Chinese dependence

India has difficult choices

The Union government has decided to expedite and streamline visa approval for Chinese technicians involved in manufacturing, which must be welcomed. The initiative is expected to ease complications, particularly for the 14 sectors under the production-linked incentive (PLI) schemes. According to new norms, which came into effect this month, after a company makes the application, it will be forwarded to relevant government departments for approval and they will have to send their response to the Union home ministry in 28 days. It is expected that the overall process will take 30-45 days and the business e-visa will be valid for six months. Several businesses had argued that visa-related matters were affecting production and productivity. It is to be hoped that the initiative will address such concerns and that visas will also be issued for companies not within the purview of PLI schemes.

While the government has addressed the visa problem, another big issue being debated is that of Chinese investment, particularly in the context of remarks made in the latest Economic Survey. Given China’s dominant position in global supply chains, it is perhaps impossible for India to become an integral part of these networks independently. The pervasive reach of Chinese manufacturing means that any effort by India to enhance its role in global supply chains will inevitably intersect with Chinese interests and operations. The visa issue also clearly underscores this point. Given the situation, India has two options — integrate more deeply into China’s supply chains, which can increase import, or promote foreign direct investment (FDI) from China in the manufacturing sector. The Survey favoured the latter, citing examples of Brazil and Turkey, and argued that encouraging FDI would boost domestic manufacturing and thereby enhance export. Chinese investment in India, resulting in increased production, can also help reduce the trade deficit, bring in technology, enhance managerial skills, and lower production costs. However, these benefits come with considerable concern and risks. The influx of Chinese capital and influence may pose risks, for example, to data security, which could compromise national security and economic sovereignty by creating information vulnerabilities.

The government mandated in 2020 that investment from countries sharing land borders with India would need its approval. However, as things stand, India’s reliance on imported inputs from China for critical sectors such as semiconductors, automobiles, and telecommunications is increasing, with the trade deficit reaching a staggering $85 billion in 2023-24. Besides, the trade figures alone do not provide a complete picture, as Chinese firms could be rerouting their supplies through countries such as Vietnam. Thus, dependence on China, coupled with current regulations and national security concerns, creates a highly complex environment. Given the geopolitical situation, it would not be easy for the government to simply open the door for Chinese investment. However, as the visa decision underscores, it is also true that China cannot be ignored if India has to integrate into the global value chain in any meaningful manner, which is critical to boosting manufacturing. There are no easy answers here. The Economic Survey must be commended for starting the debate, which will hopefully help find an acceptable solution.