New report reveals deep supply-chain integration rather than simple dependence, urging focused domestic capacity building over broad trade barriers.
A new study by Koan Advisory Group and the Institute of Chinese Studies (ICS) shows that India’s rising electronics imports from China stem from deep supply-chain integration rather than a reliance on finished goods.
The report highlights a widening, structural trade deficit in electrical machinery and electronic equipment (HS Chapter 85). In 2025–26, India’s bilateral trade deficit with China reached $112.1 billion, with electrical and electronic goods making up $43.1 billion—approximately 38%—of the overall gap. China accounted for at least 80% of Indian imports across 71 tariff lines, up from 46 tariff lines in 2018–19.
The research indicates that this import reliance is heavily concentrated in upstream inputs and core components, including electric motors, cables, switching equipment, semiconductor devices, and lithium-ion batteries. These parts feed directly into domestic consumer electronics, telecommunications infrastructure, and industrial machinery.
The trend is particularly stark in the energy storage sector, where lithium-ion battery imports from China more than doubled from 2021–22 to reach $3.9 billion in 2025–26. This volume represented 83.6% of India’s total lithium-ion battery imports during the year. Similarly, China remained India’s primary source of semiconductor imports in 2025–26, holding a 48.9% market share—well ahead of Singapore (8.4%), Indonesia (7.5%), and Vietnam (6.6%)—despite a decline from roughly 64% in 2024–25.
Lead author Samira Sarah Abraham noted that the close integration between the two economies is a practical reality, suggesting that India’s manufacturing goals are better served by leveraging this integration rather than attempting to reverse it. Santosh Pai of the ICS emphasised that because integration is concentrated in component-level manufacturing where domestic capacity remains uneven, industrial policy should focus on targeted localisation and domestic value addition in high-impact segments rather than broad-based trade shifts.
