An influential economic adviser to Prime Minister Narendra Modi has proposed a significant recalibration of India's stance towards China, advocating for substantially expanded commercial engagement at a moment when geopolitical alignments are undergoing fundamental reassessment. Rakesh Mohan, serving as a part-time member of Modi's Economic Advisory Council, contends that India should actively encourage Chinese capital flows into labour-intensive sectors including textiles, garments, footwear and furniture, while reconsidering its exclusion from major regional trade frameworks. His intervention marks a notable departure from New Delhi's post-2020 approach and reflects calculations within India's policy establishment that economic pragmatism must outweigh strategic caution in navigating an increasingly unpredictable international order.
Mohan's core argument rests on an unflinching assessment of India's current economic position relative to China. India currently imports more than $130 billion annually in Chinese goods whilst exporting comparatively little, creating a structural imbalance that constrains India's own industrial development and export potential. Rather than imposing protectionist barriers—the approach adopted following the 2020 border violence—Mohan suggests India should exploit its competitive advantages in labour costs to attract Chinese manufacturing relocations. This reframing positions foreign direct investment not as a threat to domestic industry but as a mechanism for employment generation and export capacity building, particularly in value chains where India lacks existing competitive depth.
The timing of Mohan's public intervention carries considerable significance within India's internal policy debates. Following devastating military clashes along the Line of Actual Control in 2020, India substantially increased regulatory scrutiny of Chinese investment and acquisitions, effectively closing doors that had previously remained open. Simultaneously, New Delhi declined participation in the Regional Comprehensive Economic Partnership in 2019, citing concerns that deeper integration would expose Indian farmers and manufacturers to cheaper Chinese competition without corresponding market access benefits. Mohan's current advocacy implicitly challenges both those decisions, suggesting they reflected an incomplete understanding of India's structural economic requirements and long-term development trajectory.
Critically, Mohan emphasises that economic security represents a dimension of national security rather than its opposite. This formulation attempts to reframe the debate within Indian policymaking circles, moving away from a zero-sum framework where Chinese engagement necessarily compromises Indian interests. Under his logic, India's growing import dependence on Chinese goods—now structural and difficult to reverse—makes isolation impractical and potentially self-defeating. Instead, India should negotiate this reality by attracting reciprocal investment flows that generate employment, tax revenue and technological transfer, thereby converting a trade deficit into a vehicle for development.
The advocate also identifies shifting American economic policy as a crucial factor altering India's strategic calculus. With the Trump administration deploying aggressive tariff policies and demonstrating unpredictability in trade relations, Mohan contends that India cannot reasonably depend on Washington as a stable, long-term economic partner. This assessment reflects concern within sections of India's business and policy communities that the United States increasingly subordinates trade relationships to immediate political objectives, creating uncertainty that makes India's economic planning inherently difficult. By contrast, China's approach to regional economic integration, whilst undoubtedly self-interested, offers greater predictability and clearer frameworks for participation.
Mohan calls for comprehensive easing of bilateral business restrictions, including expansion of business visa categories, restoration of direct airline connectivity, increased academic collaboration and enhanced people-to-people exchanges. These practical measures acknowledge that deeper trade integration requires institutional infrastructure and social connections that sustained suspicion inevitably corrodes. The severing of flight connections and restriction of business visas following border tensions created cascading complications across Indian and Chinese business communities, raising transaction costs and diminishing commercial incentives for engagement that might otherwise develop naturally through market mechanisms.
Central to Mohan's vision is India's integration into broader Asian supply chains that are becoming increasingly interconnected independent of Western participation. He argues that the next decade of global economic growth will centre on Asia, with Southeast Asia and East Asia as primary engines, making India's exclusion from regional trade arrangements a strategic liability rather than a prudent defence. By remaining outside RCEP and maintaining distance from deepening Asian integration, India risks marginalisation from value chains precisely where competitive opportunities are emerging and where India's labour cost advantages could prove decisive.
The adviser specifically urges reconsideration of India's 2019 decision to decline RCEP participation. Original Indian concerns centred on the prospect of cheap Chinese and other regional imports overwhelming domestic producers lacking sufficient competitive advantage. Yet Mohan's perspective suggests these fears, whilst understandable, reflect an essentially defensive posture that ultimately impoverishes Indian consumers, restricts market opportunities for Indian exporters and reinforces the very import dependence that such protectionism aimed to constrain. By remaining outside RCEP, India forfeits negotiating influence within the framework itself and loses capacity to shape rules governing regional commerce.
Mohan simultaneously advocates Indian accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which represents an alternative institutional framework for regional integration. Membership in CPTPP would provide India with direct access to developed market economies including Japan, Australia and Canada whilst creating pathways for Indian goods to reach Western consumers through the supply chain routes that CPTPP members constitute. This represents a strategy of simultaneous engagement rather than choosing between Asian and Western economic orbits—India would deepen relationships within Asia whilst simultaneously maintaining Western connections through CPTPP participation.
The historical context of India-China relations—including the 1962 war and recurrent military standoffs along the Himalayan frontier—necessarily shapes reception of Mohan's arguments. Strategic suspicions remain deeply embedded within India's security establishment and significant portions of the Indian electorate, making wholesale reversal of post-2020 policies politically challenging. Recent developments, however, suggest gradual thawing: India has resumed direct flights with China, reinstated business visa categories and approved selected Chinese investments in electronics and other sectors deemed less strategically sensitive than defence or critical infrastructure.
China's own approach remains calibrated and selective rather than reciprocally expansive. Beijing continues restricting exports of critical materials including rare earth elements whilst maintaining careful oversight of technology transfer. This asymmetry suggests that genuine deepening of economic engagement will require Chinese flexibility alongside Indian openness, an outcome far from guaranteed regardless of rhetorical shifts within either government. Nevertheless, Mohan's intervention signals that portions of India's policymaking establishment believe the current trajectory of estrangement serves neither country's economic interests and that controlled, pragmatic engagement represents a more sophisticated strategy than indefinite strategic competition.
The implications for Southeast Asia and the broader region are substantial. India's engagement depth within Asian supply chains and regional trade frameworks directly affects how Southeast Asian economies position themselves between competing great power alignments. Greater Indian participation in RCEP and other regional mechanisms would expand the region's internal dynamism and reduce dependence on any single power centre. Conversely, Indian isolation strengthens alternative power configurations and potentially accelerates bifurcation of the Asian economy into competing blocs that would ultimately diminish regional prosperity and autonomy.
