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Recalibrating strategic ties with China: The Tribune India




Ganesh Natarajan and Ajit Ranade

Strategic business experts

For nearly 50 years, bilateral relations between India and China have kept the thorny issues of border settlement and deeper economic engagement separate. Bilateral trade has grown by 20 percent per year for the first 15 years of this century. India dropped from 19th to sixth place on Beijing’s list of export destinations.

Both were enthusiastic supporters of the BRICS consortium which has led to the formation of a development bank and an annual summit, the thirteenth of which will be held in Delhi next month. Over the years, the frequent meetings between President Xi Jinping and Prime Minister Narendra Modi have created hope that this could truly be the mark of an Asian century where the two countries can work as partners and friends.

But the events of summer 2020 and the Galwan conflict irreversibly changed the balance. With this military conflict, which follows the long standoff in Doklam in 2017, China unilaterally dismantled the status quo and signaled a more hostile stance towards India. This has raised important questions for policy makers in India. How should India navigate this new landscape in which the relationship is evolving? The immediate response to the Galwan incident was correctly to mobilize our troops and the Indian army gave an appropriate response to the aggressors. This has been combined with economic sanctions such as the ban on Chinese apps, restrictions on capital flows and the emotional boycott of Chinese products. What about the medium to long term? What should the strategy be?

It requires seeing the challenge on a larger scale of time, space and force. What are the forces shaping Chinese behavior? What is their path of evolution in the decades to come? What is the best way for India in the short and long term? How can diplomacy and economic policy work together, to better serve India’s interests?

These issues were addressed in a recent comprehensive policy document written by six people (including the two current authors) associated with the Pune International Center. It’s ironic that the recalibration is happening as China continues to be India’s biggest trading partner. India’s dependence on imports in key areas such as pharmaceutical intermediates, capital goods, electronics and telecommunications equipment cannot be eliminated overnight. But we believe the long-term strategy calls for less economic dependence, stronger diplomatic and geopolitical coalitions with like-minded democracies, and a calm confrontational attitude to Chinese aggression.

We contend that in the short term, India will need to build balancing coalitions with like-minded countries, as we indeed do by Quad with the United States, Japan and Australia. We envision three groups of countries with which we can engage in such coalitions: the major democracies of the world, the countries bordering on China, and India’s own neighbors, all of which have much to gain from preventing the rise to power. of China as a malicious and autocratic superpower. . We must go beyond treaties and agreements and engage deeply with these 20 countries, encouraging frequent exchanges at many levels: diplomats, economists, scientists, academics, innovators and entrepreneurs.

There have been many discussions and debates about protectionist measures aimed at preventing Chinese imports and Chinese companies from playing a role in the growth of the Indian economy. We believe that a significant part of these measures will be doomed to failure, as they can harm India’s productivity and exports. There is certainly an argument for three groups of restrictions: preventing Chinese state-controlled companies from controlling stakes in a number of sensitive infrastructure assets, including 5G and telecommunications, avoiding standards technologies controlled by China and block all surveillance of Indians.

A selective withdrawal from economic engagement with China and an increased focus on the global market would be an ideal approach to take over the next two decades, which may result in starting with “ less China ” and eventually approaching a state almost “ without China ”. of our nation.

This represents a call to action, which the military has shown so admirably and which must now be heard by political parties, diplomats, political planners, bureaucrats, industrialists, indeed, all citizens. And the starting point of the new race is less than even, which is to be expected. Whether we look at the size of the economy, the capacity of the State, the capacities of the best companies, the extent of internationalization, the mastery of science and technology or the pace of patent filing, China is clearly ahead of India. The Chinese economy is five times the size and the bilateral trade balance is heavily skewed in its favor.

Part of the trade imbalance can be corrected by a targeted approach. India recently launched Productivity Incentives (LIPs) and selected sectors for deep investment and the creation of “global champions”. Investments of over $ 28 billion from India and abroad have been announced. Iconic companies like Apple are the first beneficiaries of this PLI opportunity. We assessed global opportunities and the relative status of India and China to identify and advocate industry-specific strategies in the following three broad industry sector categories:

1. Huge areas of asymmetry where India must gradually reduce its dependence. Rare earths are a classic example.

2. Opportunities to focus on atmanirbharta and meet all domestic demand. Telecom is an immediate imperative.

3. Global opportunities for industry development. These exist in chemistry, pharmacy – where we have made a good start with the manufacture of vaccines – the automobile, in particular with connected and electric autonomous vehicles and hydrogen as an alternative source of fuel, equipment, consumer electronics and even agriculture – where a resolution of the current impasse can become the start of a practical domestic and export policy that would help millions of farmers in the country.

In the medium to long term, China has its own vulnerabilities. Its demographics are aging and its workforce is shrinking. Its growth will surely slow down. It maintains difficult geopolitical relations with several countries. He has adopted an adversarial relationship with large private sector companies like Alibaba.

It is possible that China will experience 4 percent growth while India may grow almost 8 percent in the foreseeable future. This changes the asymmetric economic size ratio from 5: 1 to about 2: 1. To achieve this high and sustained growth, India has a program of domestic economic reforms to pursue.

As a nation, we can and must evolve to become an alternative hub in the global supply chain and join the race to become a major global manufacturing hub. It requires strategic patience and has the potential to create additional jobs for 200 million people. The atmanirbharta strategy needs to be combined with reforms that can make India globally competitive and give it atmosphere or self-confidence.

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