A senior economist within Prime Minister Narendra Modi's administration has publicly called for India to fundamentally reorient its economic strategy toward China, arguing that greater commercial engagement and openness to Chinese investment represent pragmatic responses to an increasingly uncertain global landscape. Rakesh Mohan, serving as a part-time member of Modi's Economic Advisory Council, outlined this perspective during remarks on Thursday, July 16, challenging the protective stance New Delhi has maintained since the deadly 2020 border clashes between Indian and Chinese troops.
Mohan's intervention carries particular weight given his former position as Deputy Governor of the Reserve Bank of India and his current influence on economic policy circles close to the prime minister. Rather than erecting barriers to Chinese capital flows, he contends that India should capitalise on its substantial labour cost advantages by actively attracting manufacturers from Asia's largest economy. The labour-intensive sectors of textiles, garments, footwear and furniture represent obvious targets for such investment, he suggested, sectors where Indian production could help absorb surplus Chinese capital while generating employment across the country.
The adviser framed this proposal within a broader critique of India's existing trade imbalance with China, one of the most asymmetrical bilateral commercial relationships in the developing world. India imported more than $130 billion worth of Chinese goods during the fiscal year ending March, yet struggles to find comparable markets for its own exports to Beijing. Rather than accepting this as inevitable, Mohan emphasised the importance of detailed analytical work to identify which Chinese import categories represent opportunities for Indian competition, transforming the current deficit into a more balanced partnership.
These comments represent a striking departure from the economic nationalism that has characterised New Delhi's China policy since the 2020 military confrontation, when India significantly tightened scrutiny of Chinese investment proposals and excluded certain sectors from foreign ownership. The broader context involves India's 2019 decision to remain outside the China-backed Regional Comprehensive Economic Partnership, a trade agreement encompassing roughly one-third of global commerce. That decision reflected deep anxieties within India's agricultural and manufacturing lobbies about being swamped by cheaper imports, concerns that political leaders felt obliged to respect despite economic arguments for participation.
Mohan's willingness to challenge this consensus reflects a more subtle calculation about India's long-term positioning within Asian economic structures. The framing of his argument reveals a fundamental shift in how some policymakers assess India's options: the assumption that the United States represents a stable, dependable partner for India's economic future has eroded considerably. Trump's tariff policies and their cascading effects on global trade have prompted reassessment among Indian strategists about whether Washington truly offers the kind of reliable partnership that would justify New Delhi maintaining an adversarial stance toward Beijing on economic matters.
This reassessment does not imply abandonment of India's strategic autonomy or its security concerns regarding China. The historical context remains relevant: India and China fought a war in 1962 and continue to experience recurring military confrontations along their extensive disputed frontier in the Himalayas. Over the past year, however, both countries have pursued cautious steps toward normalisation, including the restoration of direct civil aviation links, resumption of business visas for select categories and selective approvals of Chinese investments in designated sectors such as electronics manufacturing. These measures suggest a mutual recognition that perpetual confrontation serves neither country's economic interests.
Mohan acknowledged the genuine tension between economic engagement and security concerns by emphasising that economic security deserves equal weight alongside military security considerations. China continues to maintain restrictions on critical raw materials and advanced technologies, particularly rare earth elements essential for electronics and green energy applications, while India retains limitations on certain investment categories and business activities. Rather than viewing these mutual restrictions as obstacles to engagement, Mohan advocated for what he termed pragmatic management of the relationship, one accepting certain constraints while progressively expanding the commercial space where cooperation can flourish.
Beyond investment flows, Mohan pressed for substantial liberalisation of people-to-people interactions, arguing that increased business travel, expanded academic collaboration and restoration of additional flight routes would strengthen the foundation for deeper economic integration. The current architecture of restrictions, in his view, represents an overcautious hangover from the 2020 crisis rather than a calibrated response to genuine ongoing threats. By contrast, facilitating increased mobility for academics, business professionals and students would help rebuild the commercial networks and mutual understanding necessary for sustained economic cooperation.
Mohan's most controversial proposal involves reconsidering India's stance on major regional trade agreements. He specifically urged New Delhi to reconsider its decision to stay outside RCEP, arguing that exclusion from the agreement undermines India's integration into Asian supply chains that will drive much of the world's economic growth through the coming decade. Additionally, he advocated for India to seek membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the successor agreement to the Trans-Pacific Partnership from which the United States withdrew under the previous Trump administration. Participation in both frameworks would, in his analysis, strengthen India's manufacturing competitiveness and expand export opportunities to Western markets by embedding Indian producers within Asian production networks.
The political implications of Mohan's intervention extend beyond economic statistics or trade flows. His willingness to articulate these arguments suggests that segments within Modi's inner circle have concluded that the current approach to China, maintained since 2020, increasingly appears as a constraint on India's own development rather than an expression of principled strategic choice. The US pivot toward greater protectionism and strategic competition with China, rather than offering India protective cover, now threatens to isolate New Delhi from the economic dynamism of the Asian region. Mohan's framing positions economic reorientation not as capitulation but as necessary adaptation to geopolitical realities.
For Southeast Asia and the broader region, these signals from within Modi's economic advisory circle carry significant implications. India's engagement with RCEP and deeper Chinese economic partnerships would substantially reshape regional trade patterns and investment flows. Malaysia and other Southeast Asian nations, already integrated into these frameworks, would encounter a substantially different India as trading partner, investor and technological collaborator if New Delhi were to reverse its current stance. The question remains whether Mohan's arguments reflect emerging consensus within Modi's government or represent the thinking of a forward-leaning minority within the administration whose actual influence over China policy may prove limited.
