Caught in the Tech Crossfire? Economic Survey Warns India Amid Rising US-China Rivalry

India must urgently recalibrate its global strategy in response to the escalating U.S.-China confrontation over technology, trade, and critical resources, the Economic Survey 2025–26 warns. The Survey stresses that India cannot afford to remain a passive participant and must aim for “strategic indispensability” to avoid being sidelined in the emerging global order.

At the heart of this realignment is the U.S.-led initiative dubbed “Pax Silica,” which seeks to dominate AI, semiconductors, and critical minerals. The Survey notes that the age of oil and steel is giving way to a “compute-driven” world, where countries that control technology, advanced materials, and digital infrastructure will wield the most influence.

The Survey highlights how the United States has imposed extensive export controls to restrict China’s access to advanced semiconductors and chip-making tools, while China has responded with its own export restrictions on rare earths and permanent magnets and by targeting foreign companies through its “Unreliable Entities List.” These moves, the Survey emphasizes, represent a shift from efficiency-driven trade to politically motivated economic competition.

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China, facing domestic economic headwinds including stagnation, weak demand, and a struggling property sector, is leaning heavily on manufacturing and exports. The Survey points to Beijing’s December 2025 Free Trade Port experiment in Hainan as an effort to bypass external frictions by easing customs and investment rules, highlighting China’s adaptive strategies in a tense global environment.

The Survey warns that India risks falling behind if it continues as a back-office economy reliant on foreign digital systems. To secure a stronger position, the country must invest in domestic innovation, anchor itself in global value chains, and produce goods and services that other nations cannot easily substitute, thereby becoming strategically indispensable.

Failure to act, the Survey cautions, could leave India vulnerable to technology denial and strategic leverage by more dominant powers, underscoring the urgent need for a proactive and forward-looking approach in a world increasingly defined by AI, semiconductors, and geopolitical tech rivalries.

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