India needs to open the door wider to China
India should reconsider its economic approach towards China and allow more Chinese investment into its manufacturing sector as changing global trade dynamics make the US
India should reconsider its economic approach towards China and allow more Chinese investment into its manufacturing sector as changing global trade dynamics make the US a less dependable partner, according to a member of Prime Minister Narendra Modi's Economic Advisory Council.Rakesh Mohan, a part-time member of the council, said New Delhi should use its low-cost manufacturing base to attract investment from Chinese companies instead of relying mainly on protectionist measures. Such a strategy, he said, could help create jobs, strengthen exports and make India more competitive in global supply chains.Also Read: PM Modi pushes to cut imports to shield India from shocksThe former Reserve Bank of India deputy governor said the focus should be on encouraging Chinese investment in labour-intensive industries such as textiles, garments, footwear and furniture, where India has the potential to expand manufacturing at scale, he said in an interview, according to Bloomberg.Chinese investments can support jobs and exportsMohan said India needs to take a closer look at its trade relationship with China and identify products where domestic companies can compete more effectively."We are importing everything from China and exporting very little," Mohan said. "We have to look in detail at what China imports and identify where India can compete."His comments come at a time when New Delhi is reassessing its economic priorities amid shifts in global trade. While India tightened scrutiny of Chinese investment after the deadly border clashes in 2020, growing uncertainty over US trade policy has prompted fresh debate over whether the country should broaden its economic partnerships across Asia.Also Read: India, China trade rises to USD 91.72 bn in first 6-monthGlobal trade patterns call for a wider strategyAccording to Mohan, India should continue negotiating trade agreements with Western economies, including the US, but should not depend on any single market.
He said East and Southeast Asia are likely to remain key drivers of global economic growth over the next decade, making stronger regional engagement increasingly important.Washington has become "a lot more unreliable" because of frequent changes in its trade policies, Mohan said, making it necessary for India to diversify its economic relationships."We need to be much more part of the Asian supply chain," he said.As part of that approach, Mohan said the government should reconsider staying out of the China-backed Regional Comprehensive Economic Partnership (RCEP), which India chose not to join in 2019 over concerns that cheaper imports could hurt domestic manufacturers and farmers.He also urged New Delhi to explore joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), saying membership of both trade blocs would help India integrate more closely with Asian supply chains, strengthen manufacturing and improve exports to Western markets.Economic engagement despite strategic rivalryIndia and China have remained strategic rivals since their 1962 war and have experienced repeated military stand-offs along their disputed Himalayan border. Relations deteriorated sharply after the 2020 clashes, prompting India to tighten rules governing Chinese investment.However, both countries have taken steps to improve ties over the past year. India has restored direct flights, resumed issuing business visas and cleared selected Chinese investments, including in the electronics sector. China, however, continues to restrict exports of critical materials and technologies, including rare earths, while India still maintains some restrictions on Chinese investment and business activity."We have to be pragmatic in our dealing with China," Mohan said. "Economic security is as important as national security."The former central banker also called for easier business travel between the two countries, including a wider issuance of business visas, stronger academic exchanges and the restoration of more direct flights.India-China trade ties continue to deepenMohan said India's economic links with China have continued to grow despite political tensions.
The BriefWire