India cannot completely cut off its economic ties with China even though tensions between the countries have escalated in recent months, a former national security advisor to India told CNBC.
Relations between the two nuclear powers deteriorated after a border clash in the Himalayas killed 20 Indian soldiers. Beijing did not disclose information on casualties suffered by the Chinese side.
"We cannot completely block off all relationships with China economically. At least, that's the way I see it, because we need to progress," M. K. Narayanan told CNBC's "Street Signs Asia" on Monday. Narayanan was the former national security advisor between 2005 to 2010 and spent most of his public service career working in intelligence.
India's foreign ministry said last month that both sides agreed that "early and complete disengagement of the troops" along their de facto border — known as the Line of Actual Control — and de-escalation of border areas were essential for smooth bilateral relations.
We're not enemies, but I think there's always a problem about being friends. There is a competition between the two civilizations.former national security advisor to India
The border clash soured public sentiment in India toward Chinese brands, leading to calls to boycott Chinese businesses. The bilateral relationship is currently skewed in China's favor in areas of trade, investment and technology, data showed.
New Delhi has introduced measures in recent months that either sidelined or banned Chinese companies from one of the world's largest consumer markets. They included restricting Chinese investments into India even before the border face-off occurred.
India also recently banned several dozen Chinese apps including the highly popular short video-sharing app, TikTok. Existing contracts with Chinese vendors were also canceled and there were reports suggesting Chinese telecom companies Huawei and ZTE might eventually be excluded from India's 5G development.
In most of those decisions, India did not specifically name China but, rather, justified the moves on national security grounds, according to a note from consultancy Eurasia Group.
"We're not enemies, but I think there's always a problem about being friends," Narayanan said. "There is a competition between the two civilizations."
Narayanan explained that India needs to focus on managing its economic relationship with China rather than shutting it down completely.
He referred to India's refusal last year to be part of the Regional Comprehensive Economic Partnership, which would form a major trading bloc involving Asia's top economies, including China, and cover nearly a third of the world's GDP. Some saw India's presence in RCEP as a counterbalance to China.
"We left the field practically open for China," he said. "I think India cannot afford to step back. India needs to be in the economic arena, the economic space. I think India's drive in recent years has been such that I think we can fulfill that objective."
Analysts have said that recent tensions between the two neighbors could potentially push India to establish closer ties with the United States and countries like Japan and Australia.