India-China Trade Tensions and Opportunities Amid Modi Adviser’s Call for Closer Ties

India’s economic adviser has called for expanded trade and investment with China, despite ongoing border disputes and geopolitical friction, according to multiple reports. The push comes as both nations navigate a complex relationship marked by strategic competition and interdependence.

Adviser’s Remarks Highlight Economic Interests

During a closed-door meeting with business leaders in New Delhi, Principal Economic Adviser Krishnamurthy Subramanian emphasized the need for “pragmatic engagement” with China, citing the potential for increased bilateral trade to reach $50 billion annually. “Economic cooperation should not be hostage to geopolitical tensions,” Subramanian stated, according to a government press release.

This marks a shift from previous official rhetoric, which has often prioritized diversifying trade away from China amid concerns over supply chain security. However, Subramanian’s comments align with broader government efforts to attract foreign investment, particularly in infrastructure and technology sectors.

Historical Context of India-China Trade

India-China trade reached a record $110 billion in 2023, with China accounting for 16% of India’s total trade, according to the Ministry of Commerce. However, the relationship remains imbalanced, with India’s trade deficit with China exceeding $50 billion in 2023, as reported by the Reserve Bank of India.

Despite these figures, Chinese investment in India has been limited by regulatory hurdles. As of 2024, China’s cumulative investment in India stands at $12 billion, compared to $65 billion from the United States, according to data from the Department for Promotion of Industry and Internal Trade.

Strategic and Economic Considerations

The call for closer ties coincides with India’s efforts to balance its relationships with both China and the U.S. While India has deepened defense partnerships with Washington, it remains dependent on Chinese manufacturing for critical goods, including pharmaceuticals and machinery.

Analysts note that Subramanian’s remarks reflect a pragmatic approach to economic policy. “India cannot isolate itself from the global economy, and China remains a key partner despite strategic challenges,” said Aditi Shah, a senior fellow at the Observer Research Foundation. “The focus should be on creating a level playing field for investments.”

Geopolitical Challenges and Opportunities

The border dispute between India and China, which escalated into a deadly clash in 2020, continues to strain relations. However, both nations have maintained dialogue through mechanisms like the Special Representatives’ dialogue, which last met in 2023 to discuss de-escalation measures.

Recent developments suggest a cautious approach to cooperation. In 2024, India announced plans to import $5 billion worth of Chinese-made solar panels to meet renewable energy targets, according to a statement from the Ministry of New and Renewable Energy.

What’s Next for India-China Relations?

The coming months will test the viability of Subramanian’s vision. Key factors include the outcome of India’s 2024 general elections, which could shift economic priorities, and the progress of ongoing trade negotiations under the India-China Joint Working Group on Trade.

For now, the adviser’s comments underscore the complex calculus facing Indian policymakers. As trade minister Piyush Goyal noted in a recent interview, “We must engage with China not as a rival, but as a partner—while safeguarding our national interests.”