G V C Naidu
As usual, protocols have been broken and the bonhomie between Prime Minister Narendra Modi and his counterparts is too obvious for all to see. The question is, has it produced anything substantial? It depends. If seen with a suspicious mindset, it is all optics and the two nations are bound to be almost irreconcilable adversaries, if not outright rivals, come what may.
For others, it is no more a zero-sum equation as the two giants – India and China – rise. They, in fact, contribute to each other’s economic prosperity and have a lot of commonalities to work together for mutual benefit. In that perspective, there is no question that Modi’s visit is historic and the indicators suggest that relations are on the cusp of an unprecedented transformation.
In order to understand the underlying dynamics of bilateral relations, it is essential to recognise that they are increasingly becoming less captive to certain problems that hampered these two countries from forging closer links in the past. Issues like China’s support to Pakistan and the unsettled border dispute, are still around but there is a host of others that are coming to the centre stage as principal drivers.
Coordination of policies on climate change, terrorism and the creation of a new global financial order that reflects current realities, close cooperation in fashioning a new viable and reliable security architecture in the Indo-Pacific region, joining hands to harness the economic benefits of a rapidly rising East Asia by promoting greater economic cooperation and integration, and forging close economic, political and security links at the bilateral level to assuage each other’s concerns, have all become more pressing.
It is foolish to ignore the fact that today, the Chinese economy at $10 trillion (compared to India’s $2 tr) is the second largest in the world, poised to overtake that of the US to become the largest. Its outbound direct investments are expected to overtake the inbound investments this year (it was $120 billion in 2014) and soon it will become the largest exporter of capital in the world. China is already the largest manufacturing and trading nation and is sitting on a mountain of money with a foreign exchange kitty of more than $4 trillion.
True, the Chinese economy is slowing but it was not something unexpected, but it has to be seen against the backdrop of more than three decades of double-digit growth – unprecedented for any country in the world. The Chinese leadership has already initiated a series of initiatives to ensure that the economy maintains sustained momentum for the foreseeable future backed by greater consumption.
It needs to be noted that the Chinese economy is undergoing a major transformation even as it steadily scales up higher value production. It is this shift that opens a window of opportunity for India to attract not only huge Chinese investments in manufacturing as labour costs grow but also others who are looking for alternative places to China. Thus, a remarkable synergy can be built between the two large economies that are rapidly expanding and make Modi’s pet ‘Make in India’ project a success.
It has to be recognised that China is already a leader in certain niche infrastructure-related technologies such as high-speed railways, supposed to be not only the best but also the cheapest. Ditto with respect to several other areas such as electronics, solar panels, power equipment, etc.
As Chinese infrastructure development reaches a plateau, it will very soon be saddled with huge excess capacity such as cement, steel, etc. If China is looking for opportunities, India should become the prime destination as its infrastructure needs are humongous. Of course, Make in India will never succeed unless an enabling environment is created, the most prominent being the provision of world class infrastructure.
The biggest upside that Modi enjoys is that he does not have to carry the past baggage. The secrecy surrounding the events leading to the 1962 war by not making Henderson-Brooks Report and other documents public has given rise to several doubts. That way, unlike the Congress party, Modi is in a unique position to redefine the relationship.
To be sure, New Delhi should raise its concerns, especially China’s plans in Pakistan that could undermine Indian interests, trade deficits, etc. Fortunately, the border issue, despite all its complexity, is tranquil (not a single shot has been fired for nearly four decades) and numerous institutionalised mechanisms will ensure that nothing untoward happens. A lack of major breakthrough here should not hinder forging close links on many other issues.
