Economic Survey: India should strike a balance between imports and investments to address ‘the Chinese Conundrum’

New Delhi: India should reduce the import of Chinese products while maintaining investments from Beijing, the Economic Survey said, citing examples such as Brazil and Turkey, which are emerging markets and developing economies trying the same solution. 

India could consider increasing tariffs on Chinese products such as electric vehicles, while taking steps to attract Chinese foreign direct investment, the survey suggested. China’s dominance over global supply chains across product categories is a key global concern, especially in the wake of supply disruptions accompanying the war in Ukraine, the Economic Survey for FY24 said.

Addressing the 'Chinese conundrum' assumes importance because many nations consider a 'China-plus-one' approach to reduce their dependence on China. ‘China plus one’ refers to global companies reducing their investments in China by diversifying to other countries to develop resilient supply chains. India has become an important alternative destination.

The economic survey, which analysed the country’s economic performance over the past fiscal year and was presented a day before the Union budget, asked whether it was possible for India to enter the global supply chain without plugging itself into China's supply chain.

It concluded that in order to boost India's manufacturing and enter the global supply chain, it is inevitable that India plugs itself into China's supply chain. The choice to be made is whether India does so by relying solely on imports or partially through Chinese investments.

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India may be the fastest-growing economy, but its size is still a fraction of China's, the survey said. This concern comes against the backdrop of tensions rising between the two most populous nations over the past few years - from trade wars where India banned Chinese companies, to military skirmishes such as the Galwan incident in 2020.

Focusing on energy, the economic survey identified China's key position in the global markets. China's control over the supply and processing of rare-earth metals may have massive repercussions on India's renewable energy programme, as per the document. India's renewable energy programme is vulnerable due to its heavy dependence on imported raw material, the Economic Survey said.

India needs to strike a balance between importing goods and importing capital from China, the Economic Survey said. "Against this background, it may not be the most prudent approach to think that India can take up the slack from China vacating certain spaces in manufacturing," the survey said.

India's imports from China rose about 6.5% to ₹8,42,467.28 crore in FY24 from ₹7,90,931.62 crore in FY23, as per data from the Ministry of Commerce and Industry's Niryat Portal.