India`s Trade and Investment Policy: The Influence of Strategic Rivalry with China

Abstract

This paper explains the continuity of India`s globalization policies from a realist strategic perspective, incorporating economics with security studies. It contends that the Indian state is not passively surrendering to an overarching world economy, but opening up strategically, taking into account its competitive position against rival states, particularly China. Changes in tariff and foreign investment policies in India display a consistent pattern of gradual liberalization since the early 1990s and a close correspondence with China’s opening-up policies. After considering alternative explanations for such correspondence, the article suggests that the most persuasive explanation centers on strategic rivalry between the two countries. Competition with China in multiple arenas-economic, political, military, and technological-induces Indian policymakers to imitate Chinese policies of opening up. The continuation of India`s globalization policies is inspired by efforts to strengthen the state relative to its external rivals in order to vie more effectively for regional hegemony.