India and China: Economics and Soft Power Diplomacy 9780367335540, 9780367335557, 9780429320538

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INDIA AND CHINA

This book looks at the changing dynamics of diplomacy of the two emerging global powers – India and China. It examines trade relations, cultural ties and economic engagements of both countries and their shifting influence in the region surrounding them. This volume takes an in-depth look at the trade and economic strategies of India and China through the prism of soft power diplomacy. It ref lects on the challenges the two countries face over bilateral trade negotiations, BRICS and China’s Silk Road project, along with other issues of foreign policy. The book underlines the decisive role of the soft power approach and greater people-to-people contact in the global strategies of India and China and in fostering greater cooperation in the region. The book will be of great interest to researchers and students of international relations, political science, public policy and international communications. It will also be useful for think tanks, policy makers and general readers who are interested in the India-China relationship and the politics of soft power diplomacy. Geeta Kochhar is Assistant Professor at the Centre for Chinese and South East Asian Studies, Jawaharlal Nehru University, New Delhi, India. She received her doctorate from the School of International Studies, Jawaharlal Nehru University, and is f luent in Mandarin Chinese. She was awarded the Asia Fellowship for research at CASS, China; and the Government of India MHRD “India-China Bilateral Cultural Exchange Scholarship” for advance studies in China. Her publications include Modern China: Society, Culture, and Literature (2019); China’s Foreign Policy and Security Dimensions (2018); Unique Asian Triangle: India, China, Nepal (2016, co-edited); India-China-Nepal: Decoding Trilateralism (2016); and Nepal’s Foreign Policy and Her Neighbours (2016). She also co-authored 1000 Powerful Chinese Lexicon: Chinese, English, Hindi (2017). Snehal Ajit Ulman is a PhD research scholar at the Centre for Chinese and South East Asian Studies, Jawaharlal Nehru University, New Delhi, India. He is also a Junior Research Fellowship holder and is currently teaching undergraduate first year students in Jawaharlal Nehru University. He was awarded a joint scholarship from the Government of China and the Ministry of Human Resource Development to study in China for a year (September 2012–July 2013). He has co-authored a book titled 1000 Powerful Chinese Lexicon: Chinese, English, Hindi (2017).

Routledge Critical Perspectives on India and China

India and China together are home to more than one-third of the world’s population. Two of the fastest growing economies today, these two nations will be key to the world’s future. This unique collaborative series between the Routledge India and China publishing programmes, aims to bring cutting-edge, interdisciplinary research from and on these two global powers. The books in this series will focus on topical and emergent issues in contemporary India and China, presenting new perspectives on politics, society, economy, environment, and culture. India and China Economics and Soft Power Diplomacy Edited by Geeta Kochhar and Snehal Ajit Ulman For more information about this series, please visit: www.routledge.com/Routledge-Critical-Perspectives-on-India-and-China/ book-series/RCPIC

INDIA AND CHINA Economics and Soft Power Diplomacy

Edited by Geeta Kochhar and Snehal Ajit Ulman

First published 2021 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 52 Vanderbilt Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2021 selection and editorial matter, Geeta Kochhar and Snehal Ajit Ulman; individual chapters, the contributors The right of Geeta Kochhar and Snehal Ajit Ulman to be identified as the authors of the editorial material, and of the authors for their individual chapters, has been asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data A catalog record has been requested for this book ISBN: 978-0-367-33554-0 (hbk) ISBN: 978-0-367-33555-7 (pbk) ISBN: 978-0-429-32053-8 (ebk) Typeset in Bembo by Apex CoVantage, LLC

CONTENTS

List of figures List of tables List of contributors Foreword Preface List of abbreviations Glossary 1 Scope for power transitions through soft power deployment: a comparative study of China and India Salonee Shital 2 Whither Pax Indica and Pax Sinica? Indian and Chinese soft power strategies Asma Masood

vii viii ix xi xiv xxi xxv

1

19

3 Sino-Indian economic relations: cooperation or conf lict? Sriparna Pathak

33

4 Irony of India-China engagement at the global forum Krishna Kumar Verma

53

5 Rise of the BRICS and changing world order: role of India and China Junuguru Srinivas

68

vi Contents

6 India and China in contemporary times: interactions and challenges in the Indian Ocean Mohor Chakraborty

86

7 The Sagarmala Project and the One Belt One Road Project: the convergence of India-China national interests Prosper Malangmei

100

8 India China bilateral trade through Nathu-La Pass: past and present Anil Kumar Biswas

116

9 Indo-Sino trade in the post-globalisation era Sundeep Kumar S

128

10 China’s Silk Road economic project, Central Asia and India’s interests Kamala Kumari 

143

Index

158

FIGURES

1.1 1.2 3.1 3.2 3.3 3.4 3.5 5.1 5.2

China’s International Memberships Indian and Chinese Trade With the US Bilateral Trade Between India and China: 1996–2015 China’s South Asia Trade The Trade Deficit FDI Inf low From China FDI Inf low From China Versus Total Inf low Share in Global GDP (PPP Basis) Projected Structure of the Global Economy (2014–2060)

4 6 38 40 41 46 47 74 75

TABLES

1.1 2.1 3.1 5.1 5.2 5.3 5.4

Political and Civil Liberties Comparison Between India and China Comparison of Indian and Chinese Arms of Soft Power: 2015–2016 Comparing India and China Global Real GDP Growth General Information About BRICS by 2014 BRICS Countries Foreign Exchange Reserves (Million US$) Historical and Projected Annual Growth Rates of GNP per Capita (%) (2005 $PPP)

9 20 34 70 72 73 82

CONTRIBUTORS

Anil Kumar Biswas is Assistant Professor at the Department of Political Science,

University of Burdwan, West Bengal. Asma Masood is Research Officer at the Chennai Center for China Studies,

Chennai. Geeta Kochhar, PhD, is Assistant Professor at the Centre for Chinese and South

East Asian Studies, School of Language, Literature and Culture Studies, Jawaharlal Nehru University, New Delhi. Junuguru Srinivas is a research scholar at the School of International Studies, Jawaharlal Nehru University, New Delhi. Kamala Kumari is Post-Doctoral Fellow at the Centre for Russian Central Asian

Studies, Jawaharlal Nehru University, New Delhi. Krishna Kumar Verma is a research scholar, ORG Division, at the Centre for International Politics, Organization and Disarmament, School of International Studies, Jawaharlal Nehru University, New Delhi. Mohor Chakraborty is Assistant Professor of Political Science at the South Cal-

cutta Girls’ College, Kolkata. Prosper Malangmei is a research scholar, Centre for East Asian Studies, School

of International Studies, Jawaharlal Nehru University, New Delhi. S. L. Narasimhan, PVSM, AVSM, VSM, PhD (Retd.), is a member of the National Security Advisory Board, India.

x Contributors

Salonee Shital is a research scholar, Centre for International Politics, Organisa-

tion and Disarmament, School of International Studies, Jawaharlal Nehru University, New Delhi. Snehal Ajit Ulman is a research scholar in Chinese, Centre for Chinese and South East Asian Studies, School of Language, Literature and Culture Studies, Jawaharlal Nehru University, New Delhi. Sriparna Pathak is Consultant at the Policy Planning and Research Division of

the Ministry of External Affairs, New Delhi. Sundeep Kumar S is Research Officer at the Chennai Center for China Studies,

Chennai.

FOREWORD

India and China are the two countries that get discussed in all the seminars and events around the world. The reason for that is both countries are growing in comprehensive national power. As is well known, comprehensive national power of a country is the sum of both soft and hard power. This edited volume deals with one aspect each of soft power and hard power. Soft power is a tool that is used by countries either to overcome the shortage of hard power or to soften their aggressive initiatives. China is the second and India the seventh largest economies in the world. When a country’s comprehensive national power increases, its inf luence increases outwards in concentric circles. This increase in inf luence takes place with a combination of soft and hard power. This volume addresses the soft power diplomacy and economy-related issues of such a combination. India and China are involved in a complicated bilateral relationship. Both countries are in the process of increasing their inf luence. More often than not, their paths cross in this process. Asia needs approximately US $ 26 trillion in investments for infrastructure development till 2030. On economic terms, China has deep pockets. Of late, India has also been extending large lines of credit to various countries of her interest. Both countries have been trying to increase their cultural relationships, people-to-people contacts, exchange of students for education and medical tourism. There is a huge scope for use of soft power between both the countries and also by both in other countries. China’s United Front Work Department carries out activities to project China’s soft power. It undertakes establishment of Confucius institutes, Chinese language centres, Chinese traditional medicine centres, etc. It also backs them up with funding. Some countries have found the activities of these institutions not acceptable. However, these institutions function in a large number of countries. Salonee Shital analyses the impact of soft power of China in its peaceful rise. That chapter also analyses the use of soft power by both countries. As Asma

xii Foreword

Masood brings out in her chapter, India has traditionally leveraged her culture in international relations. Comparatively India’s culture is seen as benign and valued highly for its richness. China decided to wield its economic power by announcing the One Belt One Road Initiative in 2013. She also conducted two forums in 2017 and 2019 to showcase the Initiative and also to get the countries to sign the trade agreements. China claims 130 countries have signed on to this Initiative. Almost all the projects that China carries out in those countries are grouped under this Initiative. China is expected to have invested about US $ 350 billion in these projects. Sriparna Pathak in her chapter has covered the trade deficit between India and China which is pegged at approximately US $ 60 billion this year. This is unsustainable for India. Even though Mr Xi Jinping announced an investment of US $ 20 billion when he visited India in 2014, hardly a couple of billions of US dollars have been invested in India. Post the Wuhan summit between Mr Modi and Mr Xi in April 2018, there has been some positive movement towards reducing the trade deficit between both the countries. The USChina trade dispute has also contributed a bit towards China easing up on trade towards India. To be fair, India also needs to work towards further improving ease of business in India. Security-related issues should be borne in mind but in a realistic manner. Krishna Kumar Verma deals with India and China’s engagement in multilateral fora. He brings out the fact that both cooperate in forums like the World Trade Organization, climate change and in financial institutions like the Asian Infrastructure Investment Bank (AIIB) and New Development Bank (NDB). He also highlights that even though both countries cooperate in some forums, they do not do so in organisations such as the UN Security Council and Nuclear Suppliers Group. It is a fact that the growth of countries in the West slowed down and the growth of economy shifted to the East. However, the Western countries insist that the governance and financial structure established earlier by them be followed. This stance is unsustainable in the dynamic international environment that we see today. So, new groupings like Brazil, Russia, India, China and South Africa (BRICS) came up. Junuguru Srinivas analyses the interplay of India and China in forums like BRICS and their role in shaping the new world order. He has also dealt with the efficacy of the BRICS. The Indo-Pacific concept has been an issue in India-China relations in the recent past. One part of this concept is the Indian Ocean, where geographically India is poised well to take care of the security requirements in this region. Mohor Chakraborty discusses the role of the Indian Navy in the light of the Indian Maritime Security Strategy brought out by the Indian Navy and Project Mausam. Prosper Malangmei argues that the Sagarmala Project could benefit from China’s One Belt One Road (OBOR) Project. In particular, he says that the China-Pakistan Economic Corridor (CPEC) and Bangladesh-China-IndiaMyanmar Economic Corridor (BCIM-EC), which are parts of One Belt One Road Project, could be linked up with the Sagarmala Project to integrate the

