“There is no rethinking at present to support Chinese investments in the country,” the minister said. In 2020, the government made its approval mandatory for FDI from countries that share landed border with India such as China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, and Afghanistan.
The minister was responding on a pitch made by the pre-Budget Economic Survey on July 22 for seeking FDI from China to boost local manufacturing and tap the export market.
As the US and Europe are shifting their immediate sourcing away from China, it is more effective to have Chinese companies invest in India and then, export the products to these markets rather than importing from the neighbouring country, the survey has said.
India faces two choices to benefit from the ‘China plus one strategy’ — it can integrate into China’s supply chain or promote FDI from China.
“Among these choices, focusing on FDI from China seems more promising for boosting India’s exports to the US, similar to how East Asian economies did in the past. Moreover, choosing FDI as a strategy to benefit from the China plus one approach appears more advantageous than relying on trade. This is because China is India’s top import partner, and the trade deficit with China has been growing,” it has added.
China stands at the 22nd position with only 0.37 per cent share ($2.5 billion) in the total FDI equity inflow reported in India from April 2000 to March 2024.
Though India has received minimal FDI from China, the bilateral trade between the two nations has grown multi-fold. China has emerged as the largest trading partner of India with $118.4 billion two-way commerce in 2023-24, edging past the US. India’s exports to China rose 8.7 per cent to $16.67 billion in the last fiscal.
The main sectors that recorded healthy growth in exports to that country include iron ore, cotton yarn/fabrics/made-ups, handloom, spices, fruits and vegetables, plastic and linoleum.
Imports from the neighbouring country increased 3.24 per cent to $101.7 billion. The trade deficit widened to $85 billion in the last fiscal year from $83.2 billion in 2022-23. According to the commerce ministry data, China was India’s top trading partner from 2013-14 till 2017-18 and in 2020-21. Before China, the UAE was the country’s largest trading partner. The US was the largest partner in 2021-22 and 2022-23.
