Elephant in the room in meetings with Xi Jinping, Vladimir Putin: India’s manufacturing challenges

The emphasis on balance is important. India’s exports to Russia remain below $5 billion, against imports of $63.8 billion in 2024-25. The trade deficit is nearly $59 billion, largely because Russian oil and other natural resources dominate India’s imports.

But the problem is not simply the size of the deficit. It is the narrowness of what India can sell.

Russia is a substantial market for manufactured goods. China, the world’s manufacturing superpower, exported about $103 billion of goods to Russia in 2025. Chinese exports range from cars and machinery to electronics and industrial equipment. India does not have anything remotely comparable on offer as of today.

The contrast is a testament to the limits of diplomacy in economics. Modi can persuade Putin to buy more Indian products. He can negotiate payment mechanisms, investment targets and trade agreements. But diplomacy cannot conjure up the Indian industrial capacity needed to supply the Russian market. Nor can political warmth with Moscow compensate for the absence of competitive Indian products.

India’s manufacturing weakness appears in a different form with China. Bilateral trade reached about $151 billion in 2025-26, but India’s deficit rose to roughly $112 billion.

Here the asymmetry is reversed. Russia mainly sells India natural resources, especially oil and other commodities. China sells manufactured goods—and increasingly the intermediate and capital goods that Indian manufacturers themselves need.

Delhi appears to have reconciled itself to this reality. It is responding to Beijing’s demands that India end restrictions on commerce with China. There could be some progress in this direction when Modi meets Xi over the weekend.

Chinese imports are deeply embedded in Indian manufacturing, from electronics and machinery to chemicals, auto components and pharmaceutical inputs, and are key to Indian exports of manufactured goods.

This creates a paradox. India wants to reduce its economic dependence on China but Indian businesses also want access to the cheap and increasingly sophisticated manufactured goods that China produces at enormous scale. The political desire for greater economic security runs up against the commercial logic of keeping access to Chinese production.

This is where the Russia and China stories come together. The common problem is India’s limited manufacturing strength. In Russia, the weakness is visible in India’s inability to export at scale to a large market. With China, it is visible in India’s dependence on imports from a manufacturing giant even as it seeks to expand its own industrial base.

This is a throwback to India’s calls to democratise the global economic order, an objective dates back to the Cold War years. But India’s immediate bilateral economic agenda is about getting Russia and China to buy more from India, invest more in India and help strengthen Indian productive capacity.

This raises a fundamental question: can diplomacy compensate for weak manufacturing? Unlikely. The essential Indian challenge is, therefore, not diplomatic but industrial. It is the gap between India’s international economic rhetoric and its national industrial capabilities.

Closing that gap requires much more than diplomacy: sustained economic reform, simpler regulation, greater competitiveness, less corruption, deeper domestic supply chains and, above all, a much stronger manufacturing ecosystem. Foreign policy can create openings for Indian industry, but it cannot fill those openings with products that India does not yet produce competitively.

That leads to the final paradox. India can deploy considerable diplomatic capital to persuade Russia and China to buy more from it and invest more in it. But the most effective way of drawing investment from both—and from the rest of the world—is to make India more attractive to investors. The world is not short of capital and technology; but India is not at the top of the destinations where they are headed.

The bilateral does overshadow the multilateral this week in Delhi. That’s not surprising, since BRICS, like the SCO, has emerged as a valuable venue for high-level political engagement and bilateral problem-solving. And diplomacy is about seizing opportunities, wherever they present themselves.

In the end, Delhi’s real challenge is not about changing the global economic order, but reforming its internal structures. The credibility of India’s economic diplomacy will ultimately depend less on what it can persuade other countries to do than on what its economic policy makers can do enable India to produce more efficiently.

(C. Raja Mohan is a contributing editor on international affairs for The Indian Express)