An influential adviser to Prime Minister Narendra Modi is challenging India's defensive economic posture toward China, arguing that New Delhi should actively court greater investment from Beijing and revisit its rejection of major regional trade agreements. Rakesh Mohan, a part-time member of Modi's Economic Advisory Council, contends that India's traditional reliance on protectionist policies has become counterproductive in a shifting geopolitical landscape where the United States has become an increasingly unreliable economic partner. Speaking in mid-July, Mohan advocated for India to harness its competitive advantage in labour-intensive manufacturing by opening doors to Chinese capital, particularly in textiles, garments, footwear and furniture production.
The intervention marks a significant rupture from New Delhi's official stance over the past four years. Following the 2020 border clashes that killed scores of soldiers, India substantially tightened scrutiny over Chinese investment and adopted a more protective economic approach. Before those tensions even erupted, India had controversially stayed out of the China-backed Regional Comprehensive Economic Partnership in 2019, citing concerns that cheaper imports would devastate domestic manufacturers and agricultural sectors. Mohan's remarks suggest that at least some segments within the Modi government's economic circles are questioning whether continued isolation from China serves India's long-term development interests.
The timing of these comments reflects genuine anxiety within Indian policymaking circles about the stability of the Western-led economic order. Mohan explicitly highlighted that President Trump's unpredictable tariff policies have rendered the United States a less dependable long-term partner than it appeared even a few years ago. This assessment resonates beyond individual advisers—it reflects a broader recognition among emerging-market policymakers that diversifying economic partnerships is no longer optional but essential. For Malaysia and other Southeast Asian nations watching this debate, India's economic recalibration could reshape regional supply chains and trade patterns significantly.
Modifying India's China strategy faces formidable obstacles rooted in genuine security concerns and domestic political sensitivities. The 1962 Sino-Indian war and recurring military standoffs along the disputed Himalayan border have embedded deep mistrust in Indian strategic culture. Border tensions have flared repeatedly, most recently in 2020, making any embrace of closer economic ties domestically controversial. Yet Mohan's framing of the challenge—describing it as a need to be "pragmatic"—signals recognition that economic security cannot be entirely separated from national security in an integrated global economy. His argument that India already imports over $130 billion in Chinese goods annually suggests that isolation has not eliminated dependence, only prevented India from capturing productive opportunities that deeper engagement might unlock.
Mohan's specific proposals centre on facilitating manufacturing partnerships and easing the mechanics of business interaction. He called for expanding business visas, increasing academic collaboration, restoring direct flights between the countries, and carefully selecting sectors where Chinese investment would complement rather than displace Indian industry. These incremental steps have in fact already begun—India has restored direct flights, resumed issuing business visas, and recently approved selected Chinese investments in electronics manufacturing. The adviser's suggestions imply that this process should accelerate substantially rather than remain frozen at current cautious levels.
The trade agreement question looms particularly large in Mohan's recommendations. His argument for reconsidering India's RCEP rejection focuses on the reality that Asia will generate most of the world's economic growth over the coming decade, and that India risks being sidelined from lucrative supply chains if it remains outside major regional frameworks. He further advocates for India to pursue membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, arguing that dual membership in both agreements would provide India access to diverse markets while anchoring it more deeply in Asian economic architecture. These suggestions directly counter India's existing strategy, which has treated RCEP as a threat rather than an opportunity.
China itself continues sending mixed signals about economic engagement. While gradually approving selected Indian business ventures and resuming diplomatic channels, Beijing still restricts access to critical technologies and materials, including rare earth elements essential for modern manufacturing. This asymmetry reflects China's awareness of technological leverage—it remains willing to invest in India but on terms that preserve Chinese advantages in strategic sectors. India maintains its own restrictions on Chinese investment in defence-adjacent industries, creating a mutual calculus of managed openness rather than complete liberalisation.
For regional economies like Malaysia, India's potential economic reorientation toward Asia carries substantial implications. An India more deeply integrated into regional supply chains could create both opportunities and competitive pressures. Indian manufacturers competing for similar niches in textiles, electronics assembly and labour-intensive sectors could either collaborate with or displace Malaysian producers depending on how trade agreements are structured. Moreover, India's repositioning reflects a broader recognition across Asia that economic integration, managed carefully, need not compromise security interests—a principle that applies as much to Malaysia's own balancing act between major powers.
Modern India-China economic engagement remains dramatically constrained compared to their combined potential. Trade volumes, while substantial at over $130 billion annually, remain modest relative to the countries' economic sizes and could expand significantly if investment barriers diminished. The fact that Mohan felt compelled to publicly advocate for this position suggests internal debate remains genuinely contested within Indian policy circles. Whether pragmatist voices ultimately prevail over security hawks will significantly shape not just India's economic future but the broader contours of Asian regionalisation.
The adviser's arguments rest ultimately on a conviction that India cannot achieve middle-income country status while maintaining economic isolation from Asia's largest economy and its regional supply networks. His emphasis on needing to "be much more part of the Asian supply chain" reflects recognition that India's demographic dividend and manufacturing potential will only translate into prosperity if integrated into functioning regional production systems. Whether Modi's government ultimately acts on such advice remains uncertain, but the very prominence of such arguments indicates that India's relationship with China is entering a new phase of internal Indian deliberation about costs and benefits.
