The merits of ‘quarantined engagement’

The just-concluded BRICS summit in Delhi may not be remembered for a particularly muscular declaration. But to focus on that may miss its import for India. Did BRICS help a thaw in India-China relations?

India’s diplomatic achievement was not that it convened the summit — it was anyway the BRICS chair — but that it managed to hammer out a common declaration among countries whose interests frequently collide. Iran and the UAE could sit around the same table despite their tensions; China could sign a statement condemning the Pahalgam terror attack; and members could agree on a dialogue in West Asia despite sharply different alignments. India had managed something similar during its G20 presidency in 2023, when it found consensus language despite bitter divisions over Ukraine.

The Modi-Xi meeting on the sidelines of the summit was more important than the communique. Xi was visiting India for the first time in seven years. The two leaders discussed business links, market access, the structural trade imbalance, people-to-people exchanges and the official readouts made careful references to jointly promoting border peace. It would be foolish to call this reconciliation, but it is certainly an opportunity.

India and China are neighbours, together accounting for more than one-third of humanity. Geography cannot be wished away. Nor will their border dispute disappear anytime soon. Deng Xiaoping’s famous advice to Rajiv Gandhi in 1988 remains relevant: if our generation lacks the wisdom to solve the boundary question, let us leave it to a wiser future generation.

That does not mean forgetting Galwan, where 20 Indian soldiers died in 2020. The border must be strongly defended. But the border can stay cold without freezing the entire relationship.

Indeed, India and China are already practising compartmentalisation. At the SCO summit in Bishkek, they joined Pakistan, Russia and others in a declaration rejecting double standards in combating terrorism. If such contradictions can be managed inside SCO and BRICS, they can also be managed bilaterally.

The compartments are: border security; trade and investment; technology; rivers and riparian rights; Himalayan ecology; climate change; WTO reform; nuclear non-proliferation; universities, tourism and culture; and selective cooperation on international conflicts.

The economic case for pragmatism is compelling. India’s trade deficit with China is around $112 billion. Yet our dependence is not principally on cheap toys. China supplies vital APIs, electronic components, machinery, solar inputs and processed critical minerals. After Galwan, India tightened Chinese investment and technology access. Yet imports kept rising. The attempt to reduce political exposure did not eliminate economic dependence.

Our withdrawal from RCEP (Regional Comprehensive Economic Partnership) at the 2019 ASEAN summit in Bangkok offers a warning. India spent nine years negotiating the agreement but walked out abruptly in 2019, ostensibly over fear of Chinese imports. Those imports came anyway. We could have backloaded by 15 years the conditions allowed in RCEP.

What India may have sacrificed was the more valuable prize: becoming embedded in Asian production networks. Modern trade is not merely about bilateral deficits. It is about where supply chains, factories and future investment locate.

The relationship may look lopsided but China too needs India. China has formidable economic strengths but some serious vulnerabilities as well. Its population is ageing, its workforce is beginning to shrink, its property sector is struggling, debt is high, domestic consumption remains weak and excess industrial capacity needs external markets. The IMF expects slower medium-term growth as demographics, weaker productivity and declining returns on investment bite.

India offers one of the world’s largest and fastest-growing markets, a younger labour force and an alternative destination for Chinese capital facing barriers elsewhere. The appropriate response is not ‘keep China out’ but ‘if you want access to the Indian market, manufacture, employ, source here and export from here’.

Why not begin by reopening discussions with BYD about an Indian factory? BYD is now one of the world’s dominant EV manufacturers. Its Indian ambitions were caught in the post-Galwan investment freeze. Invite it back to the table, but on Indian terms — local manufacturing, Indian employment, supplier development, strict data safeguards and progressively higher domestic value-addition.

Press Note 3 (2020 series), which effectively targeted FDI from China, should evolve from blanket suspicion to risk-based screening. Chinese participation in telecom networks is different from passive Chinese capital financing a highway, warehouse, water project or irrigation system.

This is ‘quarantined engagement’, a pragmatic policy proposal outlined by Nitin Pai, Ajay Shah and this author in September 2025 — it says accept capital without management control, exclude sensitive Chinese technology and begin with ‘dumb infrastructure’.

Then open some smaller doors quickly.

Make visas for Chinese tourists, business visitors, academics and engineers easier. Restore more direct flights. Create a specially marketed Buddhist circuit — Bodh Gaya, Sarnath, Kushinagar and Nalanda — for Chinese tourists. Revive university partnerships in non-sensitive disciplines. Encourage cinema, sport and cultural exchanges. Two civilisations representing such a large share of humanity should not interact mainly through soldiers, customs officials and diplomats.

At the same time, India should insist much more forcefully on access to China’s vast consumer market. The answer to the trade deficit cannot simply be fewer Chinese imports. It must be more Indian pharmaceuticals, food products, services, entertainment and other goods entering China.

China’s extraordinary growth, despite poor Ease of Doing Business rankings and the absence of Western-style democratic institutions, is a reminder that it must be understood as it is, not as theory says it ought to be.

India should neither imitate China nor fear it. It should learn, compete and build its own capabilities — in aerospace, defence, semiconductors, critical minerals, pharmaceuticals and AI. Engagement is safest when backed by strength. AI sovereignty and technological capability are ultimately a better insurance than import prohibitions.

Nor should a thaw in ties with China dilute India’s ties with America, Europe, Japan or the Quad. India should remain active simultaneously in BRICS, SCO, Quad, G20 and other useful formations. India’s future choices cannot be held hostage to any of these relationships. That is ‘strategic autonomy’.

China takes over the BRICS presidency in 2027. The next 12 months are a special window.

A thaw does not require friendship, much less trust. It requires reciprocal interest and some imagination. Protect where we must. Compete where we should. Cooperate where we can. And use the time and space created by engagement to become stronger.

Ajit Ranade is a noted economist. More of his writing here

Article courtesy: The Billion Press