"In Our Interest": PM's Economic Adviser On Normalising Ties With China

A key member of the Economic Advisery Council to the Prime Minister has underlined the complexities of India's economic engagement with China. Sanjeev Sanyal said that while the trade deficit remained a challenge, it was neither practical nor possible to cut the country out of the equation.

Mr Sanyal was speaking at the NDTV Profit GST Conclave on Tuesday. He was asked about the prospects of normalising relations with Beijing and what impact such a move could have on the Indian economy, particularly in light of the country's significant trade deficit with China.

Mr Sanyal pointed out that restrictions such as Press Note 3 and other measures taken after the Galwan clash continue to shape bilateral trade. "The trade deficit with China has been an issue for a while, and of course, we have things like Press Note 3 and so on, various restrictions we had put in place after Galwan. So we will have to see how this pans out," he said.

Press Note 3 of 2020, issued on April 17, made government approval mandatory for any FDI from countries sharing a land border with India to curb "opportunistic takeovers" during the Covid-19 pandemic.

Mr Sanyal then went on to highlight China's central role in global manufacturing. He said that India's ambitions to expand its industrial base cannot overlook this reality. "While as a country we may not want to join things like RCEP, it is also true that we cannot wish China away. They are the world's largest industrial power."

He added, "Even if we want to become an industrial power, a lot of the inputs will come from there for the time being. And maybe even into the longer future, there will be segments where there will be an important supplier."

As an example, Mr Sanyal drew attention to India's pharmaceutical sector, which relies heavily on Chinese raw materials. "We can be a great generic manufacturer of medicines, but the inputs come from China," he said, stressing that the idea of complete self-reliance in every sector is unrealistic. He said that the "idea that we can protect everything and manufacture every single thing at home may not quite work out."

Mr Sanyal noted that while India may aim to safeguard "the key chokeholds we may want to protect," the reality is that "you cannot wish away China from the equation."

Concluding his remarks, Mr Sanyal said that closer engagement with China may serve India's long-term interests. "So, a normalisation with China over time is in our interest as well," he said.