India’s diplomatic thaw with China faces major economic tests, according to a Reuters analysis published on October 4, 2026. Prime Minister Narendra Modi and Chinese President Xi Jinping met in New Delhi last month, Xi’s first visit to the subcontinent in seven years, pledging to rebuild ties damaged by the deadly 2020 Himalayan border clashes.

Direct flights have resumed and visa services expanded. But the trade relationship stays deeply lopsided. India imported $116 billion more from China than it exported in 2025, and by August 2026 the deficit had already hit $91 billion, on track to beat last year’s record, Reuters reported.

China’s share of global manufacturing value-added stood at 28 percent in 2025 against India’s 3 percent, World Bank data shows. In merchandise exports, China’s 16.3 percent share dwarfs India’s 1.7 percent.

India’s FY2025-26 deficit with China reached a record $112.16 billion, with imports of $131.6 billion against exports of $19.5 billion, according to commerce ministry data cited by Outlook Business. Electrical machinery alone accounts for $43.2 billion of the gap.