An influential member of Prime Minister Narendra Modi's Economic Advisory Council has made a striking case for India to substantially reorient its approach to China, advocating for relaxed investment rules and a reconsideration of trade partnership decisions that New Delhi had rejected following earlier tensions. Rakesh Mohan, a former Reserve Bank of India Deputy Governor, argued during a recent interview that India must move beyond protectionist thinking and instead harness its cost advantages in manufacturing to attract capital from Beijing, particularly in labour-intensive sectors where competition remains fierce in global markets. His intervention represents a notable break from the cautious stance India has maintained toward Chinese economic activity since border violence in 2020, and signals that some within the government's inner circle are reassessing fundamental assumptions about how New Delhi should manage its relationship with its larger neighbour.
Mohan's core argument centres on a pragmatic economic case rather than geopolitical reconciliation. He pointed out that India's trade imbalance with China has become structurally problematic, with the country now importing more than USD 130 billion in Chinese goods annually while exporting relatively modest volumes in return. Rather than attempting to reduce this dependency through isolation, Mohan contended that India should strategically leverage its vast labour pool and manufacturing expertise to attract Chinese investment in specific sectors including textiles, garments, footwear and furniture production. This approach, he suggested, would create employment opportunities, strengthen export capacity and ultimately reduce the trade deficit by establishing Indian manufacturers as integrated parts of Asian supply chains rather than remaining on their periphery.
The broader context for these remarks involves significant shifts in India's external environment. The reimposition of aggressive tariff policies by the United States has led policymakers in New Delhi to question whether Washington remains a stable and predictable economic partner for long-term strategic planning. This uncertainty has prompted reconsideration of India's earlier decision to remain outside the China-backed Regional Comprehensive Economic Partnership, a trade bloc that comprises some of Asia's largest economies and accounts for a substantial portion of global economic output. When India opted out of RCEP in 2019, the government cited concerns that cheaper Chinese and Southeast Asian imports would undermine domestic manufacturers and agricultural producers. Mohan now argues that this calculus requires updating in light of changed circumstances.
The historical backdrop to current India-China relations underscores the sensitivity of any shift toward greater economic integration. The two nations fought a war in 1962 and have maintained strategic rivalry punctuated by recurring military standoffs along their disputed Himalayan frontier. The 2020 border clashes, which resulted in significant casualties and prompted nationalist sentiment across India, led to a hardening of restrictions on Chinese investment and a comprehensive review of existing Chinese business interests. For years, the relationship remained essentially frozen in this defensive posture, with New Delhi maintaining strict scrutiny of Chinese capital flows and technology transfers. However, recent months have witnessed careful rapprochement, with India restoring direct air services, resuming business visa issuance and selectively approving Chinese investments in sectors such as electronics manufacturing where technology transfer concerns are viewed as manageable.
Mohan acknowledged the legitimate tension between economic pragmatism and security considerations, framing it as a balance rather than a choice between competing imperatives. He emphasized that economic security deserves equal weight with national security, suggesting that India's vulnerability to import dependence on Chinese goods represents a genuine security risk that cannot be addressed through isolation alone. Instead, he argued, deeper integration into Asian supply chains and the attraction of manufacturing investment from China would paradoxically strengthen India's economic resilience by diversifying production sources and reducing reliance on imports. This formulation attempts to recast engagement with China not as a capitulation to geopolitical pressure but as a sophisticated strategy for enhancing India's structural position in regional and global commerce.
A key element of Mohan's recommendations involves easing restrictions on business travel and facilitating people-to-people exchanges between the two countries. He called for expanded business visa issuance, increased academic collaboration and restoration of additional airline connections. These measures, presented as relatively low-cost confidence-building steps, would lay groundwork for the deeper commercial engagement he envisioned. Such people-focused initiatives often precede institutional economic integration, as they build networks of trust and familiarity that later facilitate formal business relationships. From a Malaysian perspective, India's evolution toward greater Asian economic integration carries implications for regional supply chain dynamics and ASEAN's positioning within broader Asian economic architecture.
Mohan presented India's participation in major regional trade agreements as essential to the country's medium-term development strategy. Beyond RCEP, he urged India to pursue membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which would connect New Delhi to a different network of Asian and Pacific economies with strong links to Western markets. He suggested that simultaneous engagement with both trade blocs would position India optimally within Asian supply chains while maintaining access to developed-economy markets. This multipronged trade strategy represents a significant departure from India's earlier preference for bilateral arrangements and reflects recognition that major economies cannot remain outside the institutional frameworks shaping regional commerce without incurring costs.
The remarks also reflected growing skepticism within at least segments of India's policymaking establishment regarding the reliability and predictability of American economic policy. Mohan suggested that Washington has become increasingly volatile and difficult to rely upon for long-term economic partnership, citing shifting tariff policies and trade practices. This assessment, whether or not universally shared within the Modi government, suggests that India cannot safely structure its economic strategy primarily around American preferences or assume US protections for Indian interests. Instead, a more autonomous and Asia-centric approach to economic strategy appears increasingly prudent from this perspective. For regional observers in Southeast Asia, this reorientation could reshape how India approaches regional institutions and partnership frameworks.
The economic dimensions of Mohan's argument rest on India's substantial labour cost advantages and manufacturing potential that remains partially underdeveloped. He contended that India should market itself aggressively to Chinese manufacturers seeking to diversify production outside China due to various cost and geopolitical pressures. Indian labour costs remain substantially lower than those in developed economies and in China itself, while India possesses relatively advanced manufacturing infrastructure and technological capacity in many sectors. Chinese investment in Indian manufacturing could prove mutually beneficial, with Chinese companies gaining access to lower-cost production platforms while India gains employment, technology transfer and integration into established commercial networks.
Critical questions remain regarding how far New Delhi is prepared to move on Mohan's recommendations and whether his voice represents emerging consensus within the Modi administration or represents a minority position advocating for course correction. The government's earlier actions suggest considerable caution toward Chinese investment, notwithstanding selective approvals in recent months. Whether India will genuinely reconsider RCEP membership or pursue Trans-Pacific Partnership accession with determination remains uncertain. Nevertheless, Mohan's intervention signals that the cost-benefit analysis underlying India's earlier cautious approach is actively being questioned by influential economic policymakers. The outcome of this internal debate will carry significant implications not only for India-China relations but for the broader reshaping of Asian economic integration patterns.
