India's yearly economic assessment has endorsed increasing Chinese investment in the country, despite the fact that billions of dollars in Chinese investments have been hindered by rising geopolitical conflicts between New Delhi and Beijing since 2020.
In the annual economic survey presented to Parliament on Monday, India's Chief Economic Adviser V. Anantha Nageswaran suggested that to enhance its global exports, New Delhi could either integrate further into China’s supply chain or encourage more foreign direct investment (FDI) from China.
Referring to the report, Nageswaran illustrated that despite China's progress in high-tech fields such as battery technology and electric vehicles, the country remains heavily involved in low-skill, low-value-added manufacturing industries like apparel and footwear, which are continuing to grow.
The situation presents risks that could "slow down India's capital formation," he noted.
Considering this, Nageswaran added that if the country keeps importing goods from China — where they both have the capacity to supply and are significantly increasing their involvement in low-skill manufacturing — the trade deficit is bound to keep growing.
"Therefore, we need to strike the right balance between the import of goods and import of capital IEFDI," the economic advisor proposed.
The report indicated that countries like Brazil and Turkiye, for example, have imposed barriers on Chinese electric vehicles (EVs) while encouraging Chinese foreign direct investment (FDI) in EV manufacturing within their own borders, which represents "the kind of balance" that India needs to achieve, Nageswaran pointed out.
India, since 2020 has intensified its examination of investments from Chinese firms due to deteriorating relations with China following a deadly clash between their soldiers on the disputed Himalayan border.
In addition to this investment scrutiny, India has effectively halted visas for most Chinese nationals but is now easing restrictions for technicians to address the impact on billions of dollars in investments.
India's net FDI fell by 62% to $10.58 billion in FY24, the lowest in 17 years, down from $27.98 billion the previous year, according to central bank data.