A prominent economist advising Prime Minister Narendra Modi has advocated a major policy shift, arguing that India must substantially open its doors to Chinese capital and reconsider its stance on regional trade agreements as American economic reliability falters. The comments from Rakesh Mohan, who serves as a part-time member of the Prime Minister's Economic Advisory Council, signal a potential recalibration of New Delhi's approach to Beijing following years of heightened tensions and protectionist measures.
Mohan outlined a strategy centred on leveraging India's competitive advantage in labour costs to attract manufacturing investment from China, particularly in sectors where India already possesses established expertise. He specifically highlighted textiles, garments, footwear and furniture as industries where Chinese capital could generate substantial employment opportunities while simultaneously strengthening India's export competitiveness globally. This approach directly challenges the defensive posture New Delhi has maintained since the 2020 border conflicts, which prompted tighter scrutiny of Chinese investment flows and contributed to India's withdrawal from regional integration efforts.
The timing of these remarks carries particular significance given the broader geopolitical context reshaping Asia's economic landscape. With the incoming Trump administration signalling protectionist trade policies that have already created uncertainty among investors and trading partners, policymakers within Modi's government appear to be weighing whether India's historical reliance on Western markets remains sustainable. Mohan explicitly identified this American unpredictability as a catalyst for rethinking India's long-standing strategy of keeping China at arm's length economically, even while maintaining strategic vigilance along their contested border.
India's trade imbalance with China underscores the limitations of the current defensive approach. During the fiscal year ending in March, India imported more than $130 billion worth of Chinese goods while exporting relatively modest volumes in return. Rather than attempting to reduce this dependence through further restrictions, Mohan contended that India should instead aim to transform the bilateral relationship through deeper integration, creating opportunities for Indian manufacturers to supply components and goods to Chinese investors operating within Indian territory. This inverted logic suggests that greater engagement could ultimately reduce the trade deficit by capturing value within India's borders.
Mohan's advocacy for rejoining the China-backed Regional Comprehensive Economic Partnership represents perhaps the most contentious aspect of his recommendations, as India's 2019 withdrawal reflected deep concerns among domestic constituencies. Agricultural communities and labour-intensive manufacturing sectors had strongly opposed participation, fearing that cheaper imports would devastate local producers unable to compete with regional competitors benefiting from the agreement's preferential tariff structures. Yet the adviser argued that remaining outside such arrangements increasingly disadvantages India as other nations strengthen supply chain linkages and secure preferential market access, potentially leaving Indian producers isolated from the fastest-growing economic region.
The economic advisory role Mohan occupies provides his statements with considerable institutional weight, though they likely represent one perspective within the Modi administration rather than settled policy. India's actual stance toward Chinese investment remains cautiously selective, with the government having recently approved certain investments in electronics and other designated sectors while maintaining restrictions elsewhere. This bifurcated approach reflects the genuine tension between India's desire for economic growth and its legitimate security concerns regarding critical infrastructure and technology access.
Mohan additionally advocated for substantial easing of movement restrictions between the two nations, calling for expanded business visas, increased academic exchanges and restoration of direct flight connections. These people-to-people measures would complement deeper economic integration by rebuilding the networks of trust and familiarity that sanctions and suspicion have eroded over the past several years. The expansion of such connections could facilitate the business relationship building essential for successful Chinese investment in Indian manufacturing ventures.
The former Reserve Bank of India Deputy Governor framed his proposals around pragmatism rather than ideological alignment, explicitly acknowledging that China continues to restrict exports of critical materials including rare earth elements. His formulation of "economic security" alongside national security suggests recognition that India must carefully calibrate its engagement strategy, accepting certain asymmetries in access while securing necessary safeguards for its own strategic interests. This nuanced positioning attempts to square the circle between economic necessity and security consciousness.
Mohan's broader strategic vision extends beyond the China relationship alone. He emphasised India's need to deepen integration with East and Southeast Asian supply chains while continuing to pursue trade agreements with Western partners, including the United States. This multi-directional engagement approach reflects economic reality: the Asia-Pacific region will generate most global growth over the coming decade, yet Western markets remain crucial for high-value exports and technology access. Mohan argued that India's current posture of keeping options open while engaging minimally with regional frameworks leaves it increasingly marginalised from the economic architecture shaping the continent.
The proposal to pursue membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership signals another significant reorientation. This grouping includes Japan, South Korea, Vietnam and Australia, among others, creating a counterweight to China-centric arrangements while opening market access for Indian manufacturers. Unlike RCEP, which prioritises low-cost producers, this agreement emphasises higher-standard manufacturing and services, potentially aligning better with India's longer-term economic interests as labour costs gradually rise and the nation seeks to move beyond low-wage competition.
Historically, the India-China relationship has remained shadowed by their 1962 military conflict and recurring border tensions along the Himalayan frontier. Recent months have witnessed tentative steps toward normalisation: restoration of direct flights, resumption of business visas and selective investment approvals suggest both nations recognise the economic costs of prolonged antagonism. Yet this thaw remains fragile, with both countries maintaining restrictions in sensitive sectors and maintaining significant military presence along disputed territories.
For Southeast Asian nations closely watching India's strategic orientation, these signals matter considerably. India's participation in regional trade agreements could strengthen the economic weight of non-Chinese groupings, while its continued isolation potentially pushes the region toward greater Chinese economic dominance. The adviser's recommendations, if adopted, would substantially reshape India's role as either a counterweight or complement to Chinese regional influence.
