India should not shy away from Chinese investment: Arvind Panagariya explains why

India should remain open to investments from China like other developed countries like the United States and Germany, with an expectation from a handful of sectors, reported the news agency PTI on Thursday, December 12.

Panagariya warned that one has to be careful about investments from potentially “unfriendly countries” that might damage the country's interests, as per the report. 

India can welcome such investments as the developed countries' investments from China in any particular sector, as per the report.

“If the US is taking investment from China, if Germany is taking, I would (be) open to their investment. The activities from which you want to exclude are relatively few because I don't see other countries restricting Chinese investment in large number of sectors,” said Panagariya at the CII Global Economic Policy Forum 2024, quoted the news agency.

The Economic Survey 2023-24 has made a strong case for seeking foreign direct investments (FDI) from China to boost the country's manufacturing and tap the export market. The survey also said increased FDI inflows from China can help increase India's global supply chain participation and push exports. 

Panagariya also argued for India to enter into Free Trade Agreements (FTAs) with more nations, saying its relevance today has increased because components are manufactured in multiple nations, and high cross-border tariffs add to the final cost of the product.

Using the Apple iPhone as an example, he said it is manufactured using parts that are produced in 43 countries and then assembled. In this kind of situation, where parts are moving for assembly across many different borders, if there are high tariffs at each border, the cost and the tariffs get added on. 

“If you really want multinational companies to come to the Indian shores, you want to give them play over a very large space over which frictionlessly inputs, outputs, products and processings can move... have FTA with the EU, have FTA with the UK,” said Panagariya cited the news agency. 

“We have already done with Australia and some other countries. That would give a large space where inputs and outputs and processes can move freely without any friction,... freer trade and lower tariffs become even more important,” said Panagariya, quoted the news agency.

India is negotiating FTAs with several countries, including the EU, the UK, Peru, and Oman, reported the news agency.