NEW DELHI/HONG KONG – Recent discourses on welcoming fresh Chinese investments in India are not surprising, experts said, citing the South Asian nation’s economic and trade imperatives.

They said renewed Chinese foreign direct investment (FDI) inflow will be very positive for India, given China’s key role in the global supply chains and the benefits the investments can bring to both neighbors.

“India should invite Chinese investment; it will be win-win for both India and China,” said Sudheendra Kulkarni, who founded the Forum for a New South Asia, which promotes cooperation between India, Pakistan, and China.

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After putting curbs on investment from China for years, Indian Finance Minister Nirmala Sitharaman last week backed her chief economic adviser’s suggestion to reopen India’s door for Chinese investment.

The chief economic adviser (CEA), V. Anantha Nageswaran, said earlier in a media address that India should focus on getting more FDI from China, as it can help boost India’s export sector and also keep the trade deficit with Beijing under manageable levels.

An economic survey report for 2023-24 tabled in the Indian parliament on July 22, a day before the finance minister presented the Union Budget for fiscal 2024-25, also advocated attracting investments from Chinese companies to boost exports.

During a post-budget press conference, Sitharaman said that she did not disown the suggestion by the CEA to allow more Chinese FDI into the country.

During the budget speech in parliament, she proposed to simplify the norms surrounding FDI and overseas investments in a bid to boost capital inflows from foreign shores.

Sebastian Morris, a former professor at the Indian Institute of Management in Ahmedabad, said FDI from China will help India’s manufacturing sector to be more competitive in the international market, giving a boost to exports. But he added that it will only happen when India’s currency exchange rate is more competitive.

“Both China and India understand the nature of interconnected, interdependent and globalized world wherein flow of capital, goods and people is mutually beneficial,” said Karori Singh, former director and emeritus fellow of the South Asia Studies Centre at the University of Rajasthan in India.

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India is focusing on improving the ease of doing business to attract more FDI and boost exports, he said.

India tightened its scrutiny of investments from Chinese companies, and halted major projects from China since May 2020, amid a downturn in bilateral relations.

The curbs by Indian authorities disrupted billions of dollars of investment from China and halted some investment projects, including those of Chinese automakers BYD and Great Wall Motor. Also affected were Chinese smartphone makers Oppo, Vivo and Xiaomi. India, meanwhile, also banned more than 300 Chinese apps.

“To boost Indian manufacturing and plug India into the global supply chain, it is inevitable that India plugs itself into China’s supply chain. Whether we do so by relying solely on imports or partially through Chinese investments is a choice that India has to make,” the economic survey report stated last week.

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“Even though India is the fastest-growing G20 country and is now recording growth rates that outpace China’s, India’s economy is still a fraction of China’s,” it noted.

The report makes a case for removing restrictions on Chinese FDI in order to turn India into an export hub that can export to the Western economies, analysts pointed out.

Biswajit Dhar, a former professor at the Centre for Economic Studies and Planning at Jawaharlal Nehru University, New Delhi, said the tacit assumption behind the above argument is that China's technological prowess can improve the competitiveness of the Indian manufacturing sector.

He noted that China was able to leverage the strengths of foreign investors to increase the competitiveness of its manufacturing sector. But the question is whether India can develop an effective strategy to benefit from Chinese companies, similar to what China did vis-a-vis Western multinationals, Dhar said.

Kulkarni said there is a great scope for joint ventures between China and India in renewable energy, semiconductors,high-rise and heavy engineering, and also in digital technologies.

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Wang Shida, deputy director of the Institute of South Asian Studies at the Beijing-based China Institutes of Contemporary International Relations, said strengthening economic and trade cooperation with China is not only in line with the interests of India's industry but also important for the government in New Delhi to realize its "Made in India" vision and help the nation achieve developed country status by 2047.

He added that the Indian government and ordinary people in India are now increasingly aware that restricting economic and trade cooperation with China not only hinders the growth of India's trade but also has a negative impact on India's achievement of broader economic goals.