The Rising Influence of China in Indian Industry: Who’s Defending It and Why?

In recent years, China’s growing presence in India’s industry has become a point of deep debate and concern. Despite a general global sentiment of skepticism toward China’s opaque economic practices, some key figures and business leaders in India continue to defend and praise China. This defense comes amidst increasing tensions between the two countries, driven by geopolitical challenges and trade imbalances.

Commerce and Industry Minister Piyush Goyal, in a recent statement, highlighted how certain elements of the Indian business and political ecosystem, potentially responsible for China’s growing foothold, continue to endorse its narrative. At the heart of this complex relationship is China’s massive influence over Indian manufacturing, which has led to a range of economic challenges, including unemployment and a reliance on Chinese imports.

China’s Manufacturing Dominance
China’s ascendancy as a global manufacturing hub is largely due to its ability to offer low-cost goods at scale. Between 2004 and 2014, India’s trade deficit with China skyrocketed from USD 1.8 billion to USD 43 billion, representing a 30-fold increase. This surge was partly fueled by India reducing import duties during that period, allowing an influx of substandard, opaquely-priced Chinese goods into Indian markets. These goods not only undermined Indian manufacturing but also eroded investor confidence in the “India growth story”​(ABP Live)​(NewsDrum).

The critical period from 2004 to 2014 saw a compounded annual growth rate of 42.85% in India’s trade deficit with China. Despite efforts by the Modi administration to reduce this rate, the overall impact of China’s growing influence on Indian industries has been devastating. India’s manufacturing sector, which once promised significant job creation, has seen a reduction in its competitive edge, largely because of the entry of Chinese goods​(MoneyControl).

The Political Defense of China’s Influence
While the current Indian government has been critical of China’s influence, other political figures have taken a more nuanced stance. For example, during his 2024 US visit, Congress leader Rahul Gandhi suggested that the rise of Chinese manufacturing could be attributed not only to China’s aggressive policies but also to failures on the part of India and the United States. He contended that neither country had done enough to challenge China’s industrial dominance.

However, Goyal rebuffed these claims, emphasizing that Gandhi’s remarks displayed a lack of understanding of India’s manufacturing challenges. He pointed out that, unlike Gandhi, the government is focused on building a prosperous and self-reliant India by 2047​(NewsDrum).

Global Concerns over China’s Practices
Internationally, there is growing awareness of the dangers posed by China’s economic strategies, particularly its practice of “dumping” cheap goods in foreign markets. The United States, for instance, has responded by imposing additional taxes and duties on Chinese imports, citing security threats associated with Chinese products​(MoneyControl). India’s challenge, however, is unique given its geographic proximity and historical trade ties with China.

Economic and Trade Imbalances
The enormous trade deficit with China has left India vulnerable to fluctuations in supply chains, especially in critical sectors like pharmaceuticals, electronics, and textiles. The COVID-19 pandemic further exposed this vulnerability when India faced shortages of essential goods, many of which were sourced from Chinese manufacturers.

In response, the Indian government has initiated various policy measures aimed at reducing dependency on Chinese imports. These include higher import duties on select goods, encouraging domestic production through initiatives like Make in India, and bolstering relationships with other trading partners to diversify its supply chains.

Social Media Campaigns and Business Endorsements
On the other side of the spectrum, some Indian business leaders continue to advocate for stronger ties with China. Their argument hinges on the practical benefits of cheaper goods and materials that help industries in India remain competitive globally. However, this defense raises ethical questions about supporting a country whose practices have been widely criticized for being non-transparent and detrimental to local economies​(ABP Live).

The Role of RCEP and India’s Strategic Exit
One of the most significant decisions by the Modi government in countering China’s influence was India’s withdrawal from the Regional Comprehensive Economic Partnership (RCEP) in 2019. This trade agreement, which includes 15 countries, was seen as another vehicle for Chinese economic dominance. Goyal revealed that India had been forcibly drawn into the RCEP negotiations by the previous government, essentially binding it to a free-trade agreement with China​(NewsDrum). The withdrawal, though controversial, was seen as a strategic move to protect India’s manufacturing sector from further Chinese encroachment.

The Road Ahead: Strategies for Reducing Dependency
Reducing India’s reliance on Chinese goods will require a multi-pronged approach, involving both policy measures and private sector cooperation. Key strategies include:

• Boosting Domestic Manufacturing: Initiatives like the Production Linked Incentive (PLI) scheme aim to increase domestic production in sectors where India is currently dependent on imports.
• Trade Diversification: India is seeking to expand its trade relationships with countries like Japan, Australia, and South Korea to reduce dependency on China.
• Strengthening Infrastructure: Building robust industrial infrastructure is key to making Indian products competitive globally. Efforts are underway to improve logistics, energy supply, and the overall ease of doing business.
• Encouraging Innovation and R&D: Investment in research and development is essential for Indian manufacturers to compete with Chinese companies, particularly in sectors like electronics and green energy.

Conclusion: A Balanced View of China’s Role
While China remains a critical player in global supply chains, its growing influence in Indian industry has raised concerns about economic sovereignty, job losses, and national security. The ongoing debate over whether to engage with or distance from China underscores the complexity of modern trade relationships. India’s path forward will involve balancing pragmatism with patriotism, ensuring that its industries can thrive without becoming overly dependent on Chinese imports.