The bilateral trade registered a $12.2 billion increase in 2011, taking the total to $73.9 billion as against $61.7 billion in 2010, according to official trade figures for the last year.
The trade deficit in 2011, however, piled up to $27.07 billion even though Indian exports to China went up to $23.4 billion registering a growth of almost 12.26 per cent compared to the same period in year 2010.
"The overall trade figure looks good but the deficit remains a cause for concern," Indian Ambassador to China S Jaishankar told PTI.
He said efforts are being made to improve market access for Indian products in China.
"We have some early signs of movement in access to the Indian IT products. But these are early days," he said, referring to various campaigns organised by the Indian Embassy to push IT and Pharmaceutical exports to China.
Most important thing is that the bilateral trade is growing well despite the global economic downturn, he said.
Chinese officials have been acknowledging India's concerns over trade deficit and the issue was expected to figure in detail in India-China Trade Ministers talks during the BRICS Commerce Meeting on March 28 in New Delhi.
The Indian exports, mainly composed of primary products and commodity sector, increased despite the decline of iron ore exports, which dominated exports to China for long due to ban on mining in Karnataka and Goa, said K Nagraj Naidu, head of the economic and trade wing of the Indian Embassy.
Chinese exports to India continue to surge crossing the $50 billion mark. The exports logged $50.04 billion registering a growth of 23.51 per cent over 2010.
The share of India-China bilateral trade in China's overall trade increased to about 3.8 per cent compared to 2.06 per cent in 2010.
Naidu said India's exports of ores, slag and ash to China have dropped by 11 per cent to 10.45 billion in 2011.
Iron ore which has traditionally been the top item of export has dropped by 14 per cent to $9.6 billion in 2011 compared to the $11.2 billion exports in 2010.
The share of iron ore in the basket of Indian exports to China has dropped to 41 per cent in 2011 compared to 54 per cent in 2010 and 55 per cent in 2009, he said.
The drop in iron ore exports could be attributed to the ban on mining in Karnataka, illegal mining in Goa, restriction on iron ore truck movements in Orissa.
Also the other reason could be that China is diversifying its spot iron ore purchases away from India, largely in favour of South Africa, Naidu said.
India's cotton, yarn and fabric exports to China have seen a growth of 49 per cent reaching $3.1 billion in 2011.
While India's concerns over trade deficit remained, Indian officials say that there are encouraging signs about Chinese investments in India even though figures are not available as most of the investments are coming through Singapore and Mauritius.
The high volumes of Chinese trade in India is also focussed on infrastructure development specially, telecom and energy generation equipment.
Over all trade and investment appears to emerging as a strong binding force for the bilateral ties, according to the officials.
India's items of export which have seen positive growth rates include, copper ($two billion) precious stones ($1.1 billion), organic chemicals ($999 million) slat, sulphur, earth, stone ($514 million) and machinery ($478 million).
Under machinery, India's principal exports to China included diesel machines worth $47 million and crank shafts worth $32 million. India is Chinas 16th largest source of imports.