India’s Quest for Economic Emancipation from China
In October 2024, the meeting between Chinese President Xi Jinping and Indian Prime Minister Narendra Modi initiated a thaw in relations between the two Asian powers. Has India's high level of economic dependence on China played an important role in bringing about this diplomatic shift?
In 2020, the Covid-19 epidemic and the deadly clashes in the Galwan Valley, on the Himalayan border between China and India, underscored India’s economic dependence on China and the resulting sovereignty issues. These dependencies manifest in three key areas: commercial, technological and financial.
India relies on Chinese imports for a wide range of industrial goods, which limits the growth of its domestic companies and exacerbates its trade deficit. Additionally, the country depends on Chinese technologies in strategic sectors such as energy, telecommunications and semiconductors, raising significant security concerns. Furthermore, certain Chinese investments, particularly in Indian digital start-ups, are now viewed as strategic vulnerabilities.
In response to the Galwan incident, India introduced measures aimed at reducing these vulnerabilities, including restrictions on border investments and the exclusion of Chinese companies from public contracts. At the same time, the Indian government launched initiatives such as “Atmanirbhar Bharat” (“Self-sufficient India”) to enhance the country’s economic autonomy by promoting domestic production.
To lessen its dependence on rival China, India is also working to strengthen and diversify its economic partnerships. In recent years, it has signed several free-trade agreements with countries like Australia and the United Arab Emirates, while intensifying technological cooperation with the Quad countries (Australia, Japan, and the United States), as well as France, Taiwan, Israel and the European Union. Despite these efforts, India continues to struggle with attracting substantial investment and acquiring cutting-edge technologies, primarily due to the relatively low competitiveness of its industry compared to countries like China and those in Southeast Asia.
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India’s Quest for Economic Emancipation from China
Author(s)
Sylvia MALINBAUM
Research Fellow, Head of India and South Asia Research, Center for Asian Studies, Ifri
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