New Delhi: Amidst strained ties with China, the pre-budget Economic Survey on Monday made a strong case for seeking foreign direct investments (FDI) from Beijing to boost local manufacturing and tap the export market.

As the US and Europe are shifting 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 the neighbouring country, the Survey said.

India faces two choices to benefit from ‘China plus one strategy’ – it can integrate into China’s supply chain or promote FDI from China.

“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.

“Moreover, choosing FDI as a strategy to benefit from the China plus one approach appears more advantageous than relying on trade. This is because China is India’s top import partner, and the trade deficit with China has been growing,” it added.

It also said that increased foreign direct investment inflows from China can help increase India’s global supply chain participation and push exports.

The Survey explained how increased FDI inflows from China can help in increasing India’s global supply chain participation along with a push to exports.

These economies have typically pursued two main strategies – reducing trade costs and facilitating foreign investment.

At present, the bulk of the FDI coming into India falls under the automatic approval route, however, FDI from countries sharing land borders with India needs mandatory government approval in any sector.

China stands at 22nd position with only 0.37 per cent share (USD 2.5 billion) in total FDI equity inflow reported in India from April 2000 to March 2024.

Countries which share land borders with India are China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, and Afghanistan.

The Indian and Chinese militaries have been locked in a stand-off since May 2020 and a full resolution of the border row has not yet been achieved though the two sides have disengaged from a number of friction points.