India-China trade development: Last month, the government announced that direct flights with China would resume after a five-year suspension. Air services were halted following the Covid-19 pandemic and the Galwan clashes that froze dialogue. The civil aviation ministry said the agreement would “normalise people-to-people exchanges and rebuild confidence.”
China responded positively, confirming that China Eastern Airlines will operate direct flights to India from November 9, while IndiGo launched a Kolkata–Guangzhou service from October 26 and will start a Delhi–Guangzhou flight from November 10. The restoration ends years of costly rerouting via Singapore and Bangkok, easing travel for business and students alike.
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The resumption of flights is symbolic but fragile. The Line of Actual Control (LAC) remains volatile, and disengagement at friction points is incomplete. Both militaries continue to hold commander-level talks, but progress has been slow. Without a durable border settlement, the trust deficit will constrain the economic thaw. Trade cannot fully decouple from security perceptions when public sentiment remains cautious and defence expenditure keeps rising on both sides.
Strategic signals behind the flights
Prime Minister Narendra Modi’s visit to Tianjin for the Shanghai Cooperation Organisation (SCO) summit on August 31–September 1, 2025, added diplomatic weight to this limited opening. During the visit, he raised concerns about the widening trade deficit and sought Chinese support for stability in Asian supply chains. Both nations agreed to pursue “constructive engagement” amid a slowing global economy and US-China tariff hostilities.
India and China continue to cooperate within BRICS and the SCO, even while competing bilaterally. These multilateral platforms serve as neutral arenas for dialogue on issues like de-dollarisation, energy transition, and digital governance. India’s participation in BRICS Plus and SCO energy forums helps it advance pragmatic interests without appearing to align strategically with Beijing. Such cooperation illustrates that controlled engagement, not isolation, can coexist with firm territorial positions.
India-China trade and the US factor
The United States overtook China as India’s largest trading partner in 2021-22. While China remains India’s top import source, the US is its biggest export destination. According to government data, China ranked fourth among India’s export destinations in 2024-25, after the US, UAE, and the Netherlands.
Until April 2025, Indian exports entered the US under Most Favoured Nation (MFN) tariffs. The universal 10 per cent tariff initially caused little damage, but later hikes triggered a 16.3 percent drop in Indian shipments to the US between July and August 2025. The decline has forced Indian exporters to look toward East Asian and Global South markets, including China.
Chinese economist Liqing Zhang, Director of the Centre for International Finance Studies, Beijing, said on October 6, 2025, that China could import more from India if New Delhi re-joined the Regional Comprehensive Economic Partnership (RCEP).
Revisiting the RCEP question
India joined RCEP negotiations in 2013 but withdrew in 2019, citing fears of cheap Chinese imports and pressure from dairy and MSME lobbies. The trade pact—signed in 2020 by 15 Asia-Pacific nations including ASEAN, Japan, South Korea, Australia, and New Zealand—has since deepened intra-Asian supply chains.
In December 2024, NITI Aayog CEO B. V. R. Subrahmanyam argued that joining both RCEP and the CPTPP would benefit manufacturing and exports. Rakesh Mohan of the Economic Advisory Council to the Prime Minister supported this, while Arvind Panagariya noted that trade deficits are normal in a globalised economy. Yet Commerce Minister Piyush Goyal continues to rule out re-entry.
Trade deficit and market access imperative
India’s exports to China stood at $14.3 billion in 2024-25, down 14 percent from 2023-24, while imports rose 11.5 percent to $113.4 billion, widening the trade deficit to $99 billion. To narrow this gap, India needs greater access to Chinese markets for pharmaceuticals, IT services, and agricultural goods.
Re-joining RCEP—if coupled with safeguards—could embed India within regional value chains, linking it with ASEAN and Northeast Asia. During earlier talks, India demanded protection from import surges and IPR clauses that might harm domestic firms. Strategic participation could help Indian industries—especially textiles, gems and jewellery, and consumer goods—offset American tariff exposure and diversify export destinations.
Beyond trade, resumed air links can revive academic, tourism, and business exchanges. Thousands of Indian students once enrolled in Chinese universities have struggled since 2020. Direct connectivity can also assist joint ventures in sectors like renewable energy, pharmaceuticals, and electronics components, where supply chains overlap. These small, non-political interactions may do more to rebuild trust than formal summits.
Domestic politics and policy caution
Public opinion in India remains wary of China, a factor that constrains policymakers. The Galwan legacy and perceptions of economic over-dependence make any trade rapprochement politically sensitive. Ahead of the 2026 general elections, the government is unlikely to announce dramatic shifts like RCEP re-entry, even if economic logic supports it. Strategic caution now drives incremental engagement rather than bold integration.
The return of direct flights does not erase years of mistrust, but it signals a pragmatic recalibration. The next test will be whether both sides extend cooperation to green technologies, digital payments, and supply-chain resilience—areas where mutual interests outweigh rivalry.
In an era of rising protectionism, connectivity and dialogue remain the only sustainable tools for managing competition. India and China may continue to compete for global influence, but selective engagement can still yield shared economic gains.
Dr Amlan Ray is a researcher in international trade and academic head at Sunstone Education Technology. Tridivesh Singh Maini is a faculty member at the Jindal School of International Affairs, OP Jindal Global University, Sonipat.