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two Asian economic giants. However, this seems unlikely because, even though China says that she understands India’s concerns of territorial integrity and sovereignty due to CPEC passing through Pakistan Occupied Kashmir, she does not seem to be inclined to do anything about it. BCIM-EC precedes OBOR. China’s insistence on including it in OBOR has acted as a dampener. India supports connectivity as it brings in development and uplifts the living standards of people. There seems to be some forward movement on this in the recent past. One has to wait and watch as to how this issue develops further. Malangmei also feels that institutionalised economic cooperation could advance better relations as liberal institutionalism foresees it. One of the important features of India-China relations is the trade between them. While the total volume of trade is increasing, the trade deficit that India faces is also increasing. The chapter on trade at Nathu-La by Anil Kumar Biswas analyses the trade that is carried out across this pass and tries to come up with suggestions to improve it. However, an important aspect of this trade needs to be borne in mind. When the border trade at Nathu-La resumed on 06 July 2006, it was and now also is supposed to be border trade. By definition, border trade is different from bilateral trade. This particular distinction needs to be kept in mind when the trade at Nathu-La and other points at which border trade is conducted between India and China is analysed. Sundeep Kumar S analyses IndiaChina bilateral trade under the shadow of diverging views on trade between globalisation that is supported by India and China and the protectionist policies of the USA. He highlights the fact that India and China are complementing each other in AIIB and the NDB. An important aspect of this complementary relationship is the fact that both these banks follow international norms and the transactions are transparent. The last chapter by Kamala Kumari deals with OBOR in Central Asia and its impact. She also draws out implications for India. Though the Silk Road Economic Belt (SREB) claims Russia is part of it, the major routes being developed under this scheme have left out Russia. It is also interesting to note that Russia has not signed the Memorandum of Understanding on OBOR with China. Notwithstanding, OBOR is a project that is likely to progress though there have been questions of economic viability of these projects. There have also been internal discussions in China about the prudence of investing large sums of Chinese money in countries with questionable financial standing. All the same it is a gigantic project which may well succeed. This ten-chapter edited volume is timely and covers the aspects of soft power manifestation and economic relationship between India and China. The chapters display high-quality research and deal with some of the contentious issues. This volume will be a rich resource for those who study and follow the bilateral relations between India and China. Lt. Gen. S. L. Narasimhan PVSM, AVSM*, VSM, PhD (Retd.), Member of the National Security Advisory Board, India

PREFACE

Soft power is now a subject of much debate in use of diplomacy. Since Joseph Nye in 1990 first coined the term ‘soft power’ in his work Bound to Lead: The Changing Nature of American Power, there were many scholars looking at the other aspect of hard power and diplomacy. In 2004, Nye further elaborated on his formulation in his book Soft Power: The Means to Success in World Politics. Thereafter, it is not just academicians pondering on the merits and demerits of soft power, but the states have incorporated it as a tool in diplomacy, strategy, communication, and in economic and social engagement with other foreign powers. As the world is undergoing power transitions, especially with the rise of new powers, the focus is on Asia and the emergence of Asia as a power hub, where India and China have dominated the entire discourse on regional asymmetry and the main drivers of initiating the change of global politics. In particular, the region is central to global strategies and geopolitics using all parameters of engagement and contestation. With all eyes set on India-China engagement with other regional players in economics, trade, cultural, and social spheres, there is an inevitable prism of soft power diplomacy ref lective of the current changes. The inf luence each side will have on other regional players will not be dependent on hard power strategies alone, but soft power approaches will play a crucial decisive role. It is thus imperative to dwell upon the various strategies adopted by both India and China, as the main emerging power centres of the region, in order to reshape the power dynamics and create new power equations that is likely to define the new world order and international system. The main issues that arise out of the diplomacy of engagement politics is whether India and China will cooperate, compete, or coax to inf luence each other? This is pertinent as both powers have a history of confrontation that remains unresolved due to the legacy of colonial powers. Hence, it is worth questioning as to what kind of policies and strategies will be adopted by both

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powers to evolve a new system of regional and global order? Will the border issue and clash of interests hinder the cooperative angle or will both powers take advantage of alternative strategies to engage in multilateral and bilateral forums? Will soft power override the hard power essential in dealing with the challenges they are facing in their regional power conf lict? Will India and China be able to effectively use both hard and soft power strategies to challenge and reshape the existing world order? The aim here is to have a larger perspective of young intellectual minds of India to look at various aspects of bilateral relations between India and China. Hence, the collection is looking at all aspects of cooperation, confrontation, economic and trade relations, as well as regional and global ambitions of both powers. Salonee Shital, while exploring the concept of soft power as coined by Joseph Nye in the 1990s, looks at its relevance in the present changing world. In her comparison of India and China, she argues that with the coming of nuclear weapons and increased trade coupled with the information technology, the character of power transition has changed considerably. The first part of her chapter focuses on the successful deployment of soft power by China in various areas. It also dwells with the great power transitions looking at the writings of Organski and the possibility of the much talked about peaceful rise of China through the successful use of soft power. In the later part, she analyses the scope of soft power diplomacy by India. Here, she also suggests the untapped sources of soft power that India possess and could prove useful in the future. The thrust is on comprehending the effective use of soft power by the two middle powers to expand their power and inf luence in the world order and claim a greater power share. The strategies of soft power are looked at from the perspective of Pax Indica and Pax Sinica by Asma Masood. She stresses that in the present day’s foreign policy formulae, soft power is an essential dimension. China has institutionalised soft power, recognising its potential to counter American global inf luence. Meanwhile, India is continuing to follow its long tradition of cultural engagement with the rest of the world, as it has down the ages, with some greater governmental inputs and initiatives. Indian culture has a ‘visa’ since olden days that permeates willing borders. She argues that regardless of intentions, Indian and Chinese soft power will play a significant role in shaping foreign policies of the two countries set to lead the changing world order. In an era of rising nationalism, it remains to be seen if political foreign policy will affect sending out and receiving soft power schemes. Yet, she believes that the changing world order cannot be governed by economic and strategic elements alone. Hence, she looks on the possibilities and pragmatics of balancing political imperative with cultural contours by both India and China in an age of technology and visual gratification. Sriparna Pathak looks at the formulation of the ‘Asian Century’ with the rising economic growth rates of both India and China in the 21st century. She argues that both India and China have emerged as significant players in the international system; and beyond their own positions in the system, they are also

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shaping discourses at the international level through their individual capacities as well as through multilateral regimes that they are part of. However, their similar stances on several issues and their mere geographical location within Asia do not mean the bilateral relations between the two are not fraught with tensions. Beyond the boundary dispute, trade imbalance with a persisting deficit for India is an enduring irritant in bilateral relations. While the boundary dispute is a leftover from history, trade deficit has become a relatively newer yet constant feature of Sino-Indian relations, especially in the past decade. In 2003–04, the gap between imports and exports was USD 1098.13 million, with the balance tilting in China’s favour. In 2013–14, the deficit has grown to USD 36,210.26 million, and the balance still tilts in China’s favour. The growth in deficit for India therefore in a span of ten years has been 319.74 per cent. If the current situation persists, India will experience an unsustainable trade deficit of USD 60,000 million. The high trade imbalance, therefore, is a major concern. While China often faces security concerns from the Indian side in market access for its products, Indian products simply face a range of tariff and non-tariff barriers in China. She, therefore, uses a lens of thorny issues in Sino-Indian economic relations so as to understand a way forward for a smoother relationship that dwells on the economic aspect of the bilateral relations. Krishna Kumar Verma looks at the larger dynamics of India-China bilateral relations in the global as well as regional institutions. He argues that though India-China engagement at global forums began when they became founding members of League of Nations and United Nations, the real engagement took place only when People’s Republic of China occupied a UNSC permanent seat at United Nations and Republic of China (Taiwan) in 1971. However, in 1955, they came together through an Asia-Africa conference in Bandung (Indonesia) for framing the role of developing countries regarding the Cold War, economic development and decolonisation. Yet, these hard strategies did not do much for the betterment of the relationship and the two sides fought a war in 1962. He opines that the practical engagement between India and China only became reality when these countries went into the race of becoming the fastest growing economy after adopting economic liberation policy. There were other imperatives for engagement such as similar approaches over various global issues like climate change negotiations and WTO ministerial meetings since 2001. Meanwhile, alternative dynamics of engagement have emerged like BRICS Bank and AIIB (Asian Infrastructural Investment Bank) in order to protest for and demand just economic order. Yet, there runs an undercurrent of competition as collaborations at different global forums (AIIB, SCO, BRICS, COP, climate change negotiations, etc.) have not helped India gain Chinese veto support over India’s inclusion in NSG (Nuclear Supplier Group) and UNSC (United Nations Security Council). Hence, the diplomatic engagement at both hard and soft power levels remain as an ironic puzzle, though both countries are playing a major role together in formulating economic regimes with developed countries at the G-20 after the 2008 financial crisis.

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Junuguru Srinivas explores the regional role played by India and China, especially in relation to the formation of BRICS and its role in reshaping the world order. He posits that the two decades of globalisation have led to many changes in the economic status of countries. Countries of the European Union have faced stagnation and recession, while several southern countries have shown high growth and economic development. The fast-growing economies of China, India, and Brazil stand out in this regard. These changes have impelled changes in the international system, which shifted after the end of the Cold War bi-polar system, where one superpower – the United States (US) – dominated international politics. The international forums and institutions, both formal like the World Bank and International Monetary Fund (IMF) and informal like G-8 and G-20, continued to be dominated by the Western countries, especially the US and European Union. Even though Europe faced economic crises, and the economic strength of others increased, this domination did not change. The need for new formations resulted in the creation of the group called BRICS, consisting of major regional and global powers like China, India, Brazil, Russia, and South Africa. Its inter-continental representation and their positive growth made it a more significant entity in present global politics. The BRICS group has given space for India-China to huddle together once again in world politics. However, the role of India and China is becoming a debating point in the group regularly due to its bilateral skirmishes. With this perspective, he analyses the changing dimensions of world politics and explores whether the rise of the BRICS is inevitable or if it is a myth. Mohor Chakraborty engages with the new policy formulations of both India and China vis-à-vis the rising oceanic powers and the related strategies to enhance their sphere of inf luence. She points out that the ascending stature of India as an Indian Ocean power is by no means a recent acknowledgement. India’s geographical location, jutting out for a thousand miles into the Indian Ocean, and being walled off on three sides by land, has endowed it with a strategic security sphere over the entire Indian Ocean Region (IOR). The imperative of India safeguarding the IOR emerges from its centrality in the region, an extensive coastline of over 7516 km, an Exclusive Economic Zone (EEZ) of 2.172 million sq. km and a continental shelf of more than 1 million sq. km beyond the EEZ. Based on these considerations, the modern vision of the country’s responsible power profile in the IOR has been outlined by the Indian Naval Doctrine (inaugurated in 2004 and modified subsequently in 2007, 2009, and 2015), which constitutes an edifice of India’s ‘Look East’ policy, precursor to the present ‘Act East’. Given this premise, she analyses India’s role as a responsible Indian Ocean power, in the sphere of both traditional and non-traditional security computations, as well as takes stock of its stature as a balancer to China’s graduating military and strategic assertiveness in the region. Of particular concern to Indian strategic equations and understanding is the 21st-century Maritime Silk Road (MSR) – the maritime component of China’s ambitious Belt and Road Initiative (BRI) – which is providing Beijing its geo-strategic rationale to

