It’s time for India’s export strategy to converge its US and China tracks

US-China ties matter greatly to New Delhi, which runs two distinct relationships with them. It leans on Chinese intermediate goods, especially in industries such as electronics and pharma, yet blocks deeper inflows of Chinese capital and expertise to its market. By contrast, India relies on steady market access to US consumers, chiefly for its services and talent, yet is considering digital service regulations that may make US reciprocity less forthcoming. 

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Understanding how India fits into global production networks helps clarify the strategic trade-offs we face with both China and the US. Global Value Chains (GVCs) span every step from design to delivery of both goods and services. Three decades of globalization stretched GVCs across numerous countries. Each smartphone, for instance, requires hundreds of components sourced from various corners of the planet. The best designs come from the US, best lithography equipment from the Netherlands, best semiconductors from Taiwan, best displays from South Korea and so on. 

India lacks a decisive plan for better GVC integration. The country adds merely 2% of value in GVCs and accounts for only about 3% of global manufacturing and 4% of service exports. 

Indian regulators continue to hobble competitive industries with distortionary rules: from price regulation of non-essential markets to proposals of ex-ante competition oversight for thriving cloud and digital app markets. The country woos manufacturers from across the world, but leaves them to tackle the bureaucracy once they invest. Investment promotion agencies have no power to cut red tape, government think-tanks only suggest snips and the relevant ministries often work at odds with each other. 

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A US-China reset offers India a chance to rethink. For too long, we have treated the two relationships as unrelated. When Trump threatened 100% -plus tariffs on China, many in India applauded, forgetting how interwoven the world is. Some assumed multinationals would instantly relocate from China to India, ignoring barriers to entry including tangible and intangible costs. 

As estimated, it takes 10-14% more to assemble electronics here and 14-18% more to make components. Investment incentives have reduced our cost disadvantages, but these are temporary and enduring regulatory uncertainty puts them back in contention.

We now need a holistic policy reset built on a simple insight: China anchors our backward GVC linkages, while America can anchor our forward linkages. Put plainly, China supplies us over $100 billion in imports; the US buys a similar value of goods and services from us. If we align trade, geopolitics, local regulation and infrastructural development around this fact, then maybe we can revive stalled domestic private investment, attract subdued foreign direct investment and join GVCs.

In practice, we must secure wider market access to the US and smoother supply-chain integration with China. A bilateral trade agreement with the US could serve as a partial catalyst for this. Negotiators should leave no stone unturned. For services to boom, they must uncouple Indian IT work visas from America’s volatile immigration debate. They should bat for a trusted data corridor—threatened by sovereignty hawks on both sides. Equally, they must protect US intellectual property, from source code to trade secrets, for India to be trusted with deepening tech-driven exports to the US.

Also Read: Think ahead: India’s electronics manufacturing must go up the value curve

With China, the priority flips. India needs more of its capital and know-how in domestic production. This requires revisiting the permissions-based regime for Chinese investment installed in 2020 and easing visas for Chinese visitors. We should spell out clear ‘go’ and ‘no-go’ zones: keep Chinese firms out of telecom, power and other critical infrastructure, but invite them into industries like consumer goods. India’s plentiful labour supply can make up for an ageing Chinese workforce, but only if state incentives and infrastructure expansion level the playing field. 

Make no mistake. Beijing is trying to coerce its companies to stay, as it recognizes the value of private enterprise. Our policymakers must adopt a singular focus on making India more attractive. Business needs certainty. If New Delhi wants Chinese firms to form joint ventures with Indian partners, they should say so upfront. Having businesses make guesstimates about the openness of our market will only deter them from considering anything substantive here.

As Washington and Beijing edge  back to stability, the window opened by their trade war could close soon. India risks sliding into a strategic grey zone, insufficiently integrated with US trade policy and still cautious on China. It is time to fuse the two tracks into a unified economic strategy before today’s trade opportunity disappears.

The authors are policy experts at Koan Advisory Group.