Why Economic Survey 2024 Wants Modi Govt to Rethink its China Policy 

Futility of Trade Restrictions The Economic Survey cites a study done by Bank for International Settlement (BIS) to show the ineffectiveness of protectionist tariffs against China’s mastery over large-scale manufacturing.  Vietnam, which has improved its standing in the global manufacturing landscape ever since China+1, has improved its trade with both US and China in the past few years. Between 2017 and 2023, US imports from Vietnam more than doubled from $46 billion to $114 billion. At the same time, Vietnam’s imports from China jumped from $58 billion to $111 billion. Similar is the case with Mexico. “…the US remains reliant on Chinese inputs. In fact, the rise in trade through Mexico and Vietnam is a result of Chinese firms re-routing their supply through these countries (or by locating themselves in these countries),” the economic survey notes. Dominance over Energy Transition In critical areas such as green energy and electric vehicles (EVs), China’s dominance is so overwhelming that it is hard to move ahead with technology transition without taking China’s help. In the case of India’s renewable energy programme, its dependence on imported raw materials puts it in a “vulnerable” position. Globally, China enjoys 60 per cent dominance in sourcing rare earth minerals and 79 per cent in graphite. In terms of processing these critical materials, China is an unchallenged winner. The survey asks the Modi government to “recognise and deal with challenges posed by dependence on China for critical minerals, which are crucial raw materials needed for E-Mobility and renewable energy generation.” Way Forward Shein was one of the more popular Chinese companies that was banned by India in 2020. But recent reports suggest that the fashion retailer might make its way back to the Indian market via a licensing deal with Mukesh Ambani’s Reliance Retail. Similarly, JSW Group recently took a controlling stake in Chinese EV maker MG Motors’ operations in India. If the suggestions made by Economic Survey 2024 are taken forward, it is likely that we will get to see more of such deals wherein Chinese capital and goods will enter India in its own desi avatar.At present, China accounts for only 0.37 per cent ($2.5 billion) share of total FDI equity inflow reported in India from April 2000 to March 2024.Now, the ball is in PM Modi’s court to strike a balance between Chinese investments, India’s global trade interests and concerns around territorial integrity.

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