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increase its footprints in the IOR. She discusses Indian policy responses to China’s regional overtures from the following perspectives: first, the maritime guidance document, christened ‘Ensuring Secure Seas: Indian Maritime Security Strategy, 2015’; second, the renewed emphasis of the Indian Navy in securing the IOR, while acknowledging the Navy’s central role as a net security provider; third, the proactive role of ‘Act East’ policy; and finally, the projection of its soft power through ‘Project Mausam’. Prosper Malangmei dwells on the convergence of interests of both Indian and China in formulating grand foreign policy formulations. In his opinion, the two fastest growing economies of the world – India and China – lie a few miles apart in terms of growth rates. Yet, being geographically continental in size and financially demonstrating their economic growth prowess, the two countries should take advantage of their geographic proximity. In 2015, India launched the Sagarmala Project, indicating that the development of coastal economic zones is vital for the growth of national economy. Under this project, India’s intent is to develop major ports and thereby bring in ports-induced development. He argues that the Sagarmala Project could take the benefit of China’s One Belt One Road Project. In particular, the China-Pakistan Economic Corridor and the Bangladesh-China-India-Myanmar Economic Corridor, which are parts of One Belt One Road Project, could be linked up with the Sagarmala Project to integrate the two Asian economic giants. An institutionalised economic cooperation could advance better relations as liberal institutionalism foresees it. Furthermore, it is in the national interests of both India and China to conjoin these projects that could enhance their national economic development, progress, and sustainability. Anil Kumar Biswas dwells on the religious aspect of the relationship between India and China while exploring the challenges to the Nathu-La border route. He posits that China and India both are the emerging economies in the present global market. Both are among the age-old civilisations in the world. Traditionally they are rich in ideas and cultural beliefs. Since ancient times these two countries have been sharing their ideas, cultural beliefs and engaging in trade and business. Since then the Nathu-La Pass played an important role for protecting the friendly relationship between the two neighbours. In early days, Buddhism reached China through this route and many monks from China came to India to learn about Buddhism. Although trade and business kept going on this route, the discovery of sea routes decreased the importance of the land route. Moreover, engagement through this route decreased further and finally came to halt in 1962 when the India-China War broke out. Nathu-La Pass re-opened in 2006, after a long gap of 44 years. Initially both governments permitted 44 items for trade on this route and another 12 items were included in this list in 2012. The last ten years’ experience suggests that although business between both the countries has gradually increased and prospects between the two Asian giants are still brilliant, they are facing some serious challenges. Therefore, he analyses the past and present scenario of the trade relationship between the both

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countries via Nathu-La Pass. It also looks at the new prospects of this route along with the main challenges which are creating hindrances for trade and business on this route. Sundeep Kumar S looks at the trade protectionism as a tool of competition and approaches of both India and China. He opines that the 2008 global financial crisis has led to scepticism around globalisation. As a result, the West is increasingly adopting protectionist policies, leading to global trade becoming more challenging than ever. While China’s economic growth over the last 30 years was primarily driven by investment and exports, it currently faces challenges to rebalance its economy. From an investment and export-oriented growth model, the transformation is underway to become an industrialised and domestic consumption-led economy. With increasing labour costs, investments in China have started to become less attractive for multinationals. This is ref lected by the slowing growth rates of China, which have recently come down to a 25-year low of 6.7 per cent. On the other hand, India, with an envious service sector, aims to increase the contribution of its manufacturing sector to GDP. Major reforms and campaigns such as Goods and Services Tax (GST) and ‘Make in India’ have been formulated to attract investments in the manufacturing sector. Despite India’s growing trade deficit with China which summed up to a whopping USD 52 billion in 2016, there is huge potential for deepening economic cooperation between the two Asian giants. India membership in the China-initiated Asian Infrastructure Investment Bank (AIIB) and the Regional Comprehensive Economic Partnership (RCEP) indicate the willingness from both sides to cooperate on the economic front. He argues that the two countries have shown common interest in driving global trade which is backed by investments. This potentially stands counter to the current Western protectionist rhetoric. He analyses the possibilities of future trade cooperation between India and China in an environment of protectionist attitudes of the Western countries in general and the USA with Donald Trump as the president in particular. Kamala Kumari explores the dreams of the Chinese state to expand its sphere of inf luence with the Silk Road strategy, while highlighting that there would be resistance from India and some counter strategies to tame down the inf luence. She posits that the Silk Road Economic Belt (SREB) is basically a revival of the old silk route – the land route via Eurasia. This new silk route, which actually is an expanding network of transportation infrastructure linking the West and the East, is through the networks trying to connect carefully and deliberately to minerals and energy sources and at the same time get access to cities, harbours, and oceans. China launched its ‘Silk Road Economic Belt’ initiative in Astana, Kazakhstan, in September 2013, where President Xi Jinping was on a state visit. President Xi proposed the concept of the SREB which is part of his ‘China Dream’. The SREB focuses on bringing together China, Central Asia, Russia, and Europe. It will be linking China with the Persian Gulf and the Mediterranean Sea through Central Asia and West Asia. The SREB actually builds on China’s long-standing economic investments in Central Asia, and believes it still

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has the potential to further develop Central Asian economies. The same year in October, on a visit to Indonesia, President Xi put forward the idea of a ‘Maritime Silk Road of the Twenty-First Century’ (MSR). Incidentally in the Chinese lexicon the two initiatives are referred to as the Belt and the Road or the One Belt One Road (OBOR). Kumari argues that taken together the ‘Belt and Road’ initiatives ref lect China’s core strategy and policy orientation. As China seeks to expand its sphere of inf luence, economically or geopolitically, it is likely to encounter significant resistance, not just from the central Asian countries, but would pose challenges to Indian interests and hence the opposition. Geeta Kochhar

ABBREVIATIONS

ADMM AE AFSPA AIIB APEC APEDA API ASEAN ASEM BASIC BCIM-EC BIMSTEC BRI BRIC BRICS CAR CAREC CAS CASCADE CCP CGFII CII CNKI CNM CNPC

ASEAN Defence Ministers Meeting Advanced Economies Armed Forces (Special Powers) Act Asian Infrastructure Investment Bank Asia-Pacific Economic Cooperation Agricultural and Processed Food Products Export Development Authority Active Pharmaceutical Ingredients Association of South East Asian Nations Asia-Europe Meeting Brazil, South Africa, India and China Bangladesh-China-India-Myanmar Economic Corridor Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation Belt and Road Initiative Brazil, Russia, India and China Brazil, Russia, India, China and South Africa Central Asian Republic Central Asia Regional Economic Cooperation Central Asian States Committee Against Smuggling and Counterfeiting Activities Chinese Communist Party Catalogue for the Guidance of Foreign Investment in Industries Confederation of Indian Industry China National Knowledge Infrastructure Chief Negotiators Meetings China National Petroleum Corporation

xxii

Abbreviations

COP CPC CPEC CSMEI CTBT CTC DCR DSB EEU EEZ EMDE ERL EU FDI FICCI FMCG FTA G-4 G-7 G-8 G-20 GATT GDP GHG GIIC GMS GNI GST HDI HEU IBRD IBSA ICCR IEC IGO IIT IMF IMSS INGO INR INSTC IONS IOR IORA

Conference of Parties Communist Party of China China-Pakistan Economic Corridor China Small and Medium Enterprise Investment Limited Comprehensive Nuclear-Test-Ban Treaty Counter-Terrorism Committee Domestic Content Requirements Dispute Settlement Body Eurasian Economic Union Exclusive Economic Zone Emerging Markets and Developing Economies Engineering Research Laboratories European Union Foreign Direct Investment Federation of Indian Chambers of Commerce and Industry Fast-Moving Consumer Goods Free Trade Agreement Group of 4 Nations (Brazil, India, Japan and Germany) Group of 7 Nations Group of 8 Nations Group of 20 Nations General Agreement on Tariffs and Trade Gross Domestic Product Greenhouse Gas Guizhou International Investment Cooperation Greater Mekong Sub-region Gross National Income Goods and Services Tax Human Development Index Highly Enriched Uranium International Bank for Reconstruction and Development India, Brazil and South Africa Indian Council for Cultural Relations Import Export Code Inter-Governmental Organisation Indian Institute of Technology International Monetary Fund Indian Maritime Security Strategy International Non-Governmental Organisation Indian National Rupee International North–South Transport Corridor Indian Ocean Naval Symposium Indian Ocean Region Indian Ocean Rim Association

Abbreviations

IOR-ARC IPR IS/ISIS IT/ITES K2K KMTTP LPG MDG MFN MIP MoU MSME MSR MTCR NAM NATO NDB NDRC NGO NPT NSG OBOR OECD OIC PCA PCPIR PM POK PPP PRC RCEP RIC RMB SAARC SCO SDT SEZ SLOC SREB SRF Silk TAR TCC/PCC

Indian Ocean Rim Association for Regional Cooperation International Property Rights Islamic State/Islamic State of Iraq and Syria Information Technology/Information Technology Enabled Services Kolkata to Kunming Kaladan Multimodal Transit Transport Project Liberalisation, Privatisation and Globalisation Millennium Developmental Goals Most Favoured Nation Minimum Import Price Memorandum of Understanding Micro, Small and Medium Enterprises Maritime Silk Road Missile Technology Control Regime Non-Alignment Movement North Atlantic Treaty Organisation New Development Bank National Development and Reform Commission (China) Non-Governmental Organisation Non-Proliferation Treaty Nuclear Supplier Group One Belt One Road Organization for Economic Cooperation and Development Organisation of Islamic Cooperation Permanent Court of Arbitration Petroleum Chemicals and Petrochemical Investment Region Prime Minister Pakistan Occupied Kashmir Purchasing Power Parity People’s Republic of China Regional Comprehensive Economic Partnership Russia, India, China Renminbi (Chinese Currency Yuan) South Asian Association for Regional Cooperation Shanghai Cooperation Organisation Special and Differentiated Treatment Special Economic Zones Sea Lanes of Communication Silk Road Economic Belt Road Fund Tibetan Autonomous Region Troop Contributing Countries and Police Contributing Countries

xxiii

xxiv

Abbreviations

TPP UF6 UN UNESCO UNGA UNHRC UNPK UNPKO UNSC UPC USA/US USD USSR WTO

Trans Pacific Partnership Uranium Hexaf luoride United Nations United Nations Educational, Scientific and Cultural Organization United Nations General Assembly United Nations Human Rights Council United Nations Peacekeeping United Nations Peacekeeping Operations United Nations Security Council Unique Product Code United States of America United States Dollar Union of Soviet Socialist Republics World Trade Organization

GLOSSARY

Sr No. Chinese 1 2 3 4 5 6

7 8 9 10 11 12 13 14 15 16 17 18 19

愤青 海上丝绸之路 和平崛起 和谐世界 另起炉灶 求同存异

Pinyin Fenqing Haishang sichou zhi lu Heping jueqi Hexie shijie Ling qi luzao Qiutong cunyi

English

Angry Youth Maritime Silk Road/Route Peaceful Rise Harmonious World Setting Up a Different Kitchen Seeking Common Ground/ Overcoming Differences and Seeking Common Ground 人民币 Renminbi Chinese Yuan (RMB) 上海合作组织 Shanghai hezuo zuzhi Shanghai Cooperation Organisation 社会主义市场经济 Shehuizhuyi shichang Socialist Market Economy jingji 丝绸之路 Sichou zhi lu (Ancient) Silk Road 丝绸之路经济带 Sichou zhi lu jingjidai Silk Road Economic Belt 丝路基金 Silu jijin Silk Road Fund 网文 Wangwen Online Literature 小粉红, Xiao fenhong Little Pinks 新常态 Xinchangtai New Normal 亚洲世纪 Yazhou shiji Asian Century 一带一路 Yidai yilu Belt and Road Initiative/One Belt One Road 中国-巴基斯坦经济走廊 Zhongguo bajisitan China-Pakistan Economic jingji zhoulang Corridor 中国梦 Zhongguo meng China Dream 自干五/自带干粮的五毛 Ziganwu/zidai Voluntary Fifty-cent Army ganliang de wumao

