By Satyabrat Borah
India has come a long way since independence. In the early years our trade basket was tiny and painfully narrow. We exported tea, jute, cotton textiles, spices and a few minerals, and imported almost everything else: machinery, oil, chemicals, even everyday items like paper and bicycles. The country lived under constant fear of a balance-of-payments crisis. Every few years the foreign exchange reserves would dip dangerously low, and the government would go begging to the IMF with a long list of promises to cut imports and push exports.
Seventy-five years later the picture looks very different on the surface. India is now the world’s fifth-largest economy. We send mobile phones, refined petroleum, pharmaceuticals, software services and diamonds to every corner of the globe. Our total merchandise exports crossed 450 billion dollars in 2023-24 and services added another 340 billion. Yet when you scratch the surface, an uncomfortable truth stares back at us: we still depend far too much on a handful of countries and a handful of items, and the dependence is growing rather than shrinking.
Start with the import side. Roughly forty percent of everything we import comes from one country: China. Phones, telecom gear, laptop parts, active pharmaceutical ingredients, solar panels, toys, even festive lights for Diwali now carry the “Made in China” tag. When the pandemic hit and Chinese factories shut down for a few weeks in early 2020, Indian industries from automobiles to pharmaceuticals suddenly discovered they had no spare parts or raw materials. Production lines stopped, prices shot up, and the government scrambled to find alternatives that simply did not exist in sufficient quantity.
Oil is the second big worry. India imports more than eighty-five percent of the crude oil it consumes. A single day of tension in the Strait of Hormuz or a new sanction on a supplier can send petrol and diesel prices soaring, empty the foreign exchange kitty and push inflation through the roof. Even when the global price falls, we remain at the mercy of a few exporting nations and their political moods.
On the export side the story is only slightly better. Petroleum products (mostly refined fuel), gems and jewellery, pharmaceuticals, engineering goods and IT services make up almost two-thirds of our earnings. If global oil prices crash, if rich countries cut spending on diamonds, if America and Europe slow down their drug purchases or tighten the visa rules for software engineers, a huge chunk of our export income can vanish almost overnight. We felt this pain in 2023 when jewellery demand dropped and IT hiring in the West slowed down. Thousands of jobs were affected and the rupee weakened sharply.
The bigger danger is that this narrow base is not widening fast enough. Most new factories that open in India still assemble imported parts rather than make those parts themselves. A mobile phone may carry the label “Made in India”, but the display, the processor, the camera module and even the tiny capacitors inside still come from abroad. We have become brilliant at the final screwdriver stage, yet the real value and the real technology stay outside our borders.
This excessive dependence hurts us in three quiet but powerful ways. First, it makes the Indian economy unusually vulnerable to shocks that originate thousands of kilometres away. A trade spat between Washington and Beijing, a drought in Canada that affects fertiliser prices, a war in the Middle East, any of these can hurt Indian families faster than most of us realise. Second, it limits our bargaining power. When one country supplies forty percent of your imports, you cannot afford to upset them too much, no matter what they do. Third, it keeps high-paying research and design jobs abroad. The profits from innovation flow to foreign shareholders while India earns only the modest wages of assembly workers.
So what needs to change? The answer is not to shut the doors and go back to the old days of sky-high tariffs and empty shop shelves. That experiment was tried and it failed spectacularly. Instead, India needs a gentle but firm structural shift in the way it trades with the world.
The first step is to diversify partners. We have started signing deeper trade agreements with countries like Australia, the UAE and the United Kingdom, and we are talking to the European Union and Canada. These agreements are not just about lower tariffs; they are about building trust so that supply chains can slowly move away from a single dominant supplier. At the same time we must keep the doors open to China for things we genuinely cannot make at reasonable cost for a few more years, but we must never again allow one country to hold forty percent of our import bill.
The second step is to climb the value ladder. Instead of only refining someone else’s crude oil, we should aim to design and produce the chemicals and specialty materials that go into batteries, semiconductors and aerospace parts. The government’s Production Linked Incentive schemes are a good beginning, but they need to be wider and deeper. Companies that set up full-fledged research centres, not just assembly lines, should get extra rewards.
The third step is to look seriously at Africa and Latin America, two continents we have almost ignored as trade partners. Africa is hungry for affordable medicines, vehicles, railway equipment and renewable energy solutions, all things India is now good at making. Latin America has minerals we need and a growing middle class that wants Indian pharmaceuticals and two-wheelers. A few focused trade missions and better shipping connections can open entirely new baskets for both exports and imports.
The fourth step is to bring small businesses into global trade. Today most of India’s exports come from a few thousand large companies. Millions of tiny workshops that make handicrafts, garments, spices, organic foods and handmade jewellery stay out of the game because paperwork and logistics are too complicated. One Nation One Export Portal, simpler finance and district-level export hubs can change that within five years.
None of this will happen overnight. Building new supply chains takes time, patience and a lot of quiet coordination between government, industry and universities. But every year we delay, the dependence deepens and the risks grow. The world is entering a phase where countries are rethinking whom they buy from and whom they sell to. India has a rare window to reshape its trade portfolio before the new lines are drawn permanently.
Imagine an India twenty years from now that imports its electronics from Vietnam, Taiwan and South Korea in roughly equal measure, its oil from the Middle East, Africa and Latin America, its rare earths from Australia and Africa, and its machinery from Germany, Japan and an increasingly capable domestic industry. Imagine an India that earns foreign exchange not just from software engineers and diamond polishers but from electric vehicles, green hydrogen equipment, advanced pharmaceuticals and world-class defence products. That India would still be open to the world, still welcoming investment and ideas from everywhere, but it would no longer tremble every time a single supplier sneezes.
The journey from excessive dependence to balanced interdependence is not glamorous. It will not make dramatic headlines. Yet it may well be the most important economic task of this decade. If we get it right, the next generation of Indians will grow up in a country that trades confidently with the whole planet instead of hanging on the decisions of a few. That is a future worth working for, one supply chain, one trade agreement, one new factory at a time.
