Check Chinese imports, encourage investments – Times of India

Discourage Chinese goods but encourage Chinese capital. This is the twin track approach laid out by the Economic Survey to deal with what it calls the China Conundrum. In a policy prescription aimed at taking advantage of China Plus One strategy, the document suggested a policy rethink, arguing that FDI from India’s neighbour will help domestic companies integrate with the global value chain besides checking the widening trade deficit.
“…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,” it said.

Pointing to a recent research note, which cautioned against the risk of coercion due to Chinese dominance in certain segments, the Survey advocated “striking a right balance between importing goods and importing capital” from China. The report had cited how Brazil, Turkey and some European nations had raised import duty on electric vehicles, but courted investment from China.
“India has a similar decision to make, given its large bilateral trade deficit with China. It makes India 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 as with many other matters, we don’t live in a first-best world. We have to choose between second and third-best choices,” it said. Following Covid outbreak, India too had imposed checks on FDI from neighbouring countries, a move meant to target Chinese companies. It followed it up with import and public procurement curbs, while banning several apps, including Tik Tok, after tension escalated in Ladakh.
Survey argued imports from China are so cheap that “no amount of tariff can reduce their price competitiveness”. It cautioned against Chinese goods slipping in through third countries, without getting noticed. Beijing too has responded by blocking India’s access to solar parts after govt launched an anti-dumping probe.