1 SCOPE FOR POWER TRANSITIONS THROUGH SOFT POWER DEPLOYMENT A comparative study of China and India Salonee Shital

Soft power and middle powers Joseph Nye came up with term soft power in his book Bound to Lead in 1990. Nye argues that in today’s world the traditional understanding of power is insufficient because the definition of power is ‘losing its emphasis on military force and conquest that marked earlier eras’. He also argues that ‘proof of power lies not in resources but in the ability to change behaviour of states’ (Nye, 1990:155). Nye suggests that states need to accept the limitations of military power and try to supplement it. In modern times the complex interdependence has increased considerably. The information revolution has changed how states interact with each other and also how citizens interact and engage with each other. It changes international relations dramatically. It’s easy for the modernists to get swept away by the information revolution. Some go as far as to call the states redundant. However, Keohane and Nye argue that Politics will affect the information revolution as much as vice versa (Keohane and Nye, 1998:85). If a state can make its power legitimate in the eyes of others and establish international institutions that encourage others to define their interests in compatible ways, it may not need to expend as many costly traditional economic or military resources. (Keohane and Nye, 1998:86) Nye notes that power has always been less fungible than money, especially now more than ever. Hence military or economic power cannot be considered as a means to another end. With nationalism on the rise in poor or weak states, great powers won’t be able to use military power as easily as they used to before ( Nye, 1990:156). Great powers can no longer just rely on the traditional sources

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of power. It therefore becomes important that states consciously develop what he calls soft power. Nye defines soft power as: getting others to want the outcomes that you want-co-opt people rather than coerce them. (Nye, 2004:5) On the sources of soft power, he writes, The soft power of a country rests primarily on three resources: its culture (in places where it is attractive to others), its political values (when it lives up to them at home and abroad), and its foreign policies (when they are seen as legitimate and having moral authority. (Nye, 2004:11) He clarifies that its more than just inf luence, it’s also the ability to attract. The increase in significance of soft power has made room for the middle powers to expand power in untraditional ways without fear of balancing due to a security dilemma, precisely because the opening up of Confucius institutions doesn’t seem threatening enough to start balancing against. Middle powers thus can safely aspire to generate more soft power to enhance their footing in the international world order. Middle powers are powers that can’t be called great powers but are not insignificant in the world politics because of their size, economy, military power and other power attributes. According to the Realist assumptions, these are most usually power seekers who won’t be satisfied with the status quo. Writing in 1998, Keohane and Nye predicted that in the next century information technology is likely to be the most important power resource. It should therefore not come as a surprise that two old civilisation powers, i.e. China and India, that now boast of a considerable chunk of information technology are trying to be more than middle powers, a designation that both have had for a long time now. In the coming section the chapter looks into the various ways in which these two middle powers have tried to expand their power in world politics to claim a bigger piece of pie.

Great power transitions The world has witnessed great power transitions a number of times in history and it has resulted in wars on most of these occasions. However, a power transition might not necessarily lead to a dyadic warfare, although it could very well be one of the reasons behind it. Power transitions also tend to generate fear and hope (Houweling and Siccama, 1991:643). Lemke and Tammen believe that the power transition theory has grabbed the attention of scholars precisely because it offers

Scope for power transitions

3

falsifiable expectations about the future of world politics (2003:270). Nye notes that in the 21st century the sources of power may undergo some major changes. He also maintains that it would be a lot more difficult for any state to control the political environment (Nye, 1990:155). The no effect theory led by Organski propounds that possession of nuclear weapons has no effect on the incidence of war: possession of nuclear weapons by one or both countries in a pair of states does not suppress the willingness to take risks or embark on conf lict within that dyad. ( Houweling and Siccama, 1988:87) Organski argues that transitions of power are the mechanisms that produce major war and under this approach even nuclear arms are not capable of neutralising readiness to embark on conf lict and war (ibid.). This is opposed to the beliefs of Kenneth Waltz, who maintains that nuclear weapons are: a tremendous force for peace and affords nations that possess them the possibility of security at reasonable cost. (Waltz, 1990:731) Organski believes that nuclear weapons cannot put an end to the willingness of the nations to go on war with each other and although he admits that the cost of war has increased considerably, the pattern and challenge remain the same. In fact, according to him, the higher the position of a nation in international hierarchy, the more often the state would go to war. He concludes that there won’t be a military conf lict among the most powerful nations if the power is shared equally by both members of each pair, and when one member is not in the process of overtaking another. However, he makes an exception in cases where great powers are involved since they can go to war if the balance of power is unstable and if one member of the pair is in the process of overtaking the other in power (Houweling and Siccama, 1988:93).

Reasons for the peaceful rise of China It is argued by Chinese scholars as well as Chinese leadership that China is aiming for a ‘Peaceful Rise’ (和平崛起, Heping jueqi) (Li, 2009b:36). The term Heping jueqi, or Peaceful Rise, is used quite often by Chinese scholars when they refer to China’s rise. It would obviously imply that although China has goals to be a regional hegemon, it does not aim to even initiate a process to ‘overtake’ the United States of America (US) anytime soon. China has resisted the urge to translate its ambitions of being economically powerful to concrete military superiority over the US. Johnston notes that ‘China moved from being a

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revolutionary revisionist state to a more status quo-oriented one in forty-odd years’ ( Johnston, 2003:49). Lemke and Tammen state that Should China surpass the United States as the world’s most powerful state while having no substantial demands for change to the international system’s organizing principles, power transition theory postulates that catastrophic war likely will be averted.  (2003:270)  China has also actively tried to be a part of the international community by joining a large number of international organisations, entering into free trade agreement with other states, signing the Comprehensive Nuclear-TestBan Treaty (CTBT), etc. Till the year 2000 China had about 50 international memberships; although fewer than US and India, it scored well above the world average ( Johnston, 2003:13). Figure 1.1 clearly shows the increase in the number of memberships that China held from 1966 through 2000. Some scholars have argued that warfare between major states is not a purely dyadic affair and a lot depends on what the bystanders do or do not do. Since both the countries are very active in international organisations, there is a lot of scope for intervention

2000

50

1996

51

1987

1960 2

1079

35

1977 21 1966 1

1257

504

71

58 30

0

200

400

600

800

1000

1200

1400

Inter-Governmental Organisations (IGOs) International Non-Governmental Organisations (INGOs) FIGURE 1.1

China’s International Memberships

Sources: Yearbook of International Organizations, 38th ed., cited in Johnston (2003); Yearbook of International Organizations, 3rd ed. vol. 2, cited in Kim (1999)

Scope for power transitions

5

by other states and organisations, hence limiting the friction between the two major powers.

The liberal theory The other compelling reason against any confrontation among these two states would be the standard liberal argument that states would rather trade than go to war with each other. Any confrontation between the two states could eventually escalate to war and hamper the more than healthy trade that has been going on between the two states for more than two decades now. According to simple liberal logic, both the states would want to maintain the interdependence and benefit from the mutual trade. In modern times information technology has integrated societies further (Keohane and Nye, 1998:82). Trade between US and China is f lourishing. It has been on an increase ever since China adopted liberal policies (Figure 1.2).

The deterrence theory Both the US and China are two of the five ‘legitimate’ nuclear weapon states. Any conventional war or military confrontation between the two states has the potential to escalate into a nuclear war. As discussed earlier, Organski believes that even nuclear weapons cannot stop major powers from going to war with each other in a power transition. Kenneth Waltz on the other hand argues that with nuclear weapons in the picture, the political leaders will be wary of any threat of war since they will have to consider not just the first phase, as is true in many cases where only conventional weapons are at disposal. In these cases the leaders will also weigh in what their last step might be before they get involved in a conf lict (Waltz, 1990:734). Waltz claims that nuclear weapons dominate strategy and that probability of a major war between two nuclear powers approaches zero. If Waltz is to be believed, the US and China would avoid any major confrontation at all costs simply because it would be detrimental to their existence. It could be concluded from the liberal trade argument and the deterrence theory as well as the complex interdependence in the information age that war among these two major powers is highly unlikely. There has been little evidence to support that American cynicism regarding China is true or that China would want to draw more attention towards its rise to power. It however doesn’t mean that China is not trying to acquire more powers and challenge the US hegemony at all. Soft power has obviously caught the attention of the leaders in China who envisage soft power as the best means to expand Chinese power. Chinese authors have often defined soft power as ‘soft use of power’ (Li, 2009a:7). It shows the Chinese eagerness to avoid any all-out conf licts with the big guys.

Chinese Imports

Sources: US Census Bureau (2020a; 2020b)

Chinese Exports

Indian Imports

Indian Exports

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Indian and Chinese Trade With the US

0.00

50,000.00

100,000.00

150,000.00

200,000.00

250,000.00

300,000.00

350,000.00

400,000.00

450,000.00

500,000.00

FIGURE 1.2

US Dollars in Millions

6 Salonee Shital

Scope for power transitions

7

Li quotes Fareed Zakaria in his book Soft Power: China’s Emerging Strategy in International Politics: China has used soft power only in the sense that it has exercised its power softly. It does this consciously to show that it is not a bully. (Li, 2009a:2) The fact that Chinese soft power has become a hot topic in international relations clearly ref lects that China’s efforts are not going unnoticed. The sheer amount of literature on the topic shows that decision makers and opinion leaders have the agenda of soft power on their minds. There have been various conferences and publications on the same. The Chinese Communist Party (CCP) has also given soft power a lot of attention. Li also notes, The China National Knowledge Infrastructure (CNKI) database, currently the largest and most comprehensive database of Chinese journals and periodicals, can be used to run a simple search. Searching the three sections of CNKI’s journals and periodicals – liberal arts/history/philosophy, politics/military affairs/law, and education/comprehensive social sciences – resulted in 485 papers with the term “soft power” in their titles from 1994 to 2007. (Li, 2009b:24) It is evident then, that China, mindful of a peaceful rise, is deploying its soft power to enhance its position in the world order. The increased significance of soft power is obvious from the Confucius institutions, the increased reference to soft power by the Chinese elite and the tremendous increase of interest in soft power in academic circles.

Rise of Chinese soft power All the evidence hence clearly suggests that China is actively trying to generate soft power. Joshua Kurlantzick in his book claims that by the early 2000s China’s ‘charm offensive’ had begun. It has been argued by many that China has emerged as a potential competitor to the US by tactically using its soft power by the means of its values and culture, and as a result various surveys show that China has increased its international affinity in the world (Cho and Jeong, 2008:453). The terms that are often used to describe the rise of Chinese soft power are responsible power, peaceful rise, harmonious world, good neighbourhood policy, etc. (Cho and Jeong, 2008:455). It’s obvious that for China it’s the booming economy that gives the biggest boost to its soft power. Beijing is said to be attractive to developing countries as opposed to Washington simply because it seems more relevant in some societies and also because it emphasises development based on the countries’ own characteristics. China’s rapid economic

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growth has also contributed in its enhanced attraction for foreigners. It results directly in the increase in the number of tourists that visit China every year. In fact, the numbers have been increasing ever since China’s markets opened up. The Chinese Diaspora is another important source of soft power for the Chinese government. The Chinese Diaspora is spread all over the world in considerable numbers. Chinese presence in Africa has generated mixed feelings in the world, as some see it as a great asset to Chinese inf luence in the region while others have accused China of being a neo-colonial power. Beijing however has tried to distinguish itself from the Western powers, stating that it shares a colonial history with Africa (Ding, 2010:269). In the field of education and the promotion of Chinese culture and language, China has done immensely well by attracting a lot of foreign students. China has also invested a lot in Confucius institutions all around the globe that seek to propagate Chinese values and culture to the rest of the world. However, more than anything else, it is the promise of China’s rise to a great power status that gives it the soft power (Li, 2009b:29).

