India’s toy shops offer a surprising window into its broader economic relationship with China.
Toy Shops as Economic Barometers
Six years ago, India raised toy import tariffs to protect domestic manufacturers and reduce the flow of substandard products.
These measures worked. Imports of toys fell significantly.
China once held a substantial share of India’s toy market. That share has now dropped, marking a rare success in India’s efforts to rebalance trade with China.
Trade Imbalance Widens
Despite political tensions, India’s trade deficit with China has grown.
China now supplies a significant portion of India’s industrial imports and more than 100 critical products.
Key Sectors at Risk
- Electrical machinery and electronics
- Machinery and mechanical appliances
- Organic chemicals and plastics
India produces a notable share of the world’s iPhones. But this production is largely assembly-based and relies on imported components—many from China.
Why the Dependence Persists
China has excess capacity in sectors like steel, solar panels, and electric vehicles.
As domestic demand slows, Chinese manufacturers export goods at low prices to global markets—including India.
India’s expanding manufacturing base increases demand for these goods, especially as Western markets impose tariffs and restrictions.
India’s Export Challenges
Indian products face significant tariffs and non-tariff barriers in China.
These hurdles limit Indian exports and make it difficult for Indian firms to scale globally.
Experts say India risks maintaining economic dependence even as political ties improve.
What Experts Say
Kevin Zongzhe Li of the Asia Society Policy Institute notes: ‘India’s economic dependence on China continued to deepen while political, security, and investment ties were at their lowest point.’
Ajay Srivastava of the Global Trade and Research Initiative (GTRI) warns: ‘Their interruption would not merely affect consumption; it would disrupt production itself.’
Pathways Forward
Experts agree that India must strengthen domestic manufacturing to reduce reliance on Chinese inputs.
Key enablers include affordable power, access to credit, efficient logistics, and stable regulations—areas where India still faces challenges.
India has recently eased foreign direct investment rules, which could allow Chinese firms to expand operations in India.
But such investments must be carefully vetted. Approval should prioritize technology transfer, local value addition, and domestic component production.
What to Watch Next
India and China have signaled a thaw in relations at the Brics summit.
Prime Minister Narendra Modi and President Xi Jinping have pledged to address structural trade imbalances and supply chain issues.
But experts stress that economic dependence will only ease if China opens its markets to Indian goods—especially in sectors like pharmaceuticals, where aging populations in China increase demand.
Without reciprocal market access, political normalization may not translate into economic balance.
Source: BBC News
Sources & further reading
Featured image: Flowers growing in a swamp – Ganden Monastery (Karnataka -… by François Zeller from Montreal, Canada, CC BY-SA 2.0, via Wikimedia Commons. Image source · License
