Jaishankar, who was speaking at the annual business summit of the Confederation of Indian Industry (CII), said the Russia-Ukraine conflict, escalation of violence in West Asia, disruption of logistics due to war and sanctions, and a crisis of fuel, food and fertilisers have all combined to create a “perfect storm” for the world economy.

While Jaishankar didn’t refer to China in his speech, he addressed India’s concerns about its northern neighbour during a question-and-answer session, including the need to address natural security sensitivities in business dealings.

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“Where China is concerned, we will still encourage people in this country – manufacture in India, source in India, procure from India,” Jaishankar said in response to a question on trade with China.

“We have not completely and utterly prohibited people working with China, but frankly we would much rather you work with Indian companies if there is an Indian option available to you. That I think is good for our national security, we hope you think that it is good for your own business in the long term.”

Indian businesses will have to use a “national security filter”, which doesn’t mean that nothing would come in from China, but that national security sensitivities are evaluated in business propositions, he said.

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In a reference to the standoff on the LAC triggered four years ago by China moving large numbers of troops closer to the disputed border while disregarding agreements on managing the frontier, Jaishankar asked: “Would you do business with somebody who’s just barged into your drawing room and is trying to make a mess of your house fencing? You won’t. There’s a common sense proposition there.”

Jaishankar has maintained throughout the standoff that the overall India-China relationship cannot be normalised without peace and tranquillity on the border. This has been in marked contrast to China’s call for the border issue to be placed in the “appropriate place” in the overall relationship while the two sides take forward ties in other areas.

According to the latest figures, China overtook the US to emerge as India’s largest trading partner during 2023-24, with two-way trade worth $118.4 billion. India’s exports to China during this period were worth only $16.67 billion.

Jaishankar alluded to the trade imbalance built up over the past two decades and said there is a problem with India’s business community making choices based solely on a price point. India will have to encourage businesses to do more domestic sourcing while simultaneously encouraging domestic production, he said.

This doesn’t mean that business with China will stop, and this is also borne out by trade figures, Jaishankar said. India needs to define the problem, take precautions and identify a list of businesses, including sensitive sectors, and then assess its possibilities, he added.

Jaishankar highlighted the challenges that are currently impacting the global economy, including the Ukraine conflict in its third year, a “huge escalation” of violence in West Asia that could spread beyond, disruption of logistics due to war, sanctions, drone attacks and climate events, and a crisis of fuel, food and fertilisers.

“In Asia, new tensions have emerged in land and sea as agreements are dishonoured and rule of law disregarded,” he said without naming China.

“In many ways, we are actually going through the perfect storm. For India, the task is to mitigate its impact on itself and contribute to stabilising the world to the extent possible. It is this judicious combination of ‘Bharat First’ and ‘Vasudhaiva Kutumbakam’ that defines our image as ‘Vishwa Bandhu’,” he added.

India also has concerns about a “combination of excessive market shares, financial domination and technology tracking” as these have allowed for the weaponisation of virtually any form of economic activity.

“We have seen how both exports and imports, access to raw materials or even stability of tourism has been utilised to exert political pressure. At the same time, the power of currency and the threat of sanctions have been deployed in the toolbox of international diplomacy,” Jaishankar said.

The current government has also sought to address the neglect of manufacturing by past administrations, which led to three challenges – a lack of employment, especially for SMEs, the lack of technology strengths, and consequences for national security.

Foreign policy helps create comfort levels between governments for trust and reliability, especially the de-risking of supply sources and enhancing collaboration in sensitive and critical technologies, as is being done with the US through the iCET dialogue with the EU through the Trade and Technology Council. As India looks to access global resources to fuel its growth, Russia presents fresh economic opportunities as it turns eastwards, he said.