Limitations of Chinese soft power Yong Deng notes that ‘China’s soft power is ultimately limited by its weakness on its domestic front’ (Deng, 2009:75). Taiwan and Tibet only add up to the limitations. The Freedom House report of 2020 does not seem to regard the rise of soft power of China favourably as it paints a bad image of China. The report notes: China’s authoritarian regime has become increasingly repressive in recent years. The ruling Chinese Communist Party (CCP) is tightening its control over the state bureaucracy, the media, online speech, religious groups, universities, businesses, and civil society associations, and it has undermined its own already modest rule-of-law reforms. (Freedom House report China, 2020) The most obvious challenge to the rise of Chinese power today is its sociopolitical conditions at the domestic front. It can cost China a lot in terms of soft power as it decreases the attractiveness of a country, especially in the ‘free world’. The 2020 report from Freedom House lists both China’s press freedom status and its net freedom status as ‘not free’ with a score of just 10/100 on the freedom scale. The report also accused Beijing of using its economic ties to inf luence other democracies to repatriated Chinese citizens seeking refuge abroad. Furthermore, China was also found to be supporting regressive regimes around the globe, which also shows its aspirations of global leadership (Abramowitz, 2018). Atrocities against ethnic Uighur Muslims in China to remove their identity in the western region of Xinjiang that has 24 million ethnic minorities has also caught the attention of world media. Heavy police surveillance, forced camps for re-education and detention of ethnic minorities is commonplace in the region. However, the claims of such human rights violations against the Uighur Muslims

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TABLE 1.1 Political and Civil Liberties Comparison Between India and China

Parameters

China’s Performance (2018)

India’s Performance (2018)

Electoral process Political pluralism Functioning of government Freedom of expression and belief Associational and organisational rights Rule of law Personal autonomy and individual rights

0/12 0/16 2/12 4/16 3/12 2/16 6/16

12/12 14/16 9/12 13/16 10/12 9/16 10/16

Sources: Freedom House report (2018a; 2018b)

has been denied consistently by Beijing (Buckley, 2018). However, it’s clear that the issue has shown the shortcomings of the Chinese leadership and has also highlighted the lack of democratic ethos in the state. China also does terribly bad in corruption. It ranks 87/180 on Transparency International’s website (Transparency International, 2016). When compared to other countries in Europe and the US, it seems to be in a particularly bad place. Although the government has taken some huge steps in the direction of making China corruption free, it has resulted in further loss in the freedom and liberties of the ordinary Chinese citizen. China also lags behind when it comes to political and civil liberties. Some of these parameters and how China performed are listed in Table 1.1. It’s obvious that China’s socio-economic as well as political performance at the domestic level is anything but ideal. In today’s era of globalisation and information technology China has faced criticism for the lack of freedom in the country. Free f low of knowledge and information are extremely important in today’s world. China however has a record of sending journalists and free speech advocates to jail. This seriously undermines China’s image on the world stage. The Internet is heavily censored in China and some extremely popular social networking cites are not accessible in China. In today’s world, the Internet has been called the ‘only equal space left’ and by censoring it China takes a great risk. The younger generation living in different parts of the world might see it as a display of authoritarianism. Although Chinese economic success has left the world in awe and their foreign policy seems much focused on enhancing the image of China, it’s not enough for China’s soft power. China must address issues related to human rights and political freedom for its people. It took a lot of time for the ‘free world’ to get over Tiananmen Square.

India as a power India has been an established middle power for a while now. In spite of its humble means, India has always aimed higher in its international political ambitions.

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It has been trying to get the permanent membership of the Security Council, which some would say is highly ambitious for a country like India. Although a nuclear power, India lags behind in its hard power capabilities mostly because of its lack of a home-grown high technology arms industry and inability to keep up with the economic growth of China. India’s poor performance in terms of human development also undermines its power capabilities. This section looks into India’s soft power capabilities to determine if it could use this form of power to increase its bargaining power in world politics to move from being a typical middle power to maybe becoming something more.

The Nehruvian era The Indian state has always been aware of its soft power. Right from the beginning Nehru used India’s image as a cultural power and as an anti-colonial state to cast a bigger shadow of itself in the arena of world politics. His focus on the non-alignment movement was the perfect depiction of this role of India as an emerging leader of the third world and as a responsible figure in world politics with something to prove. India also championed decolonialising the rest of the Africa and Asia. Wagner in his article notes that It is not without irony that Nehru was probably the right person at the wrong time when he promoted soft power strategies that were not appreciated during the Cold War period but only later. (Wagner, 2010:339) It could very well be concluded that it was India’s soft power rather than its hard power during Nehru’s time that was blended with his visionary foreign policy that put India in an important place at the world level. The West had mixed feelings about India’s foreign policy and its role, which resulted in them calling India’s non-alignment as neutrality. India nevertheless managed to secure its distinct place just by being India. Nehru earned a high moral authority because of his engagement in the Non-Alignment Movement (NAM) (Wagner, 2010:339). However, India’s defeat in 1962 bought India back to the reality that soft power is only credible when there is hard power behind it (Tharoor, 2011:341). India also failed to engage with its neighbours after its independence. With his eye on the bigger picture, Nehru missed the regional game. Jawaharlal Nehru had visualised the world in expansive frames: Cairo had greater salience in his worldview than Colombo or Kathmandu; African decolonisation was more important than overcoming sub-continental ruptures; the road from Bandung led inexorably to Belgrade. Every prime minister since has conformed to the Nehruvian mould on foreign policy: systemic and global concerns (NAM, disarmament, New International Economic Order) garnered far greater diplomatic energies and resources than the primary task of building a regional neighbourhood that was internally peaceful and externally coherent (Sahni, 2016:56).

Scope for power transitions

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Later years To date India has not been able to recover from this foreign policy fiasco and still struggles to establish itself as the undisputable hegemon in the South Asian region. India only took its neighbourhood seriously after Indira Gandhi came into power. Her South Asian doctrine understood the region as part of India’s national security. The Indira doctrine however failed to generate soft power in the region because it was restrictive for India’s neighbours. It was only after the Gujral Doctrine and his policy of non-reciprocity that India managed to change its image as the ‘big brother’ of the region. The bilateral conf licts between India and its neighbours and a lack of enthusiasm delayed the creation of a regional organisation (Wagner, 2010:340). The South Asian Association for Regional Cooperation (SAARC) was founded in 1985 and is still not in the league of the Association of South East Asian Nations (ASEAN) or the Shanghai Cooperation Organisation (SCO) anyway. India had clearly failed to grasp the importance of neighbourhood policy when it comes to soft power, a mistake that seems to be ratified to a large extent by the present government. It seems clear that India failed to generate soft power from the most obvious source, i.e. its neighbourhood. It is this part of the world that India had a long trading and cultural relationship. Shashi Tharoor rightly points to the huge impact made by Indian civilisation in countries like Indonesia, Cambodia, Thailand, the Philippines, etc. India could have had used these historical cultural ties with the South East Asian countries to strengthen its soft power; however India seems to have lost this region to China that has a more contemporary inf luence than traditional (Tharoor, 2011:336). A lack of clear neighbourhood policy, except for the Gujral administration, is the reason why India lost a strategic edge. Varun Sahni notes, India perceives its neighbourhood not as a launch pad but as a drag anchor. (Sahni, 2016:61) This clearly has undermined the foreign policy aspect as a soft power source for India. Chinmaya Gharekhan, a former Indian diplomat, warns against the lure of prestige by unnecessary interventions in neighbouring countries and suggests that the government of India would achieve much more in terms of soft power by focusing on developing its economy and lifting its population out of poverty (Gharekhan, 2018). Let’s consider India’s social and political sources of soft power.

Sources of Indian soft power India in years after its independence continued with its image as a cultural superpower which had a rich spiritual tradition to offer to this world with its high ideals like non-violence, truth and inner peace. Although India was the largest

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democracy and could have used it as a source of its soft power, it resisted promoting democracy publicly. Nevertheless, it was one of the earliest contributors to the United Nations Democracy Fund (Malone, 2011:38). It was only after the concept was formulated by Nye that Indian foreign policy experts started focusing on the soft power of India. C Raja Mohan in an article in the Hindu wrote that ‘India could always count itself among the few nations with strong cards in the arena of soft power’. In the same article he emphasised the importance of one of India’s biggest sources of soft power, the Indian Diaspora. It was in 2003 that the Indian government had decided to celebrate its first Pravasi Bhartiya Diwas, which applauds the achievements of the Indian community abroad. Indian soft power and its attraction has improved considerably after India liberalised its economy and achieved great, albeit unequal, economic success. India also enjoys a free media, a huge and vibrant population which consists of a large number of young people, a fairly independent, very active judiciary, and it also has impressively struggled for human rights since independence (Mohan, 2003). A rise in multiculturalism all over the world can provide India with the scope of being a good role model for all these new communities and help them integrate to be a peaceful and tolerant society. India managed to get 21st June as the International Day of Yoga, which was celebrated as a great success for India’s soft power by the present government. C Raja Mohan on the issue wrote, Yoga’s international popularity has little to do with the government in Delhi. A variety of factors, including the spread of the Indian Diaspora, the globalisation of popular culture and the recognition of its health benefits, helped generate near universal interest in yoga. He also insisted that yoga would be better off if the Indian bureaucracy leaves it alone. He also suggested that: The Modi government should also distance itself from the efforts of Hindu groups at home and abroad that want to “take back yoga”. However, the Ministry of Ayush seems to be going down the path of doing exactly what Raja Mohan cautioned against. The same argument goes with the overselling of Sanskrit language by this government as well. The projection of monopoly of the Hindu extremists over the language could effectively kill its appeal and universal character. One could hope that India’s soft power could grow even in the face of the Hindu fundamentalism that is on the rise for ‘reclaiming’ the Indian culture. Tharoor quotes Nye: Soft power is created partly by governments and partly in spite of governments. (Tharoor, 2011:335)

Scope for power transitions

13

Bollywood, soap operas, Indian cuisine and cricket are also seen as sources of soft power for India because of their increasing popularity worldwide. There is no denying that Hindi cinema and Indian cuisine is being accepted and consumed worldwide; however, to imply that this cultural attractiveness can generate tangible soft power for India is over-ambitious. It is also quite unclear how the popularity of Indian popular culture can further its foreign policy objectives. The Indian Council for Cultural Relations (ICCR) has 22 cultural centres based in 19 countries which aim to project India’s diverse multicultural nature to film festivals and book fairs. However, recent incidents of violence against various vulnerable sections of society have undermined the achievements of the ICCR. It has also been argued that India’s goodwill abroad for its popular culture has been unplanned and that India for the longest time neglected soft power and failed to build upon its initial hard power achievements (Blarel, 2012:29–31). Jaishankar argues that India often fares badly on state-driven cultural diffusion and hence should let citizen led efforts be the guide when it comes to building soft power ( Jaishankar, 2018).

