India needs to make up its mind about economic ties with China

India finds herself in a quandary regarding her economic ties with China as the Brics summit approaches. Relations between the two nations have warmed up in recent weeks, with high-ranking officials from both countries meeting frequently. However, India remains conflicted about the degree of economic engagement with China. While the country seeks Chinese capital, technology, and expertise, it also harbors fears about potential shocks they may cause.

External Affairs Minister Subrahmanyam Jaishankar justifies the economic engagement with China, stating that India's long-term goal is to compete with China in manufacturing. Bilateral trade between the two nations has surged, reaching US$151.1 billion in the fiscal year ending March 31, making China India's largest import source and top trading partner.

India's approach to engaging with China has evolved over the years, shifting from a welcoming stance to containment after 2020 and now a more measured reopening. This evolution is reflected in the government's actions, such as introducing restrictions on foreign direct investment from neighboring countries and scrapping import duties on certain electronic components.

Despite these efforts, India's economic rationality and political logic seem to be at odds, as the country aims to secure the necessary inputs for manufacturing while simultaneously appeasing nationalist sentiments. The 2020 FDI decision and subsequent policy measures have not reduced India's reliance on Chinese supply chains nor achieved the autonomous industrial base it seeks.

The recent easing in key sectors only replaces blanket restrictions with controlled access, allowing China to continue playing a significant role in India's economy.