'Internal battle' in Modi's BJP on whether India needs Chinese investments, Natixis chief Asia economist says

There is an "internal battle" happening within India's ruling Bharatiya Janata Party over inviting Chinese investments, as the country strives to become Asia's manufacturing powerhouse, Alicia Garcia-Herrero, chief Asia Pacific economist at Natixis said.

In the country's annual economic survey released last week, India's Chief Economic Advisor V Anantha Nageswaran proposed promoting foreign direct investments from China as a better option than increasing trade activity between the two countries. He reports to the finance minister.

This proposal was shot down by Trade Minister Piyush Goyal on Tuesday who said that there was "no rethinking at present" on allowing Chinese investments into India, Reuters reported.

"Nobody wants to put up with the consequences in terms of how this will affect the BJP's image. Indians will not like this policy, but Modi and his finance ministry realized that this is needed," Garcia-Herrero told CNBC in an interview.

CNBC did not immediately receive a response from the BJP on whether there was an internal strife within the party on the issue.

The world's fastest growing economy aims to attract $100 billion in FDI annually over the next five years, Rajesh Kumar Singh, secretary at the Department for Promotion of Industry and Internal Trade, told Bloomberg in June. It received $70.95 billion of FDI inflows in financial year 2024.

Experts told CNBC that Chinese investments are needed in India's solar panel and battery manufacturing sectors — two areas that a report, citing Indian government sources last week, mentioned could see easing restrictions on Chinese investments.

"U.S. and Europe are a little bit hesitant to invest in India's manufacturing sector, most of the foreign investments have gone to the