India's Economic Strategy: Managing Short-Term Gains And Long-Term Risks Of Chinese FDI

Increasing foreign direct investment from China in the domestic market may benefit in the short-term but it risks undermining India's long-term economic security and strategic autonomy. The Global Trade Research Initiative said that dependence on Chinese firms for key manufacturing capabilities could also expose India to supply chain vulnerabilities and geopolitical risks.

The Global Trade Research Initiative said that dependence on Chinese firms for key manufacturing capabilities could also expose India to supply chain vulnerabilities and geopolitical risks.

Chinese firms investing in India may prioritise their own supply chain efficiencies, potentially sidelining local industries and reducing opportunities for home-grown companies to thrive, GTRI Founder Ajay Srivastava.

Additionally, he said, there is a risk that the employment generated might not meet expectations if Chinese firms bring in their own managerial and technical staff, limiting the benefits to the local workforce.

He said it is crucial for India to develop policies that genuinely support local industry and create meaningful employment opportunities for its population.

"While Chinese companies investing in India and exporting to Western markets might seem beneficial in the short term, it risks undermining India's long-term economic security and strategic autonomy," it added.

It also said that China is already the largest import supplier for India in each of the eight industrial product categories.

"Allowing Chinese firms to 'Make in India' risks overwhelming domestic industries, potentially leading to the closure of many Indian businesses," Srivastava said, adding that this could transform India from a manufacturing hub into merely a trading nation, dependent on Chinese firms for critical supplies and economic growth.

Amidst strained ties with China, the pre-budget Economic Survey on Monday made a strong case for seeking FDI from Beijing to boost local manufacturing and tap the export market.

The GTRI further mentioned an interesting point in the Economic Survey 2024, Japan is mentioned 20 times, Australia 32 times, Russia 25 times, the United Kingdom 9 times, Europe 44 times, and the US 107 times.

"The country that finds most mentions is China, with 132 mentions. And if one counts the term 'Chinese', the tally will reach 156," it said.