India’s Economic Strategy: Balancing Chinese Investment Amid Geopolitical Tensions
India’s latest annual economic report encourages increased Chinese investment in the country, despite recent disruptions to investments totaling billions of dollars due to heightened geopolitical tensions between New Delhi and Beijing since 2020.
V. Anantha Nageswaran, India’s Chief Economic Adviser, highlighted in the annual economic survey presented in Parliament that New Delhi could enhance its global exports by either integrating into China’s supply chain or attracting foreign direct investment (FDI) from China.
According to the report, focusing on FDI from China appears to be a more promising strategy than relying solely on trade to boost India’s exports, similar to the approach adopted by East Asian economies in the past.
The report suggests that opting for the FDI strategy could offer more advantages compared to trade, particularly in addressing India’s growing trade deficit with Beijing, which remains India’s top exporting partner.
Since 2020, India has tightened scrutiny over investments from Chinese firms, coinciding with deteriorating relations following clashes between their troops along the largely undefined Himalayan border, resulting in casualties on both sides.
In addition to investment scrutiny, India has effectively halted visas for all Chinese nationals since 2020, adversely impacting investments worth billions of dollars. However, there are considerations to ease restrictions for Chinese technicians.
Western nations are actively seeking alternative import channels to reduce dependence on China within global manufacturing and supply chains.
India’s net FDI inflow plummeted by 62.17% to $10.58 billion in FY24, marking a 17-year low, down from $27.98 billion the previous year, as indicated by data from the central bank.
Post-Economic Survey, CEA Anant Nageswaran stated that no economic approach will be left out, emphasizing the need for a comprehensive strategy that includes manufacturing, exports, and other elements.
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