The chairman of the 16th Finance Commission, Arvind Panagariya, on December 12 said that India could welcome investments from China in certain sectors where large economies like United States and Germany conduct business with Beijing.
Responding to a question on whether he supports the suggestion from the Chief Economic Advisor Anantha Nageswaran’s Economic Survey for 2023-24 that pitched for more foreign direct investment (FDI) from China, Panagariya said, "The answer is a qualified yes... the activities from which you would want to exclude are relatively few because I don't see other countries restricting Chinese investments in a large number of sectors."
Even as the former vice-chairman of NITI Aayog prescribed caution when accepting investments and trading with potentially unfriendly nations, he said, at an event in New Delhi, that barring a few areas, India could explore doing business with Beijing.
"What I would do is look at where are the investments from potentially unfriendly countries where it could inflict damage on me probably a handful of sectors I can identify, leave those side, in the rest I would check is China investing in other countries in these particular sectors and activities, if the answer is yes, if US and Germany is taking investments from China, then I would be open to those investments as well," Panagariya explained.
Nageswaran’s Economic Survey presented in July cited India’s ballooning trade gap with China and recommended a shift to capital from the neighbouring nation to lower this import dependency.
“Choosing FDI as a strategy to benefit from the China plus one approach appears more advantageous than relying on trade. This is because China is India's top import partner, and the trade deficit with China has been growing,” Nageswaran had said in the Survey.
India’s trade gap with China widened to $85 billion in the previous fiscal from $83.2 billion in 2022-23.
Panagariya also highlighted that India needs more flexible land and labour policies to become the favoured destination for companies that are looking to diversify their supply chains.
"...Land is incredibly expensive, employment of labour incredibly difficult. We need to work on these internal policy inflexibilities," he said, adding that given India's size, the country is a natural choice for multi-national companies that are lookin to exit China.
"If anybody is going to replace China for the next 15, 20 years, it has to be India," Panagariya said.
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