Shortcomings and challenges to India soft power Although India clearly has a huge advantage in the South Asian region because of its huge size, booming economy, large standing army and great military capabilities, it has failed somehow to portray itself as the ‘regional leader’. In spite of being an obvious regional power India has been unable to generate the consent among its neighbours to emerge as the undisputed regional leader. It could be attributed to the lack of socio-economic development in its own society (Sahni, 2016). India ranks 130/188 on the Human Development Index (HDI), which is considerably lower than some of its neighbours like Thailand, the Philippines, the Maldives and most importantly Sri Lanka, which is ranked 73rd. Brazil, another developing country, has the HDI ranking of 75, which is comparatively very high (Human Development Index, 2015). India’s rank in corruption is 73/164 (Corruption Perceptions Index, 2018), which is very low and clearly sends a very wrong signal to the international community about the character and work ethic of Indians, hence reducing the soft power of India considerably. However, in the face of inequalities and stark economic injustice in India, there has always been a rhetorical argument that Indians might be poor but they are happy and content. However, India ranks 140/156 on the World Happiness Index according to the World Happiness Report of 2019, which is even lower than its smaller neighbours like Nepal and Bhutan. Hence India’s political culture and social values clearly lack the attractiveness necessary to generate considerable soft power for the country. In terms of political values, one has to admire India’s lasting commitment to democratic values, but at the same time the spike in numbers of human rights violations and the continuation of draconian laws like the Armed Forces (Special Powers) Act (AFSPA) have increased misuse of political power, especially for electoral benefits, and greatly undermine the legitimacy of political values of India. Kashmir is shown as a zone in India that is not free

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by the Freedom House report in 2018, which is great setback for India’s image as the largest democracy in the world. There has also been an alarming rise in cases of mob lynching in the past few years, the victims of which have primarily been Dalits and Muslims (Dutta, 2018). The inaction by the state in such cases is troubling to say the least and is not a sign of a healthy democracy. India has also at times pushed for its image as a cultural power which could be perceived by its neighbours as being a cultural hegemon in the region, resulting in loss rather than enhancement of India’s soft power in the long run. As C Raja Mohan has emphasised in his article, Indian government needs to be cautious about how culture is portrayed and used to generate soft power for India (Mohan, 2014). India has also shied away from investing in building its soft power capabilities. Commentators have argued that just as in the case of Indian defence, India needs to seriously invest in building its soft power capabilities. In the meantime, however, India needs to look for unconventional sources for soft power like health tourism, creating a safe environment for the expatriate community or transforming into an abode for higher education for the youth living in the South Asian region.

New sources of soft power Medical tourism The Indian medical sector has emerged as a promising source of soft power for India. Health tourism could offer the Indian government with an excellent opportunity to expand its soft power while getting economic benefits out of it. A US-based website (www.health-tourism.com) cites India as providing services at 20 per cent of the cost of that in the US. According to the Government of India website, India is a growing destination for medical tourism and it is expected to gain an annual growth rate of 30 per cent as a sector. It also mentions that around 3 million people will visit India for low-cost medical treatment this year. The government of India has also created a medical visa which makes it much easier for patients from other countries to stay in India and get medical treatment that is relatively much cheaper and still meets international standards (India Health Tourism, 2017). This industry, apart from being a huge source of resource, could also help India generate soft power. However, this sector is driven by the private sector and not the public sector (The Statesman, 2016). Although that might not be a bad thing, as the Indian foreign policy expert C Raja Mohan writes in the context of yoga and Bollywood, ‘the soft power of India has grown precisely because the government had nothing to do with it’ (Mohan, 2014). Direct involvement of the government could make it more bureaucratic and unattractive for people from countries where India does not have a good public image. Medical tourism is a good alternative for India since it pays back. It’s a highly rewarding investment economically as well as politically. A boost from a robust foreign policy could help the industry reach new heights and enhance the attractiveness of the country abroad.

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Education sector India has failed miserably in attracting students from abroad. Most of the students who attend Indian universities are strictly from the Asian region or from the West Asian region (Mukherjee, 2014:51). Although graduates from the Indian Institute of Technology (IIT) are well respected abroad, as highlighted by Tharoor in his article, India failed to open the gates of its reputed universities for the world and more precisely for its neighbours. As the US has demonstrated handsomely, there are perks of having the new generation being taught in one’s country as it gives them a sense of belonging and memories to be cherished forever. In these cases, the host country more often than not manages to generate a lot of goodwill, ultimately transferred to soft power of the country. As Varun Sahni in his article observes, India has been a little too late in setting up the South Asian University. India could however still turn things around by making special provisions for foreign students in India. International students can only enter into universities by paying the full amount or through receiving scholarships. The scarcity of resources in the sector of higher education in India has led to the shrinking of scholarships as well as opportunities for international students. Most of the foreign students rely on scholarships, especially from the neighbouring countries since the same countries are also suffering to boost their developing economies and education sector. In India, 95 per cent of foreign students come from the developing countries of Asia and Africa, and India, like many developing countries, has been lagging behind in advancing the process of internationalisation of higher education, an important aspect of which is endorsing exchange programmes and making provisions for foreign students. The country’s academic structure needs to ‘internationalise’ the curricula and become more f lexible in order to attract foreign students from the neighbouring countries (Bhushan, 2005:5). Transnational movement of students is obviously the most visible and, perhaps, most significant manifestation of the internationalisation of higher education (Bhalla and Powar, 2015:24). France, Canada, Germany and Australia have the greatest number of foreign students enrolled in their universities; needless to mention, they have been successful in mounting their soft power at the international platforms.

Tourism and expatriates in India Despite the Indian government’s attempts to make India an attractive tourist destination, India ranks low in country-brand tourism. The fact that crime rates are high and local conditions don’t suit foreigners that well essentially translates into India losing its tourists. India also has a low expatriate population due to this. Ensuring the safety of people and creating a welcome environment could lead to more tourists and expats coming to India. The United Nations World Trade Organization report of 2018 shows that India has had an inbound growth in the tourism sector in 2017–18. However, the increasing pollution, especially in the urban areas and of Indian rivers, can be very discouraging for tourists. India also

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tops the chart in being the most dangerous country in the world for women; this discourages women tourists from visiting the country and they can also have less than pleasant experiences which could paint the country in a rather unf lattering light. It is thus evident that India needs to first work on domestic issues of urban planning, law and order and reducing inequality, if it wishes to generate soft power through tourism and expats.

Conclusion For a long time India neglected the area of soft power in its foreign policy and did not have a clear strategy to blast its soft power through its culture, political values or foreign policy. In spite of being a democracy since its very inception, India shied away from pushing the agenda of democracy beyond its own borders. However, India’s goodwill and culture managed to find their way around despite any lack of planning or political backing. The Indian Diaspora has been credited for generating soft power for the state. The Indian-American lobby in the United States can be seen as the best example as they have been a great inf luencing agency when it comes to India-US relations (Blarel, 2012:30). Recent development in this field suggests that the government is clearly aware of the need for India to pursue soft power. In 2006 India created a public diplomacy division in India’s Ministry of External Affairs which dealt with India’s soft power. In spite of the current government’s enthusiastic approach towards bilateral relations, India has failed to be figured on The Soft Power 30 Index (The Soft Power 30, 2018). Jaishankar claims that India’s absence from the Soft Power 30 Index shows that the state lags behind in terms of positive associations or investments in cultural diplomacy ( Jaishankar, 2018). China on the other hand has scored a place on the index for the past three years. Prime Minister Modi has time and again emphasised the long history of civilisational and cultural links with countries in Central Asia, South East Asia and the Middle East; however, China’s economic growth and its ventured interest in Africa, South East Asia and West Asia have dwarfed any attempts by the Indian leadership to have a significant presence in these countries. It has been argued that the inclusiveness of Indian politics, pluralism and dynamism of its population also make it attractive for the global population. Unfortunately, recently India has been in the headlines for all the wrong reasons. Just in the past five years there have been more than a hundred cases of mob lynching-related deaths in the country. Cow vigilantism, hyper-nationalist narratives and Hindu supremacist groups are threatening to disrupt the multicultural and dynamic societies of India. There also have been reports from China of forceful detention of Muslims in the western part of the country. These reports undermine the soft power and cultural attractiveness of both Asian countries. To claim a greater power share, it is necessary that these grave domestic issues are dealt with. Shashi Tharoor notes, It is often the side which has the better story that wins. India must remain the land of the better story: a society with a free press and a thriving mass

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media, where the people whose creative energies are daily encouraged to express themselves in a variety of appealing ways. India has an extraordinary ability to tell stories that are more persuasive and more attractive than those of its rivals. (Tharoor, 2011:336) If only that were enough.

References Abramowitz, M. J. 2018. Democracy in Crisis: Freedom in the World 2018. Washington, DC: Freedom House. Bhalla, V. and Powar, K.B. 2015. ‘International Students in Indian Universities’, International Higher Education, 79: 23–24. Bhushan, S. 2005. ‘Foreign Universities in India: Market-driven New Directions’, International Higher Education, 41: 4–5. Blarel, N. 2012. ‘India: The Next Superpower? India’s Soft Power: From Potential to Reality?’, IDEAS Reports – Special Reports, Nicholas Kitchen (ed.), SR010. LSE IDEAS, London School of Economics and Political Science, London, UK. Buckley, C. 2018. ‘China Is Detaining Muslims in Vast Numbers. The Goal: Transformation’, The New York Times, 8 September 2018. Cho, Y.N. and Ho Jeong, J. 2008. ‘China’s Soft Power: Discussions, Resources, and Prospects’, Asian Survey, 48(3): 453–472. Corruption Perception Index. 2018. www.transparency.org/cpi2018 (accessed on 7 May 2019). Deng, Y. 2009. ‘The New Hard Realities: “Soft Power” and China in Transition’ in Mingjiang Li (ed.), Soft Power: China’s Emerging Strategy in International Politics (pp. 1–18). Plymouth: Lexington Books. Ding, S. 2010. ‘Analyzing Rising Power from the Perspective of Soft Power: A New Look at China’s Rise to the Status Quo Power’, Journal of Contemporary China, 19(64): 255–272. Dutta, P. 2018. ‘What Is Lynching and Why Killer Mob Goes Unpunished’, India Today, 17 July 2018. Freedom House Report. 2018a. Freedom in the World 2018. https://freedomhouse.org/ country/china/freedom-world/2018 (accessed on 12 November 2019). Freedom House Report. 2018b. Freedom in the World 2018. https://freedomhouse.org/ country/india/freedom-world/2018 (accessed on 12 November 2019). Freedom House Report China. 2020. Freedom in the World 2020. https://freedomhouse. org/country/china/freedom-world/2020 (accessed on 11 April 2020). Gharekhan, C. 2018. ‘The Soft Power of India’, The Hindu, 19 April 2018. Houweling, H.W. and Siccama, J.G. 1988. ‘Power Transitions as a Cause of War’, Journal of Conflict Resolution, 32(1): 87–102. Houweling, H.W. and Siccama, J.G. 1991. ‘Power Transitions and Critical Points as Predictors of Great Power War: Toward a Synthesis’, Journal of Conflict Resolution,  35(4): 642–658. Human Development Report: Work for Human Development. United Nations Development Programme. 2015. New York: UNDP. India Health Tourism. 2017. ‘Medical Tourism’, www.indiahealthtourism.com/ (accessed on 11 May 2019).

