China's trade barriers biggest hurdle in bilateral ties, says Nirmala Sitharaman; flags $100 billion deficit

Finance Minister Nirmala Sitharaman on Friday flagged China's restrictions on Indian exports as a major obstacle to bilateral trade, warning that India's trade deficit with Beijing continues to widen despite improving diplomatic relations between the two countries.

Speaking at an interaction with the Atlantic Council on the sidelines of the International Monetary Fund meeting in Bangkok, Sitharaman said China's extensive use of non-tariff barriers has prevented Indian products from gaining greater access to the Chinese market.

Also Read: India's trade deficit with China crosses USD 100 bn in first 9-months


“With China, I think our trade balance is against us, and it is growing exponentially,” Sitharaman said.

“China uses non-tariff barriers unhesitatingly” and that is “the biggest hurdle in the in the trade between India and China.”

The finance minister pointed to phytosanitary regulations, which are designed to prevent the spread of plant pests and diseases, as one of the restrictions affecting Indian exporters. She said Indian products, including generic medicines, beef and vegetables, face barriers despite having “immense” potential in the Chinese market.

India's trade deficit with China has exceeded $100 billion so far this year, underscoring the widening gap between imports from Beijing and Indian exports to the country.

Sitharaman, however, said New Delhi has refrained from imposing retaliatory non-tariff restrictions or countervailing duties on Chinese goods.

Her remarks follow External Affairs Minister S Jaishankar's comments earlier this week that India was not “getting a level playing field in China.”

The trade concerns persist even as India and China work to repair diplomatic relations following the deadly border confrontation in 2020, which led to prolonged tensions and restrictions on Chinese investments and business activities.

Both countries have since taken steps to ease border tensions and resume high-level diplomatic engagement, with Prime Minister Narendra Modi and Chinese President Xi Jinping seeking to stabilise bilateral relations.

Beyond China, Sitharaman also raised concerns over India's trade arrangements with Southeast Asian economies, describing existing agreements as “very skewed” against New Delhi.

Also Read: We are working to develop relations with China once again: Piyush Goyal

She said India intends to retain its trade agreement with the Association of Southeast Asian Nations (ASEAN), but stressed that its terms would need to be revised to address the imbalance.

The finance minister also highlighted India's dependence on imported crude oil and fertilisers as a continuing economic vulnerability, even as domestic consumption and investment support the country's position as the world's fastest-growing major economy.

The import bill for these essential commodities remains “big and growing,” she said, contributing to substantial foreign exchange outflows.

Her comments come amid sustained pressure on the Indian rupee, driven by elevated crude oil prices, foreign capital outflows and higher US bond yields, which have increased demand for the dollar.

The Reserve Bank of India has intervened in the currency market through dollar sales and additional measures, including a special foreign-exchange facility for state-owned oil companies and tighter regulations on currency derivatives.

While these interventions have helped the rupee recover from near-record lows, pressure from India's import requirements and external financial conditions continues to weigh on the currency.