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[Text/Guochazhe.com Zhang Jingjuan] On July 22, the Indian Ministry of Finance released its annual economic survey report, which was written by V. Anantha Nageswaran, a senior official and chief economic adviser of the Ministry of Finance, and his team.

The report pointed out that in order to promote the development of India's manufacturing industry, India has two options: import more from China and integrate into China's supply chain, or attract more foreign direct investment from China.

"At present, India's trade deficit with China is already quite large." According to data released by the Indian think tank Global Trade Research Initiative (GTRI), India's trade deficit with China will reach US$85 billion in the 2023-2024 fiscal year. The report believes that for India, choosing a foreign direct investment strategy seems to be more advantageous than relying on trade, and "focusing on foreign direct investment from China seems to be more likely to promote India's exports to the United States, which is similar to what East Asian economies have done in the past."

The report cited emerging markets such as Turkey and Brazil as examples, saying that these countries have taken measures to attract Chinese investment into the industry while raising import tariffs on electric vehicles from China.

According to Bloomberg, a senior economic adviser to the Indian government said that if the Indian government wants to attract Chinese investment, it must relax restrictions.

After 2020, India imposed "Asia's strictest restrictions" on Chinese companies on the grounds of the outbreak of the COVID-19 pandemic and the Sino-Indian border conflict, including strict restrictions on the issuance of visas to China, banning hundreds of Chinese mobile applications, delaying approval of Chinese investments, and reducing the number of direct flights between the two countries.

An Indian electronics manufacturing executive who wished to remain anonymous told The Economic Times that many Chinese companies have stopped further investment in India since 2020. Many Chinese personnel are also reluctant to travel to India for fear of being arrested by the Indian government.

Bloomberg reported that India's manufacturing industry is still heavily dependent on Chinese manufacturing, and the above restrictions have actually weakened the Modi government's ambition to build India into a global manufacturing center, especially in the production of electronic products. The Economic Times previously pointed out that in the past four years, the increasingly tense relationship with China has caused Indian electronics manufacturers to lose $15 billion and more than 100,000 jobs.

Although the Modi government has been hoping to provide new impetus for economic growth and create more jobs by promoting the development of manufacturing, India's manufacturing industry has always had problems such as too small a share of the world, too much red tape, lack of skilled labor, low efficiency, and insufficient innovation. In 2023, its manufacturing industry accounted for about 13% of GDP, down from 16% in 2015, far below the Modi government's target of 25%, which has been postponed three times to 2025.

The India Brief previously reported that India's manufacturing industry relies heavily on high-quality professional and technical personnel from mainland China because their salaries are relatively lower but their professional level is higher. Even Taiwanese manufacturers operating in India, which are world leaders in the field of electronics, need to seek help from experts from mainland China. The India Brief also pointed out that the demand for Chinese personnel remains vital to Indian industry. It urged: "While India is committed to creating a favorable environment for domestic manufacturing, it must handle complex international relations more carefully."

The report released by the Indian Ministry of Finance on Monday also emphasized that in order to promote the development of India's manufacturing industry and integrate India into the global supply chain, India will inevitably have to integrate into China's supply chain. "Whether to rely entirely on imports or partially on Chinese investment is a choice India must make."

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