New Delhi: Prime Minister Narendra Modi’s presence at the recent Shanghai Cooperation Organisation (SCO) summit signaled a subtle recalibration in New Delhi’s approach towards Beijing. His participation — and the brief exchange with Chinese President Xi Jinping on the sidelines — underscored attempts by both sides to stabilise relations after years of border tensions and trade friction. While no major breakthroughs were announced, the optics of Modi’s visit have been read as an opening for a cautious thaw, setting the stage for renewed diplomatic and economic engagement between the two Asian giants.

Yet, for Indian policymakers, history casts a long shadow over such gestures. Since the 1950s, India has experienced several episodes where agreements or friendly overtures with China were followed by sharp reversals or conflict. The most striking example remains the 1962 Sino-Indian war, which erupted just a few years after the “Hindi-Chini Bhai Bhai” phase and the signing of the Panchsheel Agreement. Subsequent decades have witnessed repeated flare-ups despite ongoing talks and confidence-building measures — from the Sumdorong Chu standoff in 1987, to the Doklam crisis in 2017, and the deadly Galwan clashes in 2020. Each time, India’s expectations of a stable border were shaken by Chinese military maneuvers, reinforcing a pattern of mistrust.

This legacy of caution influences not just border diplomacy but also how India views its massive trade relationship with China. As geopolitical tensions ease tentatively, economic realities remain stark. China’s manufacturing overcapacity poses a serious threat to the Indian economy by undermining local industries, widening trade deficits, and destabilizing market conditions in several sectors. Despite India’s rapid industrial growth and emerging status as a manufacturing hub, the flood of cheap, subsidized Chinese goods disrupts domestic markets and jeopardies the viability of homegrown businesses.

China produces about 30 percent of the world’s manufactured goods but consumes only around 18 percent domestically. This mismatch fuels an export push, often at low prices backed by state subsidies. India has borne the brunt: a trade deficit of about USD 99.2 billion in the 2024-25 fiscal year, and intense pressure on sectors such as steel, solar panels and electric vehicles. Cheaper Chinese imports erode market share, squeeze profit margins, and slow domestic industrial growth — directly threatening the government’s “Make in India” ambitions.

At the same time, global supply chains are diversifying. Many multinational firms are adopting a “China-plus-one” strategy that includes India, recognizing its large workforce, improving digital infrastructure and strategic location. To convert this window into a long-term advantage, India must couple its diplomatic outreach with robust trade policy actions, targeted industrial reforms and stronger WTO-aligned measures to counter dumping and subsidies.

The current establishment has consistently approached trade with China with caution, fully aware of the risks posed by overreliance on a complex and often unpredictable partner. This cautious stance has allowed India to benefit from engagement while minimizing vulnerabilities. Moving forward, this approach must remain steadfast: any thaw in geopolitical tensions should be matched by strategic vigilance in economic dealings. Strengthening domestic industries, diversifying supply chains, and learning from past breaches of trust will ensure that India’s engagement with China continues to serve national interests, rather than exposing the country to avoidable risks. Only by balancing opportunity with prudence can India maintain leverage and safeguard its long-term economic and strategic goals.