New Delhi: India needs to strike a “sensible balance” between its security concerns with China and its economic reliance on Chinese imports, said Indian economist Sanjeev Sanyal, member of the Economic Advisory Council to the Prime Minister (EAC-PM). This could possibly involve re-authorising Chinese investments in India in non-strategic sectors, where India is already reliant on Chinese imports, he said in an interview to ThePrint.
Sanyal explained that India needs to come up with a practical solution to the China issue because, if India wants to integrate itself in global supply chains, it cannot “wish away China”.
The Indian government had, in 2020, introduced a restriction on foreign direct investment from countries that shared a land border with India, requiring such investments to come in only after mandatorily obtaining government approval.
In the Economic Survey 2023-24, Chief Economic Advisor to the Government of India V. Anantha Nageswaran argued that the country needs to strike a balance between importing goods from China and allowing investment from that nation. He further said that in the choice between integrating into China’s supply chain or promoting Chinese investments in India, the latter “seems more promising” in order to boost India’s exports to the United States.
This is largely the strategy Sanyal also advocates.
“The point that the Economic Survey makes, which is a good one, is that if we are going to integrate with the world’s economy, we are going to import the stuff,” Sanyal explained. “And China, by the way, already is our largest source of imports, so it is not some theoretical problem. It is an active situation.”
Also Read: Working-age Indian population rising; expected at around 64% in next census: SBI Research
‘No country can do without China, that’s the fact of life’
The latest trade data shows that India imported nearly $36 billion worth of goods from China in April-July this financial year (2024-25), up nearly 10 percent from the same period last year (2023-24). Imports from China make up 15.5 percent of India’s total imports.
“So, we cannot wish them away because they are the cheapest source of many, many things that we want to do,” Sanyal added. “Therefore, if we want to be in the global supply chain, we cannot wish away China. Even the US is unable to get rid of them. And almost no country can do without China, that is the fact of life.”
The question, Sanyal asked, was that if India was going to import parts for, say, the Apple iPhone from China, why not allow those Chinese companies to manufacture in India.
“Why force them to remain in China or to invest in some other third-party country from where we will import it,” he asked. “Why not let them do it here?”
Sanyal further explained that international history has shown that this situation, of having to do business with rivals, is not a new one and that other countries have successfully navigated their respective issues.
“China’s own industrialisation happened with investments from Japan, with whom they have, clearly, fairly tricky and rocky relations,” he said. “If you think we have friction between us and China, given the history of Japan and China, you can imagine how rocky that is.”
Sanyal added that the industrialisation of Germany was done with British capital and the industrialisation of Japan was done with American capital. So, geopolitical rivals, and countries with friction against each other, have, throughout history, traded and also received investment from them, the economist said.
That is, you can be both a collaborator and a competitor at the same time, he emphasised. However, security considerations cannot be ignored in particular sectors.
“There are obviously certain areas where you will have some concerns,” Sanyal said, explaining that there are known security concerns about Huawei and hence, “we would not want them in our telecommunications sector, or for other Chinese companies to dominate our procurement systems”.
“But there are large areas where it is anyway pointless avoiding them (China),” he said. “And there are many areas where they will bring us talent. They are now at the cutting edge of technology in many areas, they will create jobs here, and also provide capital. Because, do remember, there are many Chinese entrepreneurs who want to leave China. Why don’t we become a beneficiary of that process?”
So, he concluded, India needs to find “some sensible balance” between the economic and security considerations.
(Edited by Radifah Kabir)
Also Read: India mustn’t skip the manufacturing train. Services alone won’t tap into demographic dividend