India's China trade deficit may not tell the full story, FM Sitharaman explains why
Our export account would say that we are still not adequately exporting to China. Actually, it is going to China, but it never gets accounted like that because it goes to Vietnam, says FM Sitharaman
- Sep 27, 2026,
- Updated Sep 27, 2026 4:37 PM IST
Finance Minister Nirmala Sitharaman has explained why India's trade deficit with China looks so skewed. One reason, she said, is that China does not provide market access for some Indian goods. As a result, some Indian products reach China through countries such as Vietnam and are not counted as exports to China.
"Our export account would say that we are still not adequately exporting to China. Actually, it is going to China, but it never gets accounted like that because it goes to Vietnam, and from Vietnam it sort of crosses the road and goes to China," she said during a conversation with Anand Ranganathan at Pondy Lit Fest 2026.
"It should technically be in my account. I am exporting to China. It doesn't happen that way because - and I'll be blunt in saying this - we don't get market access for those goods which are of bulk value both in quantity and also the value that we can realise out of it. We don't get market access to China, and there is no explanation for it," the finance minister said.
Read More: India vs China manufacturing: Where India stands as Jefferies flags scale, energy and capex gaps
Sitharaman said India had been raising the issue since 2014, including for buffalo meat and generic pharmaceutical drugs. "Whether it could be buffalo meat or it could be pharmaceutical generic drugs - both of which are bulk goods, which they buy from India, but not directly. They go via Vietnam, they go via somebody else," Sitharaman said.
"So there are items on which we have done better in the export, but because they constantly deny market access, yet consume our product. And I can't explain it to our bookkeepers, saying that entry is China's entry, meaning India's export to China," she added.
As a result, she said, India's export figures may show Vietnam as the destination even when the goods eventually reach China.
The FM, however, assured that India has somewhat taken a conscious call that for some items, it will have to create capacity within the country.
"We may be importing them now, but sooner you will find that there will be a complete shift that in those very big items, sensitive items, frontier items, items related to high technology, we are creating capacities within India," she said when asked about ballooning trade deficits with China and how New Delhi wants to bring that down.
In Case You Missed It: Surprise surge in Indian electronic exports to China, shipments rise nearly 40%: Report
India's changing import dependence
Speaking on growing imports from China, she said the country's imports were increasingly going into areas where India's own production was still limited. She cited solar manufacturing as an example, saying India was trying to become self-reliant in several components needed for solar panels and related manufacturing.
"The kind of imports happening now from China are of an absolutely critical nature. For instance, in solar, we are trying to become self-reliant on many components, which have to go in the making of solar, let's say a manufacturing center where solar panels are being established. So the imports go into segments where our production is almost nil," she said.
But earlier, she flagged, the dependence on China was even the last consumable item and the consumer goods, not essential consumer goods. "There is a shift in the kind of imports that are happening now. A lot more sense of discretion is prevailing. We may still import many things, but from somewhere else instead of concentrating on one country. That is a fact, and it is a dynamic fact. So it is improving, and it can improve better."
Finance Minister Nirmala Sitharaman has explained why India's trade deficit with China looks so skewed. One reason, she said, is that China does not provide market access for some Indian goods. As a result, some Indian products reach China through countries such as Vietnam and are not counted as exports to China.
"Our export account would say that we are still not adequately exporting to China. Actually, it is going to China, but it never gets accounted like that because it goes to Vietnam, and from Vietnam it sort of crosses the road and goes to China," she said during a conversation with Anand Ranganathan at Pondy Lit Fest 2026.
"It should technically be in my account. I am exporting to China. It doesn't happen that way because - and I'll be blunt in saying this - we don't get market access for those goods which are of bulk value both in quantity and also the value that we can realise out of it. We don't get market access to China, and there is no explanation for it," the finance minister said.
Read More: India vs China manufacturing: Where India stands as Jefferies flags scale, energy and capex gaps
Sitharaman said India had been raising the issue since 2014, including for buffalo meat and generic pharmaceutical drugs. "Whether it could be buffalo meat or it could be pharmaceutical generic drugs - both of which are bulk goods, which they buy from India, but not directly. They go via Vietnam, they go via somebody else," Sitharaman said.
"So there are items on which we have done better in the export, but because they constantly deny market access, yet consume our product. And I can't explain it to our bookkeepers, saying that entry is China's entry, meaning India's export to China," she added.
As a result, she said, India's export figures may show Vietnam as the destination even when the goods eventually reach China.
The FM, however, assured that India has somewhat taken a conscious call that for some items, it will have to create capacity within the country.
"We may be importing them now, but sooner you will find that there will be a complete shift that in those very big items, sensitive items, frontier items, items related to high technology, we are creating capacities within India," she said when asked about ballooning trade deficits with China and how New Delhi wants to bring that down.
In Case You Missed It: Surprise surge in Indian electronic exports to China, shipments rise nearly 40%: Report
India's changing import dependence
Speaking on growing imports from China, she said the country's imports were increasingly going into areas where India's own production was still limited. She cited solar manufacturing as an example, saying India was trying to become self-reliant in several components needed for solar panels and related manufacturing.
"The kind of imports happening now from China are of an absolutely critical nature. For instance, in solar, we are trying to become self-reliant on many components, which have to go in the making of solar, let's say a manufacturing center where solar panels are being established. So the imports go into segments where our production is almost nil," she said.
But earlier, she flagged, the dependence on China was even the last consumable item and the consumer goods, not essential consumer goods. "There is a shift in the kind of imports that are happening now. A lot more sense of discretion is prevailing. We may still import many things, but from somewhere else instead of concentrating on one country. That is a fact, and it is a dynamic fact. So it is improving, and it can improve better."