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Context:

India is considering easing non-tariff barriers and relaxing Chinese Foreign Direct Investment (FDI) restrictions to counterbalance the pressure from US tariffs.

Background

The US is pressing India to reduce tariffs, therefore, by improving economic ties with China, India aims to signal its ability to diversify partnerships and act as a barrier against US dominance.

The increasing trade deficit with China has prompted India to examine tracks to formalise business relations while addressing domestic industry demands.

What specific measures is India planning to ease non-tariff barriers with China?

Easing BIS Certification Requirements: The Bureau of Indian Standards (BIS) certification, which is mandatory for imports from China, may be relaxed for certain electronic and IT products.
Lifting Quality Control Orders (QCOs): Restrictions under QCOs issued by the Ministry of Commerce may be reduced for specific goods.
Resuming Flights and Visa Issuance: India is considering resuming flights and issuing visas to Chinese scholars and workers, especially those involved in infrastructure projects.
Allowing Chinese Apps: Some Chinese apps banned in 2020 may be reinstated after proper scrutiny and compliance checks.

How does India plan to handle Chinese FDI inflows despite existing restrictions?

India plans to ease its 2020 policy, which mandates government approval for investments from countries sharing land borders, including China.

Policymakers are considering allowing Chinese investments through joint ventures where Chinese companies hold minority stakes, to ensure that Chinese capital flows into India without posing risks to national security or domestic industries.

For example; Chinese automaker SAIC Motors divested its controlling stake in MG Motors, transferring ownership to an Indian consortium led by JSW Group.

Why does China want to restore trade ties with India?

Western multinationals are adopting the ‘China Plus One’ strategy to de-risk their supply chains, this leads Beijing to seek alternative markets like India. By expanding economic ties with India, China aims to neutralise the challenges and maintain its global leadership.

The "China Plus One" strategy is a business approach where companies diversify their operations and supply chains by establishing operations in countries beyond China, to reduce dependence on a single market and mitigate risks like geopolitical tensions and supply chain disruptions.

India's Trade deficit with China

In FY24, bilateral trade stood at $118.4 billion, with China surpassing the US as India's top trading partner. The trade deficit with China has continued to widen, reaching over $83 billion in 2023.
India exports mainly primary commodities to China, limiting its ability to balance trade. Market access restrictions hinder Indian exports in sectors like pharmaceuticals, and agriculture.

To address these issues, India is negotiating to ease non-tariff barriers while seeking greater access for its goods in the Chinese market.

How does India plan to balance Chinese imports and investments?

India to promote Chinese investments in sectors where local value addition is possible; manufacturing and infrastructure.
India will impose anti-dumping duties and additional safeguard measures to protect domestic industries from cheap Chinese imports.

Larger Goals

Strengthening economic relations with China demonstrates India’s commitment for a multipolar world.
By improving engagement with China, India aims to counter US attempts to dictate terms on trade and tariffs.
Enhanced economic cooperation would promote regional stability along the India-China border.

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Source:

INDIANEXPRESS

PRACTICE QUESTION

Q.How does the concept of "trade diplomacy" help India navigate the complexities of US tariffs and global trade dynamics? 150 words