Time to engage smartly with China: Push premium Indian exports

Last week, Piyush Goyal stated that he sees a calibrated rebuilding of India's economic engagement with China. New Delhi and Beijing are in active dialogue to stabilise gains, in the context of surging bilateral trade along with strategic friction. Economic relations pose their own set of concerns for India - the trade balance becoming horribly lopsided and market access in areas where India has the comparative advantage. On its part, India places Chinese investment under tight scrutiny and has erected protective barriers in critical sectors to discourage overdependence on Chinese imports. But both countries share a common interest in globalisation and face similar economic vulnerabilities.

These are the building blocks for an economic dialogue to put ties on a stronger footing than before. Rebalancing trade is a huge area and can sustain constructive negotiation. India's PLIs can be extended to upstream components now imported from China. Supply chains can be developed with Chinese investments in India to increase reciprocal exposure. Investment screening can be used judiciously to encourage non-controlling capital inflows from China. Work on lowering Chinese entry barriers to IT, pharma and farm goods. Secure preferential supply of rare earths, magnets and technology components from Beijing during export restrictions.

China is offering to import more premium Indian goods. The opportunity should not be passed up. Resumption of travel and logistics needs work on easing visas and encouraging business and technical exchanges. Chinese concerns over discriminatory treatment in public procurement and infra project contracts need to be addressed. In fact, public procurement has actually had a perverse effect of subsidising excess Chinese manufacturing capacity by allowing Indian bidders to continue importing goods from China. Any recalibration will have to result in a fairer outcome. Policy frameworks on both sides are highly nuanced. They sure can benefit from a shared vision of the future.