New Delhi: Prime Minister Modi’s appearance on the Lex Fridman Podcast appears to be having a greater impact on geopolitics than conventional diplomacy. It pleased the Chinese and unsettled the Pakistanis, signalling a notable shift in Indian foreign policy.
And the world has taken notice, sparking editorials in Chinese, Pakistani, and international media. Foreign policy analyst Michael Kugelman wrote in a piece for the BBC that “Modi’s pitch for closer partnership isn’t actually as big of a leap as it may seem, given recent improvements in bilateral ties.”
He then provides a roundup of recent developments, highlighting that while bilateral trade remains robust and border patrols and direct flights have resumed, tensions persist.
“Each side has close security ties with the other’s main competitor: India with the US and China with Pakistan,” writes Kugelman. Regional politics is also influencing international relations, with Beijing blocking India’s entry into the Nuclear Suppliers Group and opposing its bid for permanent membership in the UN Security Council, while simultaneously expanding its influence through the Belt and Road Initiative. On the other hand, India continues to strengthen ties with Taiwan and remains steadfast in its support for the Dalai Lama.
“There are several signposts to watch to get a better sense of the relationship’s future trajectory,” Kugelman suggests. The most visible indicator is border negotiations—“the biggest bellwether of the relationship.” Another key factor is Chinese investment in India, as an increase in such investments would not only boost India’s economy but also grant China greater access to the world’s fastest-growing market.
Regional developments are also worth monitoring. “Four of India’s neighbours—Bangladesh, the Maldives, Nepal, and Sri Lanka—recently had new leaders take office who are more pro-China than their predecessors. But so far, they’ve sought to balance ties with Beijing and Delhi, not align with China,” Kugelman observes.
Additionally, if China distances itself from Russia—a likely scenario should the Ukraine war come to an end—and the US attempts to mend ties with Beijing, the geopolitical landscape could shift once again.
“India and China are Asia’s two largest countries, and both view themselves as proud civilisation states,” writes Kugelman. “They’re natural competitors. But recent positive developments in ties, coupled with the potential for bilateral progress on other fronts, could bring more stability to the relationship—and ensure Modi’s conciliatory language isn’t mere rhetoric.”
Kugelman’s analysis provides context for another significant development in India-China relations: the Indian government’s decision to allow a $23 billion programme designed to incentivise domestic manufacturing and counter China’s dominance to lapse just four years after its launch.
Reuters reports that the initiative, which aimed to attract firms away from China, will not be expanded beyond 14 pilot sectors, nor will production deadlines be extended.
“Some 750 companies, including Apple supplier Foxconn and Indian conglomerate Reliance Industries, signed up to the Production-Linked Incentive scheme, public records show,” Reuters states. “Firms were promised cash payouts if they met individual production targets and deadlines. The hope was to raise the share of manufacturing in the economy to 25 percent by 2025. Instead, many firms that participated in the programme failed to kickstart production, while others that met manufacturing targets found India slow to pay out subsidies, according to government documents and correspondence seen by Reuters.”
The scheme was largely deemed a disappointment, Reuters notes. However, it does not suggest that “Delhi had abandoned its manufacturing ambitions”—rather, “alternatives were being planned.”
Since the programme’s inception, India’s manufacturing share of GDP has actually declined, falling from 15.4 percent to 14.3 percent. While participating firms produced goods worth $151.93 billion—37 percent of the government’s target—only $1.73 billion in incentives have been disbursed, primarily to the pharmaceutical and mobile-phone manufacturing sectors.
“As an alternative, India is considering supporting certain sectors by partially reimbursing investments made to set up plants, which would allow firms to recover costs faster than having to wait for production and sale,” another official told Reuters.
The piece also suggests that India may have missed its moment. Moreover, the slowdown in manufacturing comes at a time when India is trying to navigate an increasingly complex trade relationship with the US.
Unsurprisingly, Global Times has its own take on these developments.
“Chinese observers said India’s abandonment of this specific strategic plan which is aimed at realizing its ‘Make in India’ vision reflects that the South Asian nation is facing quite some limitations to support this manufacturing ambition, and they noted, instead, fostering cooperative relations with China is more conducive for New Delhi to boost its manufacturing capability,” Global Times submits.
“India’s decision to scrap the scheme stems partly from weak administrative efficiency,” the piece quotes an academic, adding India must “face the reality that it does not currently possess the necessary conditions for the rapid growth of large-scale manufacturing.”
It further highlights a perceived lack of “policy sincerity” in India.
“It is possible for some of China’s industries to move to India and conduct production capacity cooperation with India. Also, we could have cooperation on the integration of supply chains,” the piece suggests, adding that “India’s manufacturing sector needs to purchase equipment and technology from China, as well as sourcing Chinese components.”
Another Global Times piece delves deeper into why “India’s PLI scheme is failing.”
“These figures reflect a deeper systemic malaise,” it asserts. “Foreign investors consistently report that these structural barriers severely constrain workforce development, caste system reform and administrative efficiency—key ingredients for a manufacturing takeoff.”
It further describes economic reforms in India as “colonial-era patchwork,” which ultimately serves “the ruling elite rather than cultivating a modern workforce.”
Additionally, Global Times argues that India’s colonial-era institutions, combined with regulatory complexity, political fragmentation, and the “stagnation of India’s education system,” make genuine economic reform difficult without addressing these realities.
The piece then prescribes a policy solution: “To join the ranks of manufacturing powers, India must shed the shackles of its colonial inheritance: streamline governance structures, advance local empowerment and foster an industrial workforce through educational equality.”
“For developing nations, this divergence offers a critical lesson: successful industrialization requires institutional reconstruction, not mere imitation. Breaking free from colonial legacies and Western frameworks, as well as building institutions tailored to national conditions, can unlock transformative potential,” Global Times writes. “As global supply chains rapidly evolve, the window for reform is narrowing. India’s future depends not on copying others but on rewriting its economic operating system. This serves as both an important lesson for developing nations and a compelling validation of following a development path rooted in national context.”
(Edited by Radifah Kabir)
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