. Her remarks indicated that New Delhi had not adopted the kind of retaliatory approach that some countries use when they believe their trading relationships have become heavily imbalanced. Countervailing duties are trade measures that may be imposed to offset the effects of certain subsidies benefiting imported goods, subject to applicable rules and investigations. They are different from non-tariff restrictions, which can affect imports through regulatory or administrative requirements. Sitharaman's comments suggest that India is highlighting the need to address market access concerns while considering its wider trade and diplomatic priorities. External Affairs Minister S. Jaishankar had also recently raised concerns about India not receiving a level playing field in China, according to the report.

China Responds to India's Trade Concerns

China has defended its economic relationship with India. Foreign Ministry spokesperson Mao Ning said Beijing did not deliberately pursue a trade surplus with India. China also expressed its willingness to strengthen cooperation, address economic and trade concerns in a balanced manner and support the continued development of bilateral relations. The differing positions underline the challenge facing both countries. India wants improved access for its products and a more balanced trading relationship, while China has expressed support for cooperation and dialogue. Whether these concerns lead to concrete changes will depend on discussions between the two governments, the treatment of individual products and any adjustments to trade-related regulations.

India-China Relations Have Gradually Improved Since 2020

Relations between India and China deteriorated sharply following a deadly border clash in 2020. The incident contributed to years of diplomatic mistrust and restrictions affecting Chinese investments and business ties. Since then, both governments have taken steps to ease border tensions and restore high-level engagement. Prime Minister Narendra Modi and Chinese President Xi Jinping have also renewed efforts to stabilise relations. However, progress on the diplomatic front does not automatically resolve economic disagreements. Market access, import dependence and the trade deficit remain separate issues that require sustained engagement. The latest comments from Sitharaman highlight how trade policy continues to influence the broader relationship between the neighbouring Asian powers.

India Also Wants Changes to ASEAN Trade Agreements

Beyond China, Sitharaman raised concerns about India's trade agreements with Southeast Asian countries. She described the existing terms of agreements with the Association of Southeast Asian Nations, or ASEAN, as heavily skewed against India. The finance minister indicated that India intended to maintain its trade agreement with the ASEAN bloc, but said its terms would need to be reworked. The issue reflects India's broader effort to assess whether existing trade arrangements provide sufficient benefits to domestic industries and exporters. Any revision would involve negotiations with partner countries and consideration of the interests of different sectors. Sitharaman also expressed hope that India and the United States would conclude a trade agreement soon, saying it could benefit both bilateral and global trade.

Rising Oil and Fertiliser Imports Add to Economic Pressure

Sitharaman also pointed to India's dependence on imported crude oil and fertilisers as a vulnerability. The cost of these essential imports has been increasing, adding pressure to the country's import bill and contributing to the outflow of foreign exchange. Higher oil prices can increase the amount India must pay for energy imports. This can affect the country's external payments position and increase demand for foreign currencies, particularly the US dollar. The Indian rupee has faced sustained pressure amid rising oil costs, foreign capital outflows and elevated US yields. These factors have contributed to demand for dollars and added to the challenges facing India's currency. The Reserve Bank of India has intervened in foreign exchange markets and introduced measures intended to manage pressure on the rupee. These steps have included selling dollars and introducing a special facility to meet the foreign-exchange needs of state-owned oil companies, along with tighter rules for currency derivatives.

What Comes Next for India-China Trade?

The key question is whether India and China can address their trade differences while continuing efforts to stabilise bilateral relations. For Indian businesses, improved access to China could create opportunities in medicines, agricultural products and other export sectors.