Why did the talk of improving relations with China arise now?

Author: Chandrabhushan

India-China economic relations are not taking any definite path. After the Galwan Valley clash in 2020, efforts were made to limit imports from China to control its economic activities in India. Also, to discourage Chinese capital investment, according to a government order issued in 2021, it was made mandatory to obtain government approval for investments coming from all countries bordering India. Seeing this mood of the government, there were strikes in some mobile phone companies of Chinese brands and there was vandalism at a couple of places. But now, in the Economic Survey that came just before the Union Budget, a proposal has been made to ease foreign direct investment from China.

Harshness in relationships: China’s diplomatic relations with India are still in the fridge. Even when Prime Minister Narendra Modi assumed office for the third time, there was no congratulatory message from Chinese President Xi Jinping. Even when an official congratulatory message came after a week, it bore the name of Chinese Prime Minister Li Qiang. In such an environment, this survey’s suggestion to make every effort to increase FDI from China seems a bit strange.

Only two options: According to the clarification given by the Prime Minister’s Chief Economic Advisor V. Anantha Nageshwaran about this proposal, India is left with only two options, given the world’s economic-commercial environment. Either import readymade goods from China, do only packaging and branding here and sell them in the western markets, or import Chinese capital and technology. This means that they should be allowed to set up factories here either directly or in collaboration with an Indian partner and while arranging employment for their people, the products should be brought to the US and European markets with better profits.

China’s dominance: Why such dependence on China at all costs? Answering this question, Nageshwaran mentioned China’s technical expertise in certain areas such as green energy, turbines, nuclear technology and battery vehicles and its monopoly on certain minerals, synthetic materials and chemicals. If we go deeper, the real issue seems to be related to the attitude of the European Union, America and Canada, which want to keep their imports from China to a minimum, in some cases even before the Ukraine war, but especially after the war started. Some of the things coming from China are bought by them because of their cheapness and some because of technical superiority.

West’s strategy: Western countries are following a three-pronged strategy in this matter. First, to slow down the pace of China’s technological progress, for which they have completely blocked all possibilities of making top-class microchips for this country. Second, to bring down the import of Chinese goods with superior technical expertise to the minimum level by investigating and imposing high import duty. And third, to import those goods which are absolutely necessary to be imported from China by involving some other country, which they have named ‘China Plus One’ policy. By becoming a part of this third strategy, Mexico has become the largest exporter to America in the last two-three years. In Asia, South Korea and Vietnam have also benefited a lot from this.

Pressure on the country: India is trying to somehow join the ranks of countries taking advantage of ‘China Plus One’. On the other hand, the Indian Finance Ministry is also facing pressure from entrepreneurs of many sectors, whose business depends on intermediate goods coming from China. In some cases, it has also been seen that someone sets up a factory for something after making a complete plan, but as soon as his/her goods came to the market, the goods of the same category from China defeated him/her in the arena of prices. This has happened many times with Indian companies making solar cells. If the suggestion of the Economic Survey is implemented, they can go into collaboration with Chinese companies.

The US threat: If Donald Trump becomes the President of the US, his/her approach towards business has been considered to be very conservative. In his/her last tenure, he/she had pressurised India to sell its non-essential goods and had also increased the tax on some goods exported by India. he/she does many things just to create an atmosphere and to attract the attention of the American public, due to which countries dependent on the American market suffer a lot.

Preparing for the future: India withstood the shock that the world economy received due to Corona and the Ukraine war, on the strength of its close relations with both Russia and the Western countries. This survey proposal shows the readiness to survive in a world market that is likely to become more polarized in the future.