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Jaishankar, D. 2018. ‘India Rising: Soft Power and the World’s Largest Democracy’, Brookings India, www.brookings.edu/opinions/india-rising-soft-power-and-the-worldslargest-democracy/ (accessed on 17 May 2019). Johnston, A.I. 2003. ‘Is China a Status Quo Power?’, International Security, 27(4): 5–56. Keohane, R.O. and Nye Jr, J.S. 1998. ‘Power and Interdependence in the Information Age’, Foreign Affairs, 77: 81–94. Lemke, D. and Tammen, R.L. 2003. ‘Power Transition Theory and the Rise of China’, International Interactions, 29(4): 269–271. Li, M. 2009a. ‘Soft Power: Nurture Not Nature’, in Mingjiang Li (ed.), Soft Power: China’s Emerging Strategy in International Politics (pp. 1–18). Plymouth: Lexington Books. Li, M. 2009b. ‘Soft Power in Chinese Discourse: Popularity and Prospect’, in Mingjiang Li (ed.), Soft Power: China’s Emerging Strategy in International Politics (pp. 21–44). Plymouth: Lexington Books. Malone, D.M. 2011. ‘Soft Power in Indian Foreign Policy’, Economic and Political Weekly, 35–39. Mukherjee, R. 2014. ‘The False Promise of India’s Soft Power’, Geopolitics, History, and International Relations, 6(1): 46–62. Nye, J.S. 1990. ‘Soft Power’, Foreign Policy, 80: 153–171. Nye, J.S. 2004. Soft Power: The Means to Success in World Politics. New York: Public Affairs. Raja Mohan, C. 2003. ‘Indian Diaspora and Soft Power’, The Hindu, 6 January 2003. Raja Mohan, C. 2014. ‘Modi’s Diplomacy: Yoga, Democracy and India’s Soft Power’, The Indian Express, 14 December 2014. Sahni, V. 2016. ‘Why Engage in a Neighbourhood Policy? The Theory Behind the Act’, in A. Bhatnagar and R. Passi (eds.), NeighbourhoodFirst: Navigating Ties Under Modi (pp. 55–63). New Delhi: Observer Research Foundation. The Soft Power 30, https://softpower30.com/country/china/?country_years=2016%2C2 017%2C2018 (accessed on 13 May 2019). The Statesman. 2016. ‘Medical Tourism: Private Sector Hospitals Earn National Exchequer Valuable Forex’, The Statesman, 7 April 2016. Tharoor, S. 2011. ‘India as a Soft Power’, India International Centre Quarterly,  38(3/4): 330–343. Transparency International. 2016. ‘Asia Pacific: How Leaders Are Big on Talk but Little on Action’, http://blog.transparency.org/2016/01/27/asia-pacific-how-leaders-are-big-ontalk-but-little-on-action/ (accessed on 23 January 2017). US Census Bureau. 2020a. ‘Trade in Goods with China’, www.census.gov/foreigntrade/balance/c5700.html (accessed on 13 May 2019). US Census Bureau. 2020b. ‘Trade in Goods with India’, www.census.gov/foreign-trade/ balance/c5330.html (accessed on 13 May 2019). Wagner, C. 2010. ‘India’s Soft Power Prospects and Limitations’, India Quarterly: A Journal of International Affairs, 66(4): 333–342. Waltz, K.N. 1990. ‘Nuclear Myths and Political Realities’, American Political Science Review, 84(3): 730–745.

2 WHITHER PAX INDICA AND PAX SINICA? Indian and Chinese soft power strategies Asma Masood

Introduction Soft power dynamics emanating from India and China have their fair share of differences. In India, soft power is a concept that implies resonance beyond borders. On the other hand, China sees soft power as both an external and internal strategy (Jintao, 2007). The Communist Party of China (CPC) has realized that creating positive perceptions in the rest of the world depends on establishing favourable perceptions within the country as well, by strengthening its cultural personality. It is ironic that ‘culture’, an inherent, even primordial, dimension is now being propped up by China’s political values. This raises questions on whether China will be successful in creating soft power impact. Meanwhile, India’s domestic diversity brings it a unique advantage at the soft power table. India can concentrate on disseminating soft power elements, consciously or subconsciously, without having to worry about moulding cultural contours at home. This aspect points to another difference: that of the ‘independence’ of each country’s soft power. China’s cultural trajectories within and outside the state are being largely steered by the government. This does not imply that all soft power elements are controlled by the Chinese state, at least completely. There are several soft power elements in China, ranging from film to art, literature to acupuncture, cuisine to calligraphy, and martial arts to traditional medicine, which have imbibed themselves into the global subconscious and thus offer themselves as influential tools for the Chinese government (d’Hooghe, 2005:88–105). India’s soft power elements such as Bollywood, cultural practices and yoga make a major soft power impact while being out of the state’s realm of control. Nevertheless, it must be noted that one profound aspect of India’s soft power appeal depends on the governmental setup: that of being a democracy, and the world’s largest one at that.

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China is also projecting a government-related soft power angle, namely, its emphasis on ‘peaceful rise’. However this seems to be primarily aimed at countering the ‘China threat perception’. Despite the peaceful rise oratory, there remains a tinge of unpredictability and lack of transparency when viewing China. Contrastingly, India has attracted attention with its predictable, non-aligned and benign personality. India’s image is also appealing because of other factors. In fact, the IT giant Infosys made its decision to choose India over China as its global development hub because of two factors. First, India’s legal system is preferred over China’s singleparty dominated legal matrix, despite the former’s slow-paced nature (Cai, 2016). Second, India’s comparative advantage of a higher number of English speakers is a positive factor. Nevertheless, China has one conspicuous plus-point: finance. In fact, some analysts observe that China could be outpacing the USA’s soft power via Beijing’s massive aid schemes, apart from attracting other states as members of the Asia Infrastructure Investment Bank (Nye, 2015). One wonders about the ease with which India can be outmanoeuvred in this scenario. According to David Shambaugh, China spends in the region of $10 billion per year on “external propaganda” (Shambaugh, 2015). The Indian Council for Cultural Relations (ICCR), which operates under the purview of India’s Ministry of External Affairs, lags behind. To get more clarity in numbers, observe Table 2.1. The study of Indian and Chinese soft power dynamics needs to go beyond facts and figures. The larger questions that arise on this issue can be postulated as follows, for analyzing in this chapter: 1 2

3 4

How can China’s and India’s soft power strategies help their accommodation as rising powers in the international system? Will rising nationalism in these two countries as well as the rest of the world help or impede the two states’ soft power success? This is especially relevant in an age of technology, whereby a nationalistic policy in Beijing or Delhi can instantly boost or ‘burst’ their soft power goals. What is the assessment of impact of India’s and China’s soft power in the changing world order? Where does the future lie for the two countries’ soft power?

TABLE 2.1 Comparison of Indian and Chinese Arms of Soft Power: 2015–2016

Soft Power Agency

ICCR (India)

Confucius Institute (China)

Year set up Number of global centres Budget

1950 39 �1.92 billion

2004 300 $20 billion

Source: Jacob, 2017

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Accommodation via attraction For the purpose of this study, it is imperative to understand the concept of ‘accommodation’ in international relations. According to T. V. Paul, accommodation refers to established and/or rising powers (countries) showing acceptance of another country’s consolidation of great power, and the removal of or significant decrease of antagonism between them (Paul, 2016:3–32). By this concept it can be derived that a country achieves accommodation and powerful influence if it manages to eliminate the threat of or ongoing conflict, partly through its soft power. Conflict is avoided when soft power creates a profound format of interdependence between countries. As Philip Potter indicates, societal interaction is also an important form of interdependence, which transcends mere trade (Potter, 2016:53– 69). This societal interaction is not a new concept, having existed down the ages. In earlier times, it ran hand in hand with trade, as “most trade was accomplished in person, and it inevitably carried with it a good deal of interpersonal connection” (Potter, 2016:53–69). China’s ancient Silk Route and India’s erstwhile ‘Spice Route’ are significant examples. Interestingly, a modern format of trade is considerably impersonal, traversing through online orders and international supply chains. Technology, which is used to streamline the economic connection of countries, may ironically be driving them apart at the societal level to an extent. One factor is the lessening of direct personal interactions due to an increase in digitization of data which is exchanged during any trade process. While there is interpersonal dialogue occurring during business visits and trade talks, there is greater reliance on telecommunication and internet-based platforms at the logistical level. This aspect which arises from virtual communication is another irony, given that instant messaging and other present-day communication tools should allow greater people-to-people contact. Virtual communication does foster easier exchange of information and ideas but it perhaps causes a degree of dependence on the virtual realm. Thereby there may be a lesser ‘need’ felt for direct contact, given perceived pressures on time and resources. It is true that modern man spends more time and funds on traveling than his ancient counterpart. But that would be for various tourism purposes. On the other hand, exchange of ideas and information can be easily achieved via new technological mediums. There is another crucial factor at play, especially in the Chinese context – that of the regulation of communication. China is constantly concerned that its citizens would be exposed to Western ideas of democracy and free speech, and is undertaking strict surveillance of the country’s internet and its citizens’ online discourse, both within themselves and with foreigners. In fact, this author had the experience of a newly opened Weibo account being shut down as soon as she shared a post, albeit benign, on Indian perspectives about China’s soft power. Due to such measures, China is clearly becoming more inward looking at the societal level, despite opening up more at the international economic level.

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This could partly explain why China today has to make the extra effort of ‘soft power strategizing’ in order to attract other nations and ensure accommodation of its own rising status. India on its part needs to enhance its image in order to sustain positive relations with other countries. There is another motivation, that of the efforts being taken by China on its own soft power, especially via the Belt and Road Initiative (BRI). India realizes that many South Asian countries feel let down about the lack of efficiency with which New Delhi is investing in the region’s infrastructure. These countries have aspirations to grow economically and emerge as regional and global trade hubs. The present global economic slowdown is impeding these ambitions. It leads to many countries including those in South Asia to gravitate towards the BRI, which offers a quick path to infrastructure development and connectivity. Thus, India seeks to alter the narrative on its regional influence by not only stepping up diplomatic and economic outreach, but also soft power. This indicates a competing angle whereby either country tries to gain accommodation. Another aspect observed in both Indian and Chinese contexts is that soft power strategies are not about sending positive signals alone but polishing negative images as well. One example is India’s application of efforts to restore the confidence of countries in South Asia in New Delhi’s capacity to succeed in investment and aid. Another instance is seen when Joseph Nye describes how China having a Confucius Institute in Manila will do little to win goodwill amidst the South China Sea dispute (Nye, 2015). Nye is precise in this context, as he is referring to people-to-people contact. However, soft power at the government-to-government level is another ball game altogether. In the case of the Philippines, President Rodrigo Duterte has warmed to China despite the Permanent Court of Arbitration (PCA) verdict in Manila’s favour. The lure of the 21st-century Maritime Silk Road (MSR) (海上丝绸之路, Haishang sichou zhi lu) may have played a significant role in this development. MSR is not about economic relations alone, but has strong cultural and people-to-people dimensions as well. It could further improve the spread of Chinese influence in the Philippines’ society. Hence, we see that China is aiming at avoiding conflict via its cultural manoeuvres, and attempting to gain accommodation as a rising power. Delhi is operating at a completely different level when it comes to accommodation. This is not just because of the absence of territorial disputes (excepting Pakistan and China). In fact, “India does not seek power for itself in a zero-sum manner (by inciting conflict), but looks to augment the power of like-minded nations” (Sinha, 2016:222–245), in addition to augmenting its own power. For example, when India is implementing ‘Act East’ policy via greater people-topeople contacts, it is not doing so for its own benefit alone. Rather it has the potential to uplift Southeast Asian nations as well. India’s skill development programme for imparting skills in English and IT in Myanmar (Masood, 2013) demonstrates that Delhi desires that the democracy in transition stands on its own feet. It is notable that India can use soft power not only for personal gain

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but mutual power augmentation. This can be termed as two-way accommodation: Myanmar acknowledges India as a rising power and India recognizes the effort Myanmar is taking in transitioning as a democracy. China’s soft power in Myanmar also involves skill training: for journalists. Naypyidaw has recently allowed certain media freedoms, and China is inviting Myanmarese reporters to attend training programmes in China (Zhou and Zhihao, 2016). While there are advantages to Myanmar from these training events, such as exposure to online media, there remain points of contention. China is a country well known for media censorship. Myanmar is relatively liberal but does have considerable restrictions (‘Myanmar’, 2016). Therefore if two countries with similar domestic policies on a particular issue (in this case, press freedom) connect on a related platform (in this case, media), there is accommodation only at the government-to-government level. It is unlikely that change will be seen at the ground level of that issue unless either party is proactive. Thus accommodation via attraction is a complex process. It must be examined through individual elements, in order to deduce meaningful results. When the rising power tries to appeal to a small power, we must also view the level of nationalism in the rising powers, namely India and China.

