India must stay focused amidst chasing Chinese investment

India should refocus its Foreign Direct Investment (FDI) policies towards enhancing its technological capabilities by leveraging Chinese FDI for technology transfers. This strategy could involve encouraging joint ventures between Indian and Chinese firms to facilitate the sharing of technological knowledge. Such transfers can be direct, through technological handovers, or indirect, through the presence of Chinese firms in India leading to knowledge diffusion. The aim is for Indian firms to benefit from technological spillover effects, closing the innovation gap and boosting the country’s development.

To fully exploit these benefits, India must invest in structural and institutional reforms to enhance its absorptive capacity and readiness for technological advancements. By promoting seamless infrastructure connectivity across the country and fostering supportive conditions for FDI spillovers, India can attract more investments and drive sustainable economic growth. A proactive approach to negotiating with Chinese multinationals and ensuring a conducive environment for FDI inflows will be crucial for India’s long-term development.

Natasha Agarwal, a research economist based in India, emphasizes the importance of redefining India’s FDI objectives to harness the full potential of technological transfers and promote sustainable economic growth.