Modi adviser urges India to seek more Chinese investment, trade

India should deepen its economic ties with China by welcoming greater investment and reconsidering regional trade pacts, as geopolitical shifts make the United States a less dependable partner, according to an adviser to Indian Prime Minister Narendra Modi.

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We are importing everything from China and exporting very little. We have to look in detail at at what China imports and identify where India can compete.

Rakesh Mohan, a part-time member of Modi's Economic Advisory Council, advocated for India to leverage its low manufacturing wages to attract capital from China, Asia's largest economy. This strategy, he argued, would create jobs and boost exports, particularly in labor-intensive sectors such as textiles, garments, footwear, and furniture. "We are importing everything from China and exporting very little," Mohan stated, emphasizing the need to identify areas where India can compete.

Mohan's comments diverge from India's economic strategy adopted after deadly border clashes with China in 2020, which led to increased scrutiny of Chinese investments and India's withdrawal from the China-backed Regional Comprehensive Economic Partnership (RCEP). The remarks also reflect a growing perception among some policymakers that the US, under shifting trade policies, has become "a lot more unreliable" as an economic partner.

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With US President Donald Trump’s tariff policies raising doubts about the US as a long-term economic partner, the comments suggest some policymakers see a case for recalibrating India’s approach to Beijing.

Despite historical tensions and ongoing military stand-offs along the Himalayan frontier, India and China have taken steps to mend relations recently, including restoring direct flights and resuming business visas. However, China continues to restrict exports of critical materials, while India maintains some investment and business restrictions. Mohan stressed the need for pragmatism, stating, "Economic security is as important as national security."

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We have to be pragmatic in our dealing with China. Economic security is as important as national security.

Mohan, a former deputy governor of the Reserve Bank of India, also called for easing restrictions on business travel and people-to-people exchanges. He argued that India's significant dependence on Chinese imports, exceeding $130 billion in the fiscal year ending March, makes deeper engagement unavoidable. He believes India needs to diversify its economic partnerships, pursuing free-trade agreements with Western countries while simultaneously deepening engagement with East and Southeast Asia, which he sees as driving global economic growth.

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Washington has become “a lot more unreliable” because of its shifting trade policies, making it essential for New Delhi to diversify its economic partnerships.