Niti member: Better to get Chinese firms to invest in India
ECONOMY & POLICY

Niti member: Better to get Chinese firms to invest in India

Niti Aayog member Arvind Virmani stated on Sunday that it would be more beneficial for India to encourage Chinese firms to invest and produce goods domestically rather than continuing to import goods from China. Virmani's comments came in response to a proposal from the pre-budget Economic Survey on July 22, which advocated for attracting foreign direct investment (FDI) from China to enhance local manufacturing and access the export market.

Virmani explained that from an economist's perspective, the trade-off involves deciding whether to continue importing certain goods from China for the next 10 to 15 years or to have Chinese firms invest in India and manufacture those goods locally. He conveyed to PTI that if imports are unavoidable, it would be preferable to have Chinese companies set up operations in India to produce those goods.

The Economic Survey suggested that as the US and Europe shift their sourcing away from China, it would be more effective for Chinese companies to invest in India and export products to these markets, rather than relying on imports from China. Virmani elaborated that each category of goods should be evaluated individually to assess this trade-off.

The survey highlighted that India faces two strategic choices to leverage the 'China plus one strategy': integrating into China's supply chain or promoting FDI from China. Virmani opined that focusing on FDI from China could be more advantageous for boosting India's exports to the US, similar to the approach taken by East Asian economies in the past. He argued that opting for FDI rather than trade could be more beneficial, given the growing trade deficit with China, which is India's largest import partner. Following the intense military clash in the Galwan Valley in June 2020, relations between India and China have deteriorated significantly. The Indian and Chinese militaries have been in a stand-off since May 2020, and although disengagement has occurred at several friction points, a full resolution of the border dispute has not been achieved. India has maintained that normalising relations with China is contingent upon achieving peace in the border areas. India has taken measures such as banning over 200 Chinese mobile apps, including TikTok and WeChat, and rejecting significant investment proposals from Chinese companies like BYD. However, earlier this year, the Competition Commission of India approved JSW Group's acquisition of a 38% stake in MG Motor India Pvt Ltd, which is a wholly-owned subsidiary of Shanghai-headquartered SAIC Motor. Despite receiving minimal FDI from China, bilateral trade between the two countries has expanded significantly. China became India's largest trading partner with $118.4 billion in two-way commerce for 2023-24, surpassing the US. India's exports to China increased by 8.7% to $16.67 billion in the last fiscal year, with notable growth in sectors such as iron ore, cotton yarn, spices, fruits and vegetables, and plastics. Imports from China rose by 3.24% to $101.7 billion, widening the trade deficit to $85 billion from $83.2 billion the previous year. Historically, China was India's top trading partner from 2013-14 to 2017-18 and in 2020-21, with the UAE and the US serving as the largest trading partners in other years.

Niti Aayog member Arvind Virmani stated on Sunday that it would be more beneficial for India to encourage Chinese firms to invest and produce goods domestically rather than continuing to import goods from China. Virmani's comments came in response to a proposal from the pre-budget Economic Survey on July 22, which advocated for attracting foreign direct investment (FDI) from China to enhance local manufacturing and access the export market. Virmani explained that from an economist's perspective, the trade-off involves deciding whether to continue importing certain goods from China for the next 10 to 15 years or to have Chinese firms invest in India and manufacture those goods locally. He conveyed to PTI that if imports are unavoidable, it would be preferable to have Chinese companies set up operations in India to produce those goods. The Economic Survey suggested that as the US and Europe shift their sourcing away from China, it would be more effective for Chinese companies to invest in India and export products to these markets, rather than relying on imports from China. Virmani elaborated that each category of goods should be evaluated individually to assess this trade-off. The survey highlighted that India faces two strategic choices to leverage the 'China plus one strategy': integrating into China's supply chain or promoting FDI from China. Virmani opined that focusing on FDI from China could be more advantageous for boosting India's exports to the US, similar to the approach taken by East Asian economies in the past. He argued that opting for FDI rather than trade could be more beneficial, given the growing trade deficit with China, which is India's largest import partner. Following the intense military clash in the Galwan Valley in June 2020, relations between India and China have deteriorated significantly. The Indian and Chinese militaries have been in a stand-off since May 2020, and although disengagement has occurred at several friction points, a full resolution of the border dispute has not been achieved. India has maintained that normalising relations with China is contingent upon achieving peace in the border areas. India has taken measures such as banning over 200 Chinese mobile apps, including TikTok and WeChat, and rejecting significant investment proposals from Chinese companies like BYD. However, earlier this year, the Competition Commission of India approved JSW Group's acquisition of a 38% stake in MG Motor India Pvt Ltd, which is a wholly-owned subsidiary of Shanghai-headquartered SAIC Motor. Despite receiving minimal FDI from China, bilateral trade between the two countries has expanded significantly. China became India's largest trading partner with $118.4 billion in two-way commerce for 2023-24, surpassing the US. India's exports to China increased by 8.7% to $16.67 billion in the last fiscal year, with notable growth in sectors such as iron ore, cotton yarn, spices, fruits and vegetables, and plastics. Imports from China rose by 3.24% to $101.7 billion, widening the trade deficit to $85 billion from $83.2 billion the previous year. Historically, China was India's top trading partner from 2013-14 to 2017-18 and in 2020-21, with the UAE and the US serving as the largest trading partners in other years.

Next Story
Infrastructure Energy

Digital Economy, Renewable Energy to Boost Job Creation: Economic Survey

The Economic Survey 2024-25, presented by Union Finance Minister Nirmala Sitharaman, indicates substantial improvement in India’s labour market, driven by strong post-pandemic recovery and formalisation of the workforce. Key findings include a significant drop in the unemployment rate from 6 per cent in 2017-18 to 3.2 per cent in 2023-24. Additionally, there has been notable growth in female labour force participation, which increased from 23.3 per cent in 2017-18 to 41.7 per cent in 2023-24.Other highlights include:Over 30.51 crore unorganised workers registered on the eShram portal, suppor..

Next Story
Real Estate

Aditya Birla Housing Finance Secures Rs 8.3 Billion from IFC

Aditya Birla Housing Finance Ltd. (ABHFL), a subsidiary of Aditya Birla Capital, has raised Rs 8.3 billion through non-convertible debentures (NCDs) from the International Finance Corporation (IFC). The company stated that the funds will be used to provide housing loans to low- and middle-income groups (LIG and MIG), with a special focus on promoting homeownership among women. Additionally, a portion of the investment will support MSMEs, particularly women-led enterprises, to drive economic growth. The initiative aims to strengthen financial inclusion and uplift underserved communities in the ..

Next Story
Infrastructure Energy

Bihar to Bid Out 2,400 MW Power Plant by March

The Bihar government plans to auction the proposed 2,400 MW coal-based power plant at Pirpainti by March 2025. Part of the state's FY25 budget initiatives, the project is valued at Rs 214 billion, covering multiple power sector developments. Coal for the plant is expected to come from Eastern Coalfields, with fuel and location already determined to streamline the bidding process. Discussions are underway to finalise coal supply under the SHAKTI scheme, with a resolution expected by February. The Central government has also pledged support for fast-tracking environmental clearances to facilit..

Hi There!

"Now get regular updates from CW Magazine on WhatsApp!

Join the CW WhatsApp channel for the latest news, industry events, expert insights, and project updates from the construction and infrastructure industry.

Click the link below to join"

+91 81086 03000