How FDI inflows from China can help India as per Economic Survey

Economic Survey suggests India can boost exports by attracting FDI from China and integrating into global value chains through 'China plus one' strategy.

The Economic Survey said that increased foreign direct investment (FDI) inflows from China can help increase India’s global supply chain participation. This can also help India push exports as the country looks to deepen its involvement in global value chains (GVCs). For the same, New Delhi needs to look at the successes and strategies of East Asian economies, the Economic Survey said.

A security personnel keeps watch next to a Chinese Communist Party flag. (Reuters)

East Asian economies have pursued two main strategies - reducing trade costs and facilitating foreign investment, it noted. India, therefore, faces two choices to benefit from 'China plus one' strategy and that is either to integrate into China's supply chain or promote FDI from China, it said.

The Survey noted, “Among these choices, focusing on FDI from China seems more promising for boosting India's exports to the US, similar to how East Asian economies did in the past.”

Choosing FDI as a strategy to benefit from the China plus one approach appears more advantageous than relying on trade, the Economic Survey advised.

"This is because China is India's top import partner, and the trade deficit with China has been growing. As the US and Europe shift their immediate sourcing away from China, it is more effective to have Chinese companies invest in India and then export the products to these markets rather than importing from China, adding minimal value, and then re-exporting them," it stated.