An influential member of Prime Minister Narendra Modi's Economic Advisory Council has made a striking case for India to recalibrate its relationship with China, urging New Delhi to actively court Chinese investors and re-examine its position on major regional trade frameworks. Rakesh Mohan's comments represent a notable departure from India's protectionist stance of recent years, reflecting growing recognition among some policymakers that economic isolation carries its own costs as the global order undergoes profound transformation.
Mohan's argument centres on a straightforward economic calculation: India possesses abundant low-cost labour that could attract manufacturing investment from China, Asia's largest economy, particularly in labour-intensive sectors where India has natural advantages. He specifically identified textiles, garments, footwear and furniture as priority areas where Chinese capital could drive job creation and export growth. The former Reserve Bank of India Deputy Governor contends that India's current approach—restricting Chinese investment while simultaneously importing vast quantities of Chinese goods—represents a missed opportunity to harness bilateral economic complementarities for mutual benefit.
The statistical reality underpinning Mohan's position is undeniable. India's annual imports from China exceed $130 billion, yet the nation exports relatively little in return. This asymmetry creates what economists call a structural imbalance, where one economy absorbs manufactured goods while struggling to develop competitive export sectors. By strategically opening doors to Chinese manufacturers, Mohan argues, India could begin rebalancing this relationship while simultaneously building industrial capacity in sectors where it possesses competitive advantage through labour costs.
Mohan's advocacy represents a significant intellectual challenge to New Delhi's post-2020 approach toward Beijing. Following deadly military clashes on the Himalayan frontier four years ago, India substantially tightened regulatory scrutiny of Chinese investments, reflecting security concerns about strategic vulnerability. This defensive posture, though understandable given centuries of rivalry and recent military tensions, has according to Mohan's analysis inadvertently handicapped India's development prospects by closing off capital sources critical to industrial upgrading.
The timing of these remarks carries particular significance given broader shifts in global economic geography. Mohan explicitly identifies the unpredictability of American trade policy under shifting administrations as a key factor compelling India to diversify its economic partnerships. Where once New Delhi might have confidently oriented toward Washington as a stable economic partner, the experience of volatile tariff policies and changing strategic priorities has demonstrated the risks of over-reliance on any single major economy. This recognition extends to India's earlier decision to remain outside the China-backed Regional Comprehensive Economic Partnership in 2019, a choice Mohan now questions.
India's exclusion from RCEP reflected legitimate concerns about cheaper Chinese imports undermining domestic manufacturers and agricultural producers. However, Mohan contends that remaining outside the bloc ultimately weakens India's position within Asian supply chains by limiting market access and integration opportunities. By similar logic, he advocates for India to pursue membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, viewing simultaneous engagement with multiple regional frameworks as essential to maximising economic leverage and market access.
The adviser emphasises that economic engagement with China need not mean abandoning security considerations. His invocation of the principle that "economic security is as important as national security" suggests a framework for calibrated pragmatism—deepening beneficial economic ties while maintaining vigilance regarding sectors with strategic implications. This nuanced approach distinguishes his position from either wholesale embrace or blanket rejection of Chinese involvement in the Indian economy.
Mohan's advocacy for easing restrictions on business travel, expanding visa categories, and facilitating academic exchanges reflects recognition that economic relationships ultimately rest upon human connections and institutional trust. Current restrictions limiting direct flights, constraining business visa availability, and impeding people-to-people contact all serve to calcify political distance into economic separation. His call to reverse these measures suggests that relationship-building must precede or accompany commercial negotiations.
For Southeast Asian nations, Mohan's framing carries instructive implications. India's wrestling with the question of how to balance security concerns against economic opportunity reflects challenges many regional economies face in navigating US-China competition. His emphasis on "being much more part of the Asian supply chain" and developing intra-regional trade networks resonates with ASEAN discussions about deepening Southeast Asian integration independent of external powers. India's potential pivot toward greater Asian economic engagement could reshape regional dynamics by positioning New Delhi as a more active participant in Asian-centred production networks.
However, Mohan's advocacy must contend with legitimate reservations rooted in India's historical experience with China. The military conflict of 1962 and recurring border standoffs along the Himalayan frontier create deep structural tensions that economic interdependence alone cannot resolve. Moreover, China's continued restrictions on exporting critical materials like rare earths and advanced technologies suggest Beijing maintains its own strategic hedging approach toward economic engagement with India.
The broader significance of Mohan's intervention lies in how it reflects evolving calculations among Indian policymakers about the nation's optimal development path. Whether Delhi ultimately heeds his counsel remains uncertain, but his willingness to articulate a case for pragmatic engagement demonstrates that India's strategic community increasingly questions whether defensive economic postures adequately serve national interests in an era of accelerating Asian integration and declining Western economic predictability.
