India Needs More FDI from China: Chief Economic Adviser Insights

India’s Chief Economic Adviser, V Anantha Nageswaran, has suggested an increase in foreign direct investment (FDI) from China. This recommendation, outlined in the Economic Survey, aims to boost local manufacturing and enhance export capabilities.

Economic Survey Insights

In an exclusive interview, Nageswaran discussed the Economic Survey’s recommendations, highlighting the importance of seeking FDI from Beijing. Despite India’s trade deficit of USD 87-90 billion with China, he believes that importing goods hinders domestic manufacturing growth.

Nageswaran emphasized the need to balance importing goods and capital, stating, “Domestic production inside the country is a different ball game. It allows export capabilities to grow in the country, transfer of know-how happening. So we need to strike the right balance between the two.”

Comparative Global Approaches

Nageswaran noted that many countries, including Brazil and Turkey, face similar dilemmas in engaging with China. He cited these countries’ strategies of banning imports of Chinese electric vehicles while incentivizing local manufacturing by Chinese companies.

Strategic FDI from China

The Economic Survey suggests that with the US and Europe shifting their sourcing away from China, it would be more effective for Chinese companies to invest in India. This strategy could boost India’s exports to these markets, similar to the approach taken by East Asian economies.

“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,” the survey stated. It added that FDI offers a more advantageous strategy than relying on trade alone, given China’s status as India’s top import partner and the growing trade deficit.

Current FDI Scenario

At present, most FDI coming into India falls under the automatic approval route. However, FDI from countries sharing land borders with India, including China, requires mandatory government approval. From April 2000 to March 2024, China’s share in total FDI equity inflow in India stood at only 0.37% (USD 2.5 billion), ranking 22nd.

Aakhir Tak Editor-in-Chief

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