Technology Decoupling and Strategic Tech: The National Security Implications of Restricting Chinese Digital Infrastructure and FDI in India

Abstract

India’s restrictions on Chinese digital infrastructure and foreign direct investment (FDI) represent a shift from a predominantly market-access logic toward a national-security logic in technology policy. This paper argues that the strategic issue is not whether Chinese technology is “safe” or “unsafe” in the abstract, but whether dependence is concentrated in parts of the digital stack were ownership, software control, privileged network access, standards, financing or supply-chain disruption could create coercive leverage. India’s 2020 Press Note 3 moved Chinese-linked investment from the automatic route to government approval, while the telecommunications sector subsequently developed a trusted-source regime, critical-telecommunication-infrastructure rules and stronger cyber-security obligations. At the same time, India continues to depend on globalized supply chains for electronics, semiconductors, components and digital hardware, which means that blanket decoupling can raise costs without eliminating strategic exposure. Using the concept of weaponized interdependence and a layered digital-infrastructure framework, the paper examines FDI restrictions, telecom vendor controls, critical-infrastructure rules and their economic trade-offs. It finds that targeted restriction is strategically superior to indiscriminate decoupling: India should secure core networks, critical cloud and data infrastructure, sensitive procurement chains and ownership/control rights while preserving competitive access to non-critical technologies. The paper concludes that resilient “de-risking” requires diversification, domestic capability, security-by-design and auditable supply chains rather than a binary Chinese-versus-non-Chinese technology policy.