New Delhi's approach to economic engagement with China may be shifting, according to remarks from Rakesh Mohan, a part-time member of Prime Minister Narendra Modi's Economic Advisory Council. Speaking this week, Mohan has made a case for India to substantially recalibrate its relationship with Beijing by opening doors to Chinese capital and reconsidering previous decisions to stay out of key regional trade frameworks. His comments come at a moment of geopolitical flux, as traditional relationships between India and Western powers face strain amid changing trade policies and strategic calculations.
Mohan's argument hinges on a pragmatic reassessment of India's economic interests in an era of shifting international alignments. Rather than maintaining the protective barriers that New Delhi has erected since deadly 2020 border clashes between Indian and Chinese troops, he suggests India should actively court Chinese manufacturers to establish operations in labour-intensive sectors including textiles, garments, footwear and furniture production. By leveraging India's competitive wage advantage, such investment could simultaneously create substantial employment opportunities and expand the nation's export capacity, particularly in sectors where Chinese companies already possess sophisticated supply chain networks and market access.
Central to Mohan's thesis is the observation that India's current trade relationship with China remains deeply asymmetrical. New Delhi imports more than $130 billion in Chinese goods annually while exporting comparatively little, creating a significant structural imbalance. Rather than viewing this disparity through a purely defensive lens, Mohan frames it as an opportunity for strategic repositioning. By identifying sectors where Indian producers could compete within Chinese import demand, India might transform what has historically been a one-directional flow into a more balanced commercial partnership that benefits both economies.
These recommendations carry particular weight given Mohan's former role as Deputy Governor of the Reserve Bank of India, lending institutional credibility to his analysis. More significantly, his public statements challenge the prevailing orthodoxy that has dominated Indian economic policy since the 2020 border conflict. That incident prompted New Delhi to implement stricter oversight of Chinese investment and contributed to India's 2019 decision to withdraw from the China-backed Regional Comprehensive Economic Partnership, the mega-regional trade agreement that now encompasses most major Asian economies. Mohan's intervention suggests that elements within Modi's economic policymaking apparatus may be reconsidering whether these defensive postures serve India's longer-term interests.
The timing of these comments reflects broader anxieties about the reliability of the United States as a consistent economic partner. With the Trump administration's trade policies creating uncertainty and protectionist pressures increasing, some Indian policymakers evidently question whether New Delhi can indefinitely depend on Western markets as engines of growth. This concern gains particular salience as the United States pursues policies that appear to prioritize bilateral arrangements and strategic competition with China, potentially at the expense of India's own economic aspirations. In this context, deepening Asian economic integration emerges not as a abandonment of Western ties but as essential diversification.
Mohan's analysis specifically addresses the tension between economic security and national security, concepts that have often been conflated in Indian discourse since the border crisis. He contends that India can maintain security concerns while simultaneously pursuing economic rationality in its China engagement. This distinction matters considerably for Southeast Asian nations that themselves navigate complex relationships with Beijing. For Malaysia and its neighbours, India's recalibration could signal broader shifts in how major democracies approach China economically, potentially affecting regional investment flows, supply chain restructuring and trade dynamics across the Indo-Pacific.
The adviser has called for tangible easing of bilateral commercial restrictions, including expanded business visa availability, restored air connectivity, and enhanced academic collaboration. These measures would facilitate the people-to-people contact and business familiarity necessary for meaningful economic integration. Notably, some progress has already occurred, with India recently approving selected Chinese investments in electronics and restoring direct flights after previous suspensions. These incremental steps suggest that even as security sensitivities persist, economic pragmatism is gradually reasserting influence over bilateral calculations.
Mohan's case for India reconsidering its RCEP exclusion represents perhaps his most provocative suggestion. When India opted out of the agreement in 2019, concerns centred on fears that cheaper Chinese and Southeast Asian imports would devastate Indian manufacturing and agriculture. However, Mohan argues that non-participation itself creates costs by leaving India outside the emerging architecture of Asian supply chains. By remaining external to RCEP, India sacrifices opportunities to influence its rules and integrate its producers into networks that increasingly define regional commerce. Similarly, he advocates for Indian membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, viewing integration into multiple trade blocs as essential rather than threatening.
For Malaysia and the broader ASEAN community, India's potential repositioning carries significant implications. An India more deeply embedded in Asian supply chains and more receptive to Chinese investment could reshape competitive dynamics across the region. Indian businesses might emerge as more formidable competitors in manufacturing sectors, while Indian demand for Southeast Asian inputs could expand. Simultaneously, if India gains greater access to Chinese supply chains and technology, this could accelerate Indian manufacturing capabilities in ways that both complement and compete with ASEAN production networks.
The geopolitical underpinning of Mohan's argument deserves emphasis. His comments essentially acknowledge that the post-Cold War order guaranteeing American economic benevolence has fundamentally transformed. In this new environment, Indian prosperity depends on integrated participation in the Asian economic system rather than positioning itself as either aligned with the West against China or locked in zero-sum rivalry. This represents a significant philosophical departure from much Indian policy discourse over the past decade.
However, substantial obstacles remain to realizing Mohan's vision. China continues restricting critical materials exports, including rare earths essential for modern electronics and green technologies. India maintains its own investment restrictions and business limitations reflecting residual security concerns. Most crucially, the underlying geopolitical tensions that produced the 2020 border clashes persist, with military standoffs continuing to punctuate the Himalayan frontier despite recent diplomatic improvements. Whether bilateral economic deepening can occur amid unresolved territorial disputes represents the fundamental challenge facing both nations.
Moreover, Mohan's recommendations will likely face domestic political resistance in India. Manufacturing sectors that perceive Chinese competition as existential threats, agricultural constituencies worried about import surges, and nationalist political factions all maintain incentives to oppose deepened engagement with Beijing. The fact that such arguments require articulation from high-level advisory council members suggests they remain contested within Indian policymaking circles rather than representing consensus positions.
Nevertheless, Mohan's public statements signal that serious Indian policymakers recognize fundamental economic logic: India cannot indefinitely maintain high barriers against the world's second-largest economy while simultaneously seeking integration into Asian supply chains and stable global trade. As the international environment continues shifting, New Delhi's calculation of costs and benefits associated with Chinese engagement appears to be evolving, though implementation of any policy reorientation will likely proceed gradually and unevenly.
