Prime Minister Narendra Modi recently wished the nation a joyful Diwali while encouraging people to support Indian-made products. He called for unity and a self-reliant India. Diwali plays a huge role in boosting the economy, earning it the title “Celebration of the Indian Economy.” However, reports show that around 70% of items sold during Diwali, like decorations and firecrackers, were imported, mostly from China. This highlights the challenge of reducing dependence on foreign goods, despite a push for local products.
India’s reliance on China is growing. In the first half of the current financial year, imports from China reached nearly $63 billion, an increase of over 11% from the previous year. With unresolved border conflicts and calls for a boycott, many are surprised by this rising dependency. Notably, India’s trade ministry is considering easing restrictions on some Chinese imports to secure essential raw materials for industries, showcasing the complex relationship between the two nations.
The trade deficit with China was about $54 billion, up from $49.6 billion last year. The Indian government recently decided to end a $23 billion incentive program aimed at boosting domestic manufacturing. Many companies struggled with production or faced delays in receiving promised subsidies. The goal was to raise manufacturing’s share in the economy to 25% by 2025, but it currently sits at about 14%.
Furthermore, there’s pressure for India to join the China-led Regional Comprehensive Economic Partnership (RCEP). Joining this trade bloc could lower tariffs and provide beneficial trade opportunities, but it also raises concerns about local industries facing increased competition.
Trade deficits globally have hit India hard. The trade deficit nearly doubled in September 2025 compared to previous months, reaching $16.6 billion. While exports performed well last year, there’s a declining trend, especially in services.
Interestingly, while India has been importing more from major partners like the USA and UAE, imports from Russia have decreased since the U.S. imposed sanctions. This shift highlights India’s strategic decisions regarding its trade partnerships. Reports suggest that India and the U.S. are approaching a trade deal that could cut American tariffs on Indian imports, indicating a significant shift in India’s trade policy.
The challenges posed by cheap imports are particularly affecting traditional craft communities in India. Many artisans belong to marginalized groups, and their livelihoods are threatened as they compete against inexpensive foreign goods. Despite government initiatives aiming to promote local products, the influx of imports continues, undermining domestic producers.
Looking at recent economic indicators, there are some worrying signs. India’s retail inflation is at an eight-year low, suggesting declining demand. A report also shows that real earnings for salaried workers have been declining annually since 2012. The private sector’s investment share in the economy has fallen, while households have increased theirs, indicating a lack of confidence in the market.
Unemployment rates also revealed concerning trends, particularly among youth. It spiked to 5.2% in September, with higher rates among new entrants to the job market.
As India navigates these complex economic waters, the path forward requires careful planning to support domestic industries while managing international relationships. Balancing competitive trade practices with the needs of local communities will be essential for fostering a resilient economy.
For further insights on India’s economic landscape, you may explore reports by the International Labour Organization here.
