China’s dominant role in India’s import basket, particularly in critical sectors like electronics, energy, and pharmaceuticals, presents a serious challenge in a time when trade is often used as a geopolitical instrument. However, the degree of vulnerability varies across sectors. By applying a risk-impact framework, CATR finds that India’s exposure is concentrated in a handful of strategic areas, while other sectors offer greater flexibility and room for diversification.
A uniform decoupling strategy would be inefficient and impractical. What India needs is a phased and focused approach that matches the level of risk with the importance of each sector and balances immediate needs with long-term goals.
In recent years, China has increasingly used trade as a tool of coercion, responding to foreign government actions with sanctions, export controls, and other administrative measures. These steps are often asymmetrical, targetingsectors where other countries depend heavily on Chinese exports.
This approach puts many countries in a difficult position. Those who rely heavily on China for critical goods, whether industrial inputs or essential food and non-food items, may find their ability to make independent policy decisions constrained by the risk of economic retaliation.
A more diverse trade portfolio offers countries greater freedom and resilience. The top five importers of Chinese goods—the US, Hong Kong, Vietnam, South Korea, and Japan—are especially vulnerable to potential sanctions.
India is close behind, ranking as the sixth-largest importer of Chinese goods. About 16% of India’s total imports come from China. Within this, there are categories where China’s share exceeds 90%, indicating very high dependence. But on the other extreme, there are also sectors where the dependence is minimal. In this article, CATR analyses the key sectors where India has a high exposure (read import dependence) to China, and their potential impact.
India’s top five import categories (at HS 2 digits) from China reflect a heavy reliance on industrial and manufacturing inputs. Electrical machinery leads the list, growing at a strong 13% CAGR over the past five years, followed by mechanical appliances, which also saw consistent growth. Organic chemicals, essential for pharmaceuticals and industrial processes, rank third, though their growth has been more modest. Interestingly, these three HS 2-digit chapters accounted for around 66% of imports from China. Plastics and iron and steel, while smaller in absolute value, have registered the fastest growth rates—both at 17% CAGR—indicating rising dependence in sectors crucial for packaging, construction, and manufacturing. Together, these categories highlight the strategic vulnerabilities in India’s supply chains. Overall, India’s imports from China have grown at a 5-year CAGR of 10%.
This article aims to identify which Indian sectors are most at risk from potential Chinese trade restrictions and which are relatively insulated. To do this, we have used risk-impact and scenario analysis to better understand the possible outcomes. The goal is to support informed policymaking, especially in times of uncertainty.
To assess India’s vulnerability to potential Chinese trade restrictions, we’ve used a simple Risk-Impact framework. Products and sectors have been categorised based on two factors:
Risk: How dependent India is on China for a particular item (measured by China’s share in India’s total imports of that item). Impact: How disruptive would it be if access to that item were restricted (measured by the size of total imports)
Among India’s most critical import dependencies on China are components central to the electronics, renewable energy, and telecom sectors. At the six-digit level, these include data-processing machines (HS 847130) and mobile phone parts (HS 851779), both of which support India’s expanding electronics assembly ecosystem. Photovoltaic cells (HS 854143) and lithium-ion accumulators (HS 850760) are vital for solar energy infrastructure and electric mobility. Also important are semiconductor processors and controllers (HS 854231), which form the backbone of devices ranging from smartphones to industrial systems.
The concern is not only the high import share—China supplies up to 80% of some of these items—but also their strategic role. These are not final products but essential intermediaries. Without them, production slows, value chains break, and growth plans face delays.
Table 1: Top 5 critical imports from China
Source: ITC Trade Map
A significant risk scenario emerges. India has recently become a major exporter of both mobile phones and solar panels, showcasing its ambition to become a global manufacturing hub. However, any interruption in the supply of these critical inputs could damage India’s export competitiveness and disrupt its rise in high-value manufacturing. More importantly, it could unsettle foreign investors like Apple at a time when India is actively inviting global firms to shift their supply chains. If China chooses to restrict the flow of these intermediaries, it could deter companies from relying on India as a stable alternative, thereby slowing the country’s momentum in global trade dependence.
India also imports several high-dependence goods from China that, while not as large in absolute trade volume, still warrant close attention due to their strategic or sectoral importance. These include flat panel display modules (HS 852491) and unassembled photovoltaic cells (HS 854142), both with China contributing around 80% of India’s imports. Also included are tempered safety glass (HS 700719) and key pharmaceutical ingredients such as penicillins (HS 294110) and other antibiotics (HS 294190), where China’s share exceeds 85%.
Grouped by sector, these products encompass a varietyh os sectors, including electronics, clean energy, construction materials, and active pharmaceutical ingredients (APIs). While none of these currently account for very large import volumes, they are critical parts of value chains that support both industrial and consumer markets. Their lower impact today may reflect limited scale or substitutability, but as India scales up production in areas like solar manufacturing, consumer electronics, or active pharmaceutical production, today’s low-impact items may become tomorrow’s pressure points.
Table 2: Top 5 imports on watchlist
A likely scenario is that as India attempts to localise and expand capacities in these sectors, China may choose to target these niche but high-dependence items to signal strategic discomfort or exert influence without disrupting high-volume trade. Such moves may not cripple entire industries, but could slow growth or complicate the transition to domestic alternatives. Vigilance in these segments is essential, as they could become levers in future trade or diplomatic tensions.