Nationalism: boon or bane for soft power? The question of whether nationalism can aid or impede soft power is a subjective one. Xi Jinping’s assertive stance is increasing his popularity in China, thus helping the ‘domestic’ component of soft power. This internal soft power is fuelling nationalism among China’s citizens, who show more support for the Chinese government’s domestic and foreign policies. However, this strong nationalism emanating from both the leadership and the people does not appear to strengthen China’s image abroad. As Joseph Nye points out, China is popular only in countries in Africa and Latin America, where it does not have territorial disputes, and here too, the practice of China getting its own citizens as labour for its projects has not been condoned (Nye, 2015). Besides, polls taken across India and Japan infer largely negative views about China’s outreach (Nye, 2015). On the other hand, India’s Prime Minister Narendra Modi’s nationalistic tilt is not making India’s soft power teeter; rather it is enhancing it. This is seen in his numerous foreign trips where he reiterated India’s cultural connections, and declared policies to attract investment (Make in India, etc.). However his ambitions are not being fully consolidated. Grand plans such as ‘Mausam’ have not taken off. These cannot be blamed on lack of funds alone. India can learn to do more with less. Besides, critics have consistently maintained a stand that India’s foreign policy framework needs to stop being driven by leadership alone; rather it must be “formally institutionalized” (Tandon, 2016). In other words, it requires a team effort for Modi’s visions to translate into manifest reality. In this aspect, the number and deployment of India’s foreign policy staff needs to be enhanced. The staffs at

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Indian embassies and consulates also require dedicated hands to perform soft power activities. The other concern when discussing nationalism’s influence on soft power is that of the effect of technology. Narendra Modi is harnessing the power of social media to instantly appeal to a worldwide group of followers. Sushma Swaraj demonstrated what her good offices are capable of as well, and with prompt timing, as seen on Twitter. While new media and social media in China are state regulated, they are creating brownie points within the country, thus aiding the domestic dimension of China’s soft power. For instance, the country’s online drive against corruption: a Xinhua editorial had described in detail the role of the media and the public in keeping an eye on corruption, by using the powerful tool of social media, thus enabling the “amateurs” to be role models for the official investigators (Cohen, 2013). The reason we do not see Xi Jinping on social media sites such as Weibo, at least openly, is because it will mean allowing space for online political dissent, both at home and internationally. And political dissent as it is well known is the CPC’s Achilles’s heel. However there are other mediums of online expression whereby some Chinese are displaying overt nationalism. These include the ‘Little Pinks (小粉红, Xiao fenhong)’ (Ruan, 2016), ‘Angry Youth (愤青, Fenqing)’ (Anderlini, 2008) and ‘Voluntary fifty-cent Army (自干五, Ziganwu)’ (‘Ziganwu’, 2013), who are primarily nationalistic Chinese voluntarily defending their country’s territorial claims and other nationalism-related issues on online forums. These channels of nationalism may help the Chinese government’s credibility at home, but dent China’s soft power abroad. Besides, China is not allowing free ‘communication’ by its citizens to other nations’ citizens – a crucial element of soft power – through popular social media. It is doubtful how China’s achievements in space and artificial intelligence will garner a positive image abroad, when it is restricting the use of technology among its people while they communicate with the rest of the world. While China’s nationalism is being projected by certain sections of its public on new media and social media, they are not ‘discussing’ their ideas with their global counterparts, for example on Twitter or Facebook. It shows how a Chinese paradox lies wherein a predominantly inward-looking population is being run by a government which is spending billions of dollars on international soft power. China wants the rest of the world to notice the country, but without letting its own people take note of other nations’ liberal ideals and principles. Beijing desires that Chinese citizens’ nationalistic leanings are not dampened by democratic discourse. It is no surprise then that Chinese students who travel abroad for higher studies are instructed back home so as not to be influenced by such Western concepts and to promote their own Chinese culture. This ‘managed nationalism’ will not help China in promoting its soft power via its youth studying abroad. A valuable conduit of soft power, that of Chinese students in foreign countries, is being ignored by China in the name of nationalism.

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It is doubtful how China’s soft power can succeed in the long term without direct and independent involvement of non-state actors. China’s film industry is investing in Hollywood and collaborating on movie projects, but this cannot escape the fact that the Chinese government is running the show. There hence needs to be a two-way flow of ideas at the people-to-people level for a country’s nationalism to translate into soft power. China can learn a lesson from India on this perspective.

Soft power: getting bang for the buck The impact of China’s soft power is currently being observed predominantly at the state-to-state level. On a different tone, Indians are conduits of their country’s soft power, as much as, if not more than, the Indian government itself. Their ‘soft power’ actions are resulting in hard power gains. Indian and Indian-American business organizations helped to carry forward the 2008 Indo-US nuclear deal (Sinha, 2016:222–245), while the Confederation of Indian Industry (CII) played a role in shaping India’s Look East Policy (Baru, 2009:266–285). It is doubtful if the Indian-Americans would have succeeded in influencing the outcome of the nuclear negotiations if it was not for their strong cultural bond with the American landscape. This cultural bond spans lifestyle, the arts and exchange programmes. While India is having a share of success in soft power, Indian policy-makers also have a long way to go before matching Western might. Such influence is crucial if India aims at having tangible soft power results. While Bollywood is popular abroad, there are still cases of prejudice against Indians existing in certain countries. For instance, Hindi films and music are all the rage in the Middle East, but Indian labourers in the region face significant concerns regarding their rights there. It is doubtful how India’s move to build a temple in the United Arab Emirates may help in the long term to change the pockets of discrimination against labour-class Indians in the region. Thus India’s soft power is seen to have impact in the following realms: 1

2 3 4

People-to-state soft power: Indian citizens are helping the Indian government realize their goals in some domains while dealing with other states. This is a clear case of a non-state actor proving its merit. State-to-people soft power: India’s Ministry of External Affairs is undertaking schemes to directly benefit citizens of several other countries. People-to-people soft power: intersocietal interactions are displaying continuity since ancient times. India’s soft power is partially effective at the state-to-state level. India generated Bangladesh’s goodwill by accepting a United Nations Tribunal’s decision to favour Dhaka in the maritime boundary dispute case. On the other hand, Mausam as a long-term plan cannot see the light of day without the government burning the midnight oil on this initiative.

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Despite the drawbacks, India is thus seen to make considerable headway in its soft power. Soft power with Chinese characteristics is yet to make a global impact similar to Indian or even Western soft power. This is despite the presence of some pockets of people across the world who are interested in China’s art, calligraphy, language and food. One reason for the attraction of these sections of people towards Chinese culture is the ‘new’ factor. Chinese culture adds a ‘fresh element’ of cultural learning among the global citizenry, be it via Mandarin language, art or other elements. Other cultures, for instance those emanating from Japan or South Korea, may not attract the same attention. The reason being that there is higher demand for professionals knowing Chinese Mandarin. China being the largest trading partner for many nations is a contributing factor. China is handing out a large number of scholarships to those interested in learning the language, thus helping meet the demand for Chinese language experts. Other countries such as India and Japan are promoting the learning of their own languages in other countries, but the demand may not be as high as it is for Mandarin. Besides, India has the advantage of a population that is more proficient with English-speaking skills than the Chinese, thus this is perhaps reducing the need felt for learning Indian languages. But this does not necessarily mean those who are keenly learning about Chinese cultural aspects or the language are the same people who support Chinese policies. Similarly, people-to-people contact in these areas may not help influence hard power decisions. It must be also be noted that China’s soft power policies are making an impact on other states’ governments, and not people. This involves instruments such as aid for infrastructure, etc. Despite this shortcoming, China is not being silent. Beijing is investing heavily in promoting the country’s culture both domestically and internationally. This ranges from making its citizens more conscious of their country’s art (Venkatesh, 2015), similar to the West, and also institutionalizing promotion of China’s literature abroad (‘CBI Project’, 2017). It remains to be seen how China’s marketing of its soft power elements such as literature and films will influence global populations in the years to come. China’s literature may be making a mark by getting prizes in various genres such as science fiction, children’s literature and absurdist literature. But these are not independent of China’s control. These Chinese authors abide by the norms, that is, not criticizing the government or calling for political change. There are some political dissenters who have gained international recognition for their writing, but their works only dent and not shine on China’s image. While China’s publishers are travelling full steam ahead to promote the country’s culture, it cannot be ignored that China’s online literature (网文, wangwen) is attracting a vast crowd in the West. These are online anthologies of stories based on myth, fantasy and surrealism. It indicates that there is a new generation of readers who share common interests in both China and the US. It is up to China to capitalize on this phenomenon and a make soft power impact in the long run.

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The overall impact of China’s soft power is analyzed as follows: 1

2

3

4

People-to-state soft power: partial impact. Chinese diasporas in Southeast Asia are helping trade relations between China and ASEAN states. However, Chinese citizens are generally not seen as making an impact on other countries’ governments. There is one indirect impact – the Chinese diaspora who support Beijing’s foreign policy are validating China’s approach to the countries of their residence. State-to-people soft power: China is not displaying significant signs of elevating the people of other countries directly. It is often criticized for disseminating infrastructure aid which negatively affects the local populations in the recipient country, such as by causing displacement, environmental damage or not providing equitable share of profits. People-to-people soft power: negligible impact. The large outflow of Chinese tourists, the greater business ties, the high number of Chinese students going abroad, the many foreigners coming to China for higher education and travel – these factors are not helping to significantly improve people-to-people relations between Chinese citizens and the rest of the world. There may be greater people-to-people contact, but this does not automatically translate into soft power for China. State-to-state soft power: significant impact. This is also seeing recent manifestation, with China’s announcement at the second Belt and Road Forum, held in April 2019, that it will take into account concerns of BRI partner nations, such as sustainable debt. This is likely to make countries which had second thoughts about BRI to continue with the initiative.

China is a country that learns from other nations. If China can accomplish its target of promoting its culture internationally, with the aim of correcting foreign misperceptions, then Beijing will have its way even more than before in hard power scenarios. However China should not sideline Indian interests both at the bilateral front and in international forums. There hence needs to be a clear path set for the future course of India’s soft power. In addition there are some ways in which China can also improve its soft power impact without undermining India’s interests. A case study of Indian and Chinese soft power in Bangladesh helps provide a glimpse of specific impacts. The ICCR in Dhaka offers scholarships to Bangladeshi nationals. In fact there are many Bangladeshi students among nationals from other South Asian countries at Pondicherry University in South India. There is training offered to Bangladeshi military officers. India may be doling out loans and aid to Bangladesh via projects, but the question remains on the efficiency in implementation of these projects. While there is yoga, it is a very localized phenomenon, and not necessarily associated with India. Besides, yoga is not accessible to all classes of society.

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India is projecting soft power in Bangladesh, but there is poor reception in Bangladesh. This is due to the certain gaps in government-to-government relations. For instance, the Bangladeshi people feel let down by the Farakka Barrage issue and are upset about what they term as ‘border killings’. Hence soft power can be implemented with full force, but realpolitik can overshadow such efforts. Nevertheless, it cannot be denied that, unlike China, India is not looking at only influencing trade ties with Bangladesh via cultural diplomacy. There also is the greater aim and genuine desire to maintain the age-old cultural connection and goodwill. China is implementing soft power in Bangladesh via infrastructure aid, education scholarships, Confucius institutes, mediating between Bangladesh and Myanmar on the Rohingya issue and offering fellowships for journalists. The one advantage China is seen to have over India is monetary resources for implementing soft power. One questions how effective material pursuits can be in sustaining soft power in the long term. Bangladesh has already announced in 2019 that it will not take any more loans from China. Dhaka is aware of the pitfalls of a debt trap with China, as seen in the case of Sri Lanka’s Hambantota port. China’s offