India Should Think About Receiving Chinese Investments

Chennai: In order to boost Indian manufacturing and plug India into the global supply chain, it is inevitable that India plugs itself into China's supply chain. India has to choose whether it wants to rely solely on imports or partially on Chinese investments.

It is increasingly seen that emerging economies are introducing import restrictions on Chinese goods while accelerating a push for free trade elsewhere to protect their domestic manufacturers due to the threat of China’s overcapacity.

Some Chinese goods are so cheap that no amount of tariff can reduce their price competitiveness. Further, some Chinese products can move past these restrictions without being noticed since they are packaged in third countries. Meanwhile, China has started retaliating against these import restrictions.

Brazil and Turkey recently raised tariffs on the import of e-vehicles from China but, at the same time, took steps to attract Chinese FDI in the sector. India has a similar decision to make, given its large bilateral trade deficit with China, finds the Survey.

“India is vulnerable to potential abrupt supply disruptions. Replacing some well-chosen imports with investments from China raises the prospect of creating domestic know-how down the road. It may have other risks, but we don’t live in a first-best world. We have to choose between second and third-best choices. In sum, to boost Indian manufacturing and plug India into the global supply chain, it is inevitable that India plugs itself into China's supply chain. Whether we do so by relying solely on imports or partially through Chinese investments is a choice that India has to make,” the survey said.