Arvind Panagariya cautions India against cutting trade ties with China

New Delhi, December 22

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.

Panagariya suggested that India should try to enter into free trade agreements with countries such as the UK and the European Union to expand its trade.

“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),” the eminent economist told PTI.

Indian and Chinese troops clashed along the Line of Actual Control (LAC) in the Tawang sector of Arunachal Pradesh on December 9 and the face-off resulted in “minor injuries to a few personnel from both sides”, according to the Indian Army.

Panagariya, currently a professor of economics at Columbia University, said both countries can play the trade sanctions game but the ability of a USD 17 trillion economy (China) to inflict injury on a USD 3 trillion economy (India)  is far greater than the reverse.

“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 observed.

Panagariya 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.