For Modi, economic security is priority with China, not profit for Indian business

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The Galwan clash marked a turning point for India, leading to stricter controls on visas for Chinese nationals.

For Modi, economic security is priority with China, not profit for Indian business

 

The relationship between India and China has undergone significant changes since the border clash at Galwan four years ago. The Narendra Modi government has prioritized national economic security over the business interests of Indian companies, a shift that is evident in the sharp decline in the number of visas issued to Chinese nationals.

A Sharp Decline in Visas

Data and insights from top officials reveal that approximately 200,000 visas were issued to Chinese nationals in 2019, before the pandemic and the June 15, 2020, Galwan clash. This number plummeted to just 2,000 in 2024 following a rigorous screening process of Chinese investments in India. The tragic Galwan incident saw twenty Indian soldiers, including Colonel Santosh Babu, lose their lives, while an unspecified number of Chinese soldiers were also killed.

In the past eight months, about 1,500 visas have been issued to Chinese nationals, with around 1,000 of these facilitating demands from the Indian electronics industry. Another 1,000 visas are in the pipeline, primarily for the electronics sector, subject to intensive screening.

Trade Imbalance and Economic Measures

Despite efforts to boost production through measures such as a ₹2 lakh crore production linked incentive (PLI) scheme and a reduction in corporate income tax, the trade deficit with China remains substantial. In the first five months of 2024, India’s trade deficit with China reached $38.11 billion. India exported $8.93 billion worth of merchandise to China, while imports from China amounted to $47 billion.

The Indian electronics industry has voiced concerns about job losses due to the denial of visas to Chinese businessmen and workers. However, data released on June 14 shows a 9% annual increase in India’s merchandise exports in May 2024, driven by petroleum products, engineering goods, and electronics. The PLI scheme has played a significant role, with electronic goods exports rising from $23.55 billion in FY 2023 to $29.12 billion in FY 2024.

Legal and Security Challenges

The structural screening of Chinese investments post-Galwan uncovered violations by Chinese telecommunication companies like Vivo. The Enforcement Directorate (ED) charged Vivo with laundering funds to China to evade Indian taxes, accusing the company of siphoning about $13 billion and violating visa conditions. In response, Vivo stated, “We are deeply alarmed by the current action of the authorities. The recent arrests demonstrate continued harassment and create an environment of uncertainty amongst the wider industry landscape.”

The national security establishment and economic ministries have emphasized that visas will only be issued after thorough vetting to avoid compromising India’s “Atmanirbhar Bharat” (self-reliant India) plan and to protect domestic manufacturing.

Ongoing Tensions and Strategic Responses

India-China bilateral ties have been strained since the PLA’s transgressions in May 2020. Despite multiple rounds of military and diplomatic talks, the PLA has yet to de-escalate and restore the status quo ante in East Ladakh. Four years after Galwan, the Chinese military remains fully deployed in East Ladakh, with reserves backing them from the hinterland.

In the Indian Ocean Region, Chinese surveillance ships and anti-piracy forces are deployed year-round, including the ballistic missile tracker Yuan Wang 7, which was recently positioned 1,000 kilometers south of Kanyakumari.

A senior official emphasized the Modi government’s stance: “With the Xi Jinping regime continuing to put pressure on India on land and sea, the Modi government had no option but to take steps to ensure the economy is less dependent on China. India’s national economic security cannot be compromised for a few pieces of silver…. Visas will be issued for Chinese technicians and businessmen only after screening with assurance that travel conditions will not be violated.”

Conclusion

The Modi government’s focus on national economic security reflects a strategic decision to safeguard India’s interests amidst ongoing tensions with China. While this approach may pose challenges for certain sectors of Indian business, it underscores the importance of a resilient and self-reliant economy in the face of external pressures.

 

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