India should significantly expand its economic engagement with China by welcoming substantial Chinese investment and reconsidering its participation in regional trade frameworks, according to a prominent adviser within Prime Minister Narendra Modi's administration. Rakesh Mohan, who serves as a part-time member of Modi's Economic Advisory Council, contends that India's current approach underutilises opportunities to harness Beijing's capital and manufacturing expertise, particularly as the global economic landscape becomes increasingly unstable and the United States proves less predictable as a long-term partner.
Mohan's intervention comes at a critical juncture for Indian economic policy. He suggests that rather than clinging to protectionist measures that insulate domestic industries, New Delhi should capitalise on its competitive advantage in labour costs to attract substantial Chinese capital flows. This strategy, he argues, would generate employment opportunities across multiple sectors and simultaneously enhance India's export capacity. The adviser specifically identified labour-intensive manufacturing domains—notably textiles, garments, footwear and furniture production—as sectors where Chinese investors could establish operations and contribute meaningfully to India's industrial development.
The call for deeper China engagement represents a significant departure from India's post-2020 stance. Following military confrontations along their disputed Himalayan border, New Delhi implemented stringent oversight mechanisms targeting Chinese investment, effectively closing the door to capital inflows from Asia's largest economy. This defensive posture reflected legitimate security concerns but, according to Mohan's analysis, may have constrained India's broader economic potential. The current trade relationship appears decidedly lopsided, with India importing over $130 billion in Chinese goods during the fiscal year ending March, while exporting comparatively little to Beijing. This asymmetry, Mohan suggests, offers India an opportunity to identify export categories where it possesses genuine competitive advantages and can displace Chinese suppliers or partner productively.
India's earlier decision to remain outside the China-backed Regional Comprehensive Economic Partnership represents perhaps the most contentious element of this new thinking. When New Delhi opted out of RCEP in 2019, policymakers expressed concern that cheaper imports would undermine domestic manufacturers and agricultural producers. Yet Mohan now argues that this exclusion has left India sidelined from one of Asia's most significant trade architectures precisely when the region will drive global economic growth throughout the coming decade. He further advocates for India to pursue membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, an alternative multilateral framework that would deepen Asian supply chain integration and create pathways to Western markets.
The geopolitical context underpinning these arguments deserves careful consideration for Malaysian and Southeast Asian observers. US policy unpredictability under the Trump administration—particularly regarding tariff regimes and trade agreements—has created genuine uncertainty about whether Washington can reliably serve as India's long-term economic anchor. This erosion of confidence in American constancy has prompted Indian policymakers to contemplate hedging strategies that reduce dependence on any single partner while expanding engagement across the Asian region. Rather than viewing this as capitulation to Chinese interests, Mohan frames it as pragmatic diversification reflecting contemporary economic realities.
Recent thaws in India-China relations provide some foundation for optimism regarding expanded engagement. Over the past year, both nations have taken cautious steps toward normalisation: India has restored direct flight services, reactivated business visa programmes and approved selective Chinese investments in electronics and allied sectors. China simultaneously continues restricting exports of strategic materials and advanced technologies, including rare earth elements, while India maintains certain investment limitations. This asymmetry suggests that any expanded partnership would likely remain carefully circumscribed, with both nations maintaining protective mechanisms around genuinely sensitive sectors.
Mohan's emphasis on complementary rather than purely competitive dynamics reflects sophisticated economic reasoning relevant to Southeast Asian policymakers. He advocates not for one-sided concessions but for genuine commercial partnership where Indian labour costs and manufacturing capabilities align with Chinese capital and technological resources. Simultaneously, he urges expanded business travel facilitation, enhanced academic exchanges and additional flight routes to undergird the relationship with robust people-to-people connections. These measures, though seemingly procedural, create the social infrastructure necessary for sustained economic cooperation.
The concept of "economic security" articulated by Mohan introduces important nuance often absent from globalisation debates. He argues that economic security possesses equivalent importance to conventional national security, implying that excessive trade dependence on any single partner—including China—poses genuine risks. This framing justifies selective engagement rather than wholesale abandonment of protective mechanisms. India would presumably continue scrutinising sensitive sectors like defence, telecommunications and critical infrastructure while opening opportunities in genuinely competitive manufacturing domains.
For Southeast Asian nations including Malaysia, these policy discussions carry direct significance. India's potential integration into Asian supply chains would create additional competitive pressures across manufacturing sectors, particularly textiles, electronics and light manufacturing. Simultaneously, it could generate new market opportunities as Indian companies expand exports regionally and globally. Malaysia's position as a regional trade hub might benefit from increased India-ASEAN-China trilateral commerce facilitated through more fluid regional trade architecture.
The adviser's proposals fundamentally challenge India's post-2020 strategic orientation while attempting to preserve legitimate security considerations. Whether Modi's government ultimately embraces this recalibration remains uncertain, as it would require overcoming considerable political resistance from domestic manufacturers who fear import competition. Nonetheless, Mohan's articulate advocacy suggests that elements within India's policymaking establishment increasingly recognise that strategic rivalry with China need not preclude economically beneficial engagement across carefully demarcated sectors.
