## India-China Ties: Galwan’s Ghost Still Looms as Economic Relations Remain Complex
While the recent disengagement at the border between India and China has brought a sense of cautious optimism, the ghost of the 2020 Galwan clash continues to haunt the economic landscape. The implications of the border standoff are still unfolding, and India’s approach to Chinese businesses remains nuanced and strategic.
While some measures taken by India against Chinese businesses may be scaled back, other restrictions, such as import restrictions on finished goods and a cautious stance on foreign direct investment (FDI) from China, are likely to remain. This reflects India’s careful balancing act – seeking to maintain its economic interests while remaining vigilant about national security concerns.
A Cautious Approach to Trade and Investment
There are signs that India might ease restrictions on the import of equipment and machinery from China for its manufacturing sector. Quicker processing of visas for Chinese technicians is also expected, reflecting a pragmatic approach towards facilitating manufacturing partnerships. However, FDI from China will continue to be scrutinized on a case-by-case basis, adhering to Press Note-3, which requires all investments from countries sharing a land border with India to be cleared by the central government.
Potential for Growth but Challenges Remain
While the commerce ministry acknowledges the possibility of improved FDI flow from China, the overall approach remains cautious. The resolution of border issues is seen as crucial in easing trade barriers and boosting economic ties between the two nations. However, experts highlight that a complete return to the pre-Galwan era is unlikely in the near future.
The Economic Survey and the Future of FDI
Key economists within the Indian government have argued for a more open approach towards Chinese FDI. The 2023-24 Economic Survey, authored by the Chief Economic Advisor, proposed a more favorable view of Chinese investments. This perspective emphasizes the potential benefits of joint ventures (JVs) with Chinese companies, particularly for manufacturing goods locally and reducing import dependency.
Strategic Considerations and Regional Trade Agreements
India’s decision to withdraw from the Regional Comprehensive Economic Partnership (RCEP) in 2019, primarily due to concerns about China’s influence, remains a key point of contention. While some experts suggest that India might reconsider its position if relations improve, the government is currently adopting a wait-and-see approach.
Building a ‘China-Plus-One’ Strategy
The global shift towards a ‘China-plus-one’ strategy in electronics, aiming to diversify manufacturing beyond China, presents both opportunities and challenges for India. While India is keen to promote domestic manufacturing, it faces hurdles in product design and compatibility with China’s existing component ecosystem. This underscores the complex interdependence of the two economies and the need for cooperation to navigate the future.
The Legacy of Galwan and the Path Forward
The Galwan clash had a significant impact on India-China economic relations. The ban on Chinese apps, tighter FDI regulations, increased scrutiny of imports, and promotion of domestic alternatives reflect India’s efforts to reduce its reliance on China. While trade between the two countries has continued, the dominance of Chinese imports in certain sectors highlights the challenges for Indian businesses to compete.
The recent diplomatic engagements and disengagement at the border offer a glimmer of hope for improved relations. However, the long-term trajectory of economic ties will depend on the resolution of border issues, the pace of trust-building, and the willingness of both sides to cooperate in a mutually beneficial manner. The ghost of Galwan will likely continue to linger, prompting India to tread cautiously while seeking to navigate the complex web of economic interdependence with its giant neighbor.
