A prominent economic adviser to Prime Minister Narendra Modi has made a controversial case for India to substantially expand its economic engagement with China, contending that shifting global trade dynamics and American policy uncertainty necessitate a strategic recalibration in New Delhi's approach to Beijing. Rakesh Mohan, who serves as a part-time member of Modi's Economic Advisory Council, delivered these remarks during an interview in mid-July, signalling that sections of India's policymaking establishment are reconsidering the protectionist stance adopted following the 2020 border conflict between the two nations.
Mohan's intervention represents a notable departure from the hardline position India has maintained over the past several years. He argues that rather than maintaining restrictive barriers against Chinese capital, India should actively invite manufacturers from across the border to establish operations in labour-intensive sectors including textiles, garments, footwear and furniture manufacturing. This strategy, he contends, would leverage India's cost advantages to generate employment opportunities whilst simultaneously facilitating technology transfer and skills development. The adviser emphasises that India's existing manufacturing wages remain competitive globally, yet the nation has failed to capitalise on this advantage by remaining insular toward Chinese investors seeking alternative production locations.
The economic asymmetry between the two nations forms the crux of Mohan's argument. India currently imports more than $130 billion worth of goods annually from China whilst exporting comparatively little, creating a structural trade imbalance that Mohan suggests cannot be remedied through isolation. Instead, he advocates for a granular examination of Chinese import patterns to identify specific product categories where Indian manufacturers could develop competitive capabilities. This analytical approach would require policymakers to move beyond blanket restrictions and instead pursue targeted engagement strategies tailored to particular industries and technologies.
Mohan's comments arrive at a moment when India-China relations have begun showing tentative signs of normalisation following years of military tension. The two countries have recently restored direct flight services, resumed business visa issuance and approved selected Chinese investments in electronics and related sectors. These incremental measures suggest that diplomatic channels remain open despite the historical animosity rooted in their 1962 war and recurring standoffs along the disputed Himalayan frontier. However, substantial barriers persist, with China continuing to restrict supplies of critical materials and rare earth elements whilst India maintains selective investment screening mechanisms.
The adviser's framing of economic engagement as distinct from security considerations represents a crucial analytical shift. Mohan articulates that economic security warrants equivalent prioritisation alongside traditional national security concerns, implying that India's current approach—which treats Chinese investment with suspicion—may inadvertently undermine long-term economic resilience. This perspective challenges the prevailing orthodoxy within Indian policymaking circles, where concerns about technological dependence and industrial vulnerability have traditionally dominated discussions regarding Chinese participation in Indian manufacturing.
A particularly significant component of Mohan's recommendations concerns India's earlier decision to remain outside the China-backed Regional Comprehensive Economic Partnership, a massive trade framework encompassing most of Asia. India withdrew from RCEP negotiations in 2019, citing apprehensions that cheaper Chinese and Southeast Asian imports would devastate domestic agricultural and manufacturing sectors. Mohan now suggests that this exclusion position warrants reconsideration, contending that non-participation isolates India from dynamic Asian supply chains and limits export opportunities to Western markets. He similarly recommends that India pursue membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, positioning the nation as an active participant in reshaping regional economic architecture.
The adviser's arguments gain particular salience within the context of American policy unpredictability under the Trump administration. Mohan characterises the United States as an increasingly unreliable long-term economic partner, pointing to volatile tariff policies and shifting trade regulations that leave allied nations uncertain regarding market access and investment security. This assessment, whilst controversial in some quarters, reflects genuine concerns among segments of India's foreign policy and business establishment regarding the sustainability of India-US economic partnerships. The implication is that India cannot rely indefinitely on Western market access and must therefore diversify its economic partnerships across the Asian region.
Mohan's call for liberalising business travel restrictions and expanding people-to-people exchanges represents another dimension of his comprehensive engagement strategy. He advocates for increasing academic collaborations, expanding business visa allocations and restoring additional flight connections between India and China. These measures, he suggests, would facilitate the formation of commercial relationships and knowledge networks essential for attracting quality investment and supporting joint ventures. The emphasis on soft measures alongside formal trade policy adjustments reflects an understanding that economic integration requires foundational trust and familiarity among business communities and institutional actors.
The adviser's positioning of India within broader Asian economic dynamics highlights a crucial geopolitical reality for the region. With forecasts suggesting that Asia will generate substantial proportions of global economic growth over the coming decade, India's participation in regional supply chains and trade frameworks becomes increasingly consequential for its development trajectory. Mohan argues that exclusion from these structures leaves India perpetually relegated to peripheral status within Asian commerce, limiting access to high-value manufacturing opportunities and market expansion possibilities. This framing resonates with concerns among Indian industrialists and exporters regarding the competitive disadvantages imposed by non-participation in major regional arrangements.
The tension between Mohan's recommendations and India's longstanding security anxieties regarding China remains palpable. India's decision to tighten investment scrutiny following 2020 border clashes reflected broader concerns about technological leakage and industrial espionage. These apprehensions carry substantial weight within Indian defence and security establishments, where Chinese intentions are viewed with persistent scepticism. Mohan's suggestions therefore encounter formidable institutional resistance from those who prioritise strategic autonomy and technological sovereignty over short-term economic gains. The question of whether India can establish sufficiently robust regulatory frameworks to manage Chinese investment whilst preventing security vulnerabilities remains unresolved.
For Malaysian and Southeast Asian observers, Mohan's advocacy carries significant implications. India's economic trajectory and regional integration choices fundamentally shape the regional balance of power and the architecture of Asian commerce. Should India opt for deeper Chinese engagement and RCEP participation, it would signal a substantial shift in regional economic alignment, potentially accelerating China's integration into Southeast Asian supply chains. Conversely, sustained Indian protectionism would reinforce existing fragmentation within Asian trade structures, perpetuating inefficiencies that benefit neither the region nor individual nations. Malaysia, as a trade-dependent economy deeply embedded in Asian supply chains, has particular interest in India's positioning choices.
The adviser's arguments ultimately hinge on a pragmatic assessment that the costs of economic isolation exceed those of managed engagement with China. Whether this perspective gains traction within Modi's government remains uncertain, given the powerful constituencies opposing Chinese investment and the persistence of security concerns. Yet Mohan's intervention suggests that even within hawkish Indian policy circles, voices are emerging that advocate for recalibrating the relationship with Beijing based on economic rationality rather than strategic rivalry alone. The trajectory of these internal debates will significantly influence India's role within emerging Asian economic structures and the character of regional competition and cooperation over the coming years.
