IGI Logo

Amid demands for snapping trade ties with China for its transgressions on the border, former Niti Aayog Vice Chairman Arvind Panagariya has opined that cutting trade with Beijing at this juncture would amount to sacrificing India's potential economic growth. Instead, he suggested that India should try to enter into free trade agreements (FTA) with countries such as the UK and the European Union to expand its trade.

Panagariya said ‘engaging China in a trade war at this juncture will mean sacrificing a considerable part of our potential growth... purely on economic grounds, it will be unwise to take any action in response to it (transgressions on the border). He said both countries can play the trade sanctions game but the ability of a $17 trillion economy (China) to inflict injury on a $3 trillion economy (India) is far greater than the reverse. He observed that ‘now there are some who want trade sanctions on China to 'punish' it for its transgressions on the border... if we try to punish China, it will not sit back, as amply illustrated by its response to sanctions by even the mighty United States.’ He pointed out that even a large economy such as the US has not been very successful with its sanctions either against China or even Russia.

To reduce the trade deficit with China, he suggested that the idea ought to expand trade faster with other trading partners rather than cutting it with Beijing through a blunt instrument such as trade sanctions. He said ‘we should take advantage of India's excellent growth prospects for the next decade and concentrate on growing the economy bigger as fast as possible. Once we are the third largest economy, our sanctions threats are likely to carry greater credibility’.