An influential member of Prime Minister Narendra Modi's Economic Advisory Council has made a striking case for India to recalibrate its approach toward China, suggesting New Delhi should actively court Chinese manufacturers and reconsider its rejection of major regional trade partnerships. Speaking in mid-July, Rakesh Mohan argued that India's long-held reservations about Chinese capital flows should give way to pragmatic economic engagement, particularly as the reliability of Western trading partners comes into question.
Mohan's intervention carries particular significance because it directly contradicts the protectionist trajectory India has followed since 2020, when deadly border clashes prompted New Delhi to impose stricter screening of investments from its northern neighbour. The remarks suggest that at least segments of India's policy establishment are contemplating a significant shift in strategy. Rather than maintaining defensive barriers, Mohan advocates deploying India's competitive advantage in labour costs to attract manufacturing investment from China's largest companies, particularly in labour-intensive sectors including textiles, apparel, footwear and furniture production.
The economic logic underpinning his argument centres on addressing a glaring imbalance in bilateral trade. India currently imports more than $130 billion worth of Chinese goods annually, according to figures for the fiscal year ending March, while exporting comparatively little to Beijing. This structural deficit, Mohan contends, reflects India's failure to identify and develop competitive products rather than an inherent trade relationship problem. By welcoming Chinese manufacturers to establish operations within Indian territory, the adviser suggests New Delhi could simultaneously address unemployment concerns, develop manufacturing expertise and redirect trade flows in more balanced directions.
The geopolitical backdrop lending urgency to Mohan's position involves Washington's unpredictable trade policies under the Trump administration. The proliferation of American tariffs and shifting trade strategies have raised questions among Indian policymakers about whether relying on the United States as a long-term economic anchor remains viable. This concern resonates particularly strongly across Southeast Asia, where countries similarly grapple with overdependence on American market access. For Malaysia and other regional nations, India's potential reorientation toward Asian supply chains carries implications for competitive positioning and investment flows within the continent.
Mohan's call for reconsidering India's 2019 decision to withdraw from the China-backed Regional Comprehensive Economic Partnership represents perhaps his most provocative recommendation. India had declined to join RCEP citing concerns that cheaper Chinese imports would devastate domestic manufacturers and agricultural producers. Yet Mohan argues that remaining outside Asia's largest trade grouping exacts costs that now outweigh the original concerns. He specifically advocates India pursue membership in both RCEP and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a move that would substantially deepen India's integration with regional production networks.
The practical steps Mohan proposes include immediate relationship-building measures: expanding business visa categories, increasing direct flight connections, broadening academic collaboration and facilitating people-to-people exchanges. These initiatives aim to rebuild trust relationships fractured during the 2020 border crisis. Notably, some progress has already occurred, with India recently restoring direct flights, resuming business visas and approving select Chinese investments in electronics manufacturing. These incremental steps suggest that cautious rapprochement is already underway, even without formal policy reversal.
Mohan frames his position around what he terms "economic security," arguing this deserves parity with traditional national security concerns. This framing proves particularly relevant for Malaysia and the broader Southeast Asian region, where countries equally weigh military considerations, investment flows and supply chain resilience. The adviser's emphasis that engagement with China need not mean abandoning relationships with Western economies provides a template for Southeast Asian nations seeking to maintain multiple partnerships without forced alignment.
However, Mohan's recommendations exist within significant constraints. China continues restricting exports of critical materials and advanced technologies, including rare earth elements essential for modern manufacturing. Simultaneously, India maintains investment restrictions in sensitive sectors. These reciprocal limitations mean that even deeper engagement would proceed within carefully bounded parameters. The adviser acknowledges these realities by emphasising the need for pragmatism rather than unconstrained opening.
The timing of these comments reflects broader Asian rebalancing underway across the region. Southeast Asian governments similarly confront questions about optimal positioning amid US-China competition and shifting trade architectures. India's potential pivot toward RCEP and deeper Asian supply chain participation would reshape competitive dynamics for manufacturing investment and export markets. For Malaysia, already deeply enmeshed in regional production networks, India's increased manufacturing capacity and market access could present both competitive challenges and partnership opportunities.
Mohan's arguments ultimately rest on the proposition that India's geographic position and labour-cost advantages position the country as an essential component of next-decade Asian prosperity. By voluntarily excluding itself from major regional trade agreements and restricting Chinese investment, he contends India diminishes its own growth prospects while missing opportunities to serve as an alternative manufacturing hub. This reasoning has begun gaining traction among other Indian economists and business leaders concerned about the country's declining share of global manufacturing.
The question remains whether Modi's government will act on these recommendations. Political constraints and domestic manufacturing lobbies retain considerable influence over trade policy. Nevertheless, that a prominent voice within the prime minister's own advisory structures is articulating this position signals that reconsideration is underway. For Southeast Asia, the outcome will substantially influence regional manufacturing competitiveness, investment patterns and the architecture of Asian economic integration over the coming decade.