There are several critical product categories where India imports from China, but China’s market share is relatively modest, giving India leverage to diversify suppliers or strengthen domestic alternatives without major disruption. These include parts and accessories for motor vehicles (HS 870899), PVC polymers (HS 390410), and machine parts for data-processing equipment (HS 847330). Also on this list are electronic integrated circuits—both processors and controllers (HS 854231), and other types (HS 854239)—where China contributes roughly one-third or less to India’s import basket.
These items span automotive components, plastics, electronics, and IT hardware, all of which are essential but not overwhelmingly dependent on Chinese suppliers. Their relatively low-risk profile means that India can strategically scale up domestic production or explore alternative trading partners without exposing its industries to short-term vulnerabilities.
Table 3: Top 5 Products where we can leverage opportunities
In a scenario where China escalates trade restrictions or raises costs, India looks well-positioned to absorb the shock in these categories. This resilience creates a window of opportunity—not just for import substitution, but also to build credibility as a stable manufacturing destination. These products represent the middle ground where India can actively build negotiating room, attract investment, and improve long-term supply chain autonomy, all while maintaining business continuity.
An examination of India’s import basket reveals a range of goods that, while industrially relevant, fall into the category of non-critical items from a strategic and supply-risk standpoint.
These include base industrial chemicals and intermediates such as anhydrous ammonia, saturated acyclic hydrocarbons, fatty acids, and toluene, which are widely available in global markets and have a low substitution cost. Similarly, low-sensitivity metals and alloys like unwrought lead, unwrought aluminium alloys, and roasted molybdenum ores serve niche or secondary manufacturing needs and exhibit low concentration risk despite being partially sourced from China.
Another cluster comprises commodity-grade polymers and plastics, notably polycarbonates and propylene copolymers, which are integral to packaging, automotive, and electronics sectors but do not constitute irreplaceable components. The inclusion of electronic accessories and data infrastructure components, such as storage units for automatic data-processing machines and regulating instruments, reflects functional imports with high global substitutability.
Lastly, parts and spares ranging from aeroplanes and engine components to refined copper wire and flat-rolled steel products form part of broad global supply chains and are typically sourced competitively. Collectively, these products represent a low strategic vulnerability. Their moderate import volumes, coupled with ample sourcing alternatives, make them manageable within India’s diversification strategy.
India’s import exposure to China remains concerning in a few strategic nodes—electronics (HS 8471, 8542, 8517), solar hardware (8541), lithium-ion batteries (850760), and critical pharmaceutical ingredients (2941). These high-risk, high-impact items dominate both volume and strategic relevance, underscoring an urgent need to localise value chains or de-risk through targeted trade partnerships.
However, the broader risk-impact matrix reveals important nuances. Several items in the “Leverage Opportunity” categories, such as automotive parts (870899), data-processing machine accessories (847330), and general-purpose chemicals (390410), offer India a buffer and bargaining room, where supply chain resilience can be enhanced without immediate exposure to shocks. On the other hand, high-risk but low-impact products like unassembled photovoltaic cells and flat panel displays still present chokepoints that may become significant under adverse scenarios, especially as India’s clean energy and electronics ambitions grow.
What emerges is that India must adopt a tiered de-risking strategy, based on the cumulative risk score:
Prioritise Deep Localisation: High cumulative risk items like portable data-processing units, smartphone components, lithium-ion batteries, and antibiotics need urgent attention. These are foundational to India’s tech and health security aspirations. Focused PLI schemes, joint ventures with trusted global players, and R&D incentives should be strengthened here.
Diversify without Disruption: For medium-risk but high-impact products such as integrated circuits, PVC polymers, and display components, India should deepen supplier diversification through FTAs, while supporting domestic capacity in parallel.
Build Competitive Ecosystems: Leverage lower-risk items to build economies of scale and manufacturing ecosystems that can eventually support the more complex items. For example, polymer, plastic, and basic machine part manufacturing can act as stepping stones for deeper electronics and automotive component integration.
Signal to Investors: India’s growing export competitiveness in solar panels and mobile phones must not be undermined by fragile import dependencies. Any retaliatory move by China in upstream components could dampen investor confidence. India must proactively offer secure production environments, IP protection, and logistics assurance to attract long-term capital.
This roadmap should be data-driven and sector-specific, balancing the urgency of decoupling with the practicality of global integration. Done right, it could transform India from a vulnerable end-market to a credible node in the global supply chain to a resilient, reliable, and ready-for-scale one.
Methodology:
This analysis aims to identify product categories where India is most vulnerable to potential Chinese trade restrictions. We began by shortlisting items at the 6-digit HS code level that collectively account for the top 75% of India’s total imports from China in 2024, ensuring our focus remained on the most significant trade flows. Each product was then assessed using a point-based Risk-Impact framework.
The Risk Score was based on China’s share in India’s total imports of that product: a score of 5 indicates critical dependence (≥80%), while a score of 1 reflects minimal dependence (<20%). The Impact Score was assigned according to the value of imports from China in 2024: categories above US$10 billion scored 5 (very high impact), while those below US$1 billion scored 1 (minimal impact).
We then calculated a composite score out of 10 by summing the Risk and Impact scores, and used this to classify each product into High (8–10), Medium (5–7), or Low (2–4) overall risk.
Finally, each item was mapped onto a Risk-Impact Matrix, which helped group them into four key categories:
Most Critical: High Risk, High Impact — immediate diversification priority
Non-Critical: Low Risk, Low Impact — manageable exposure
Leverage Opportunities: Low Risk, High Impact — strategically important but already diversified
Watch List: High Risk, Low Impact — currently limited economic effect but worth monitoring
This approach offers a granular, strategic view of where India’s trade resilience is most vulnerable and where policy or investment responses are most urgently needed.
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