India debates increased Chinese investment: can benefits outweigh geopolitical risks?

The report concludes that more FDI from China would have numerous benefits, such as enhancing local manufacturing and export market access. Analysts agreed, arguing India should not let geopolitics stand in the way of economic progress despite the risks Beijing’s increased financial influence might bring.

While addressing a press conference on the launch of the country’s annual Economic Survey (ES) report on Monday, Chief Economic Adviser V. Anantha Nageswaran emphasised the importance of attracting FDI from China to enhance India’s exports to the United States and other Western countries, thereby addressing India’s escalating trade deficit with Beijing.

With the US and Europe shifting their immediate sourcing away from China, it is more effective to have Chinese companies invest in India and then export the products to these markets rather than importing them from its neighbour, the report concludes.

The ES is a highly influential annual report prepared by the Ministry of Finance that reviews the country’s economic development over the past financial year and provides insights into the performance of various sectors to help the government formulate strategic economic policies.

This year’s report notes that the West is shifting towards a “China plus one strategy” of diversifying manufacturing and supply chains to reduce dependency on Beijing and mitigate associated risks. It argues India can benefit from this in one of two ways – integrating into China’s supply chain or attracting FDI from Beijing.

“Among these choices, focusing on FDI from China seems more promising for boosting India’s exports to the US, similar to how East Asian economies did in the past. Moreover, choosing FDI as a strategy to benefit from China plus one