Illustration: Tang Tengfei/GT
A recent article in the Indian Express, headlined "US tariffs looming, India looks at easing non-trade barriers, relaxing Chinese FDI," highlighted that "on the investment front, there are indications the Indian side is now open to allowing inflows from Beijing."
Although this article has yet to receive official confirmation from Indian authorities, leaving some uncertainty, it references "sources aware of developments," suggesting that conversations around "relaxing Chinese FDI" are increasing within India. This could be a positive signal for economic interactions between China and India.
According to the Indian Express, "discussions are on between departments to dilute or neutralize some of the restrictions on trade and investments that were put in place five years ago." Whether or not these talks swiftly translate into policy, the emergence of such dialogue itself underscores a reality: enhancing economic and trade relations with China - an important trading partner for India - is a topic worthy of serious discussion. It also signals a growing recognition within India of this fact.
Despite some artificial restrictions imposed by India on Chinese investments in recent years, Chinese investment and trade could play an important role in India's economic and industrial development. From an economic and market perspective, expanding cooperation in trade and investment with China is advantageous for India's growth.
The advancement of India's manufacturing sector benefits from Chinese components, intermediate goods and technologies. China possesses significant technological expertise and extensive manufacturing experience. Easing investment restrictions would encourage more Chinese companies to establish factories in India, thereby helping enhance India's manufacturing capabilities and address employment challenges.
China was India's largest trading partner in the financial year 2023-24, according to the Press Trust of India, which cited data from the think tank GTRI. This highlights the mutually beneficial nature and vast potential of economic cooperation between China and India. Chinese investment could bring capital to key Indian industries, boosting domestic production in India from manufacturing to renewable energy, providing India with a timely economic boost.
China has been among the top three global sources of outbound investment for several years. Relaxing investment restrictions and attracting Chinese manufacturers to invest and set up factories in India could, to some extent, substitute imports and boost local manufacturing output.
Conversely, ample evidence demonstrates that India's artificial restrictions on Chinese investment and economic cooperation and its tendency to view China-India economic and trade relations through a geopolitical lens may hinder India's efforts to foster industrial and economic development.
Recently, the Indian government decided to let lapse a $23 billion program aimed at incentivizing domestic manufacturing, just four years after launching the initiative to attract firms away from China, according to Reuters, citing Indian government officials.
Trade expert Biswajit Dhar at the Delhi-based Council for Social Development has noted that India needs to do more to attract foreign investment, suggesting that the country may have missed its opportunity, the report said. In addition, many economists believe that protectionist policies over the past decade have undermined India's "Make in India" initiative, according to the BBC.
A source cited by the Indian Express mentioned that the removal of trade and non-trade barriers is an industry demand, especially from the small and medium-sized enterprise segment.
Despite growing rational views within India regarding economic cooperation with China and the attraction of Chinese investment, the country has yet to substantially relax the artificial restrictions on economic cooperation between the two nations.
India's Chief Economic Adviser, V. Anantha Nageswaran, in February stated that the country is unlikely to lift the ban on Chinese investments anytime soon. This is regrettable and detrimental to India's manufacturing sector and broader economic development, especially against the backdrop of increased global economic uncertainty due to rising trade protectionism from the US.
Intensifying global economic uncertainty has heightened the external pressures on India's economic growth. At this juncture, if Indian policymakers could give greater consideration to voices from the business community, especially from small and medium-sized enterprises, and adopt a more open and positive attitude toward China-India cooperation, this could provide a boost to the Indian economy. It is hoped that India will heed such calls to relax Chinese FDI restrictions and won't miss out on valuable opportunities.
The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn
