'We have a special China problem...': S Jaishankar calls for 'checks' amid neighbourhood challenge

External Affairs Minister S. Jaishankar on Saturday delivered a pointed message about India's unique challenges with China, stressing on the nation's need to carefully navigate its relationship with the economic giant. 

"We have a special China problem," Jaishankar told an audience at the ET World Leaders Forum, adding that India's concerns over Beijing was over and above the world’s problem with China.

The minister emphasized the delicate balance between economic considerations and national security, remarking, "There is a thin line between economics and national security in most cases."

Jaishankar also emphasized the need for businesses to recognize their social obligations within this context. While he is supportive of investment and growth, Jaishankar cautioned against unchecked foreign direct investments (FDIs), particularly those from China. 

"I am pro-investment, pro-growth, but somewhere there should be a balance," he said. 

Jaishankar's stance reflects India's broader approach to managing foreign investments, where the government has increasingly taken a cautious stance on Chinese investments. The scrutiny of these investments has been tightened in recent years, particularly following the border tensions between the two countries. Jaishankar said while the free flow of FDIs is important for economic growth, it should not come at the cost of domestic industries, particularly the micro, small, and medium enterprises (MSMEs) that are vital to India's economy.

Arvind Panagariya, economist and Chairman of India's 16th Finance Commission, had in an ET report suggested a more nuanced approach to Chinese investments. Panagariya argued that beyond investments classified as security risks, allowing Chinese investments could actually provide India with leverage over China. "Remember that we also acquire leverage against China when a sizeable investment by that country is on our soil," he stated. This perspective suggests that economic engagement, even with a strategic competitor like China, can be used to India's advantage.

Panagariya also touched on the broader debate around tariffs and protectionism, challenging the conventional view that these measures are inherently detrimental to foreign investment. He noted that "tariff jumping FDIs," where businesses invest locally to circumvent tariffs, can actually boost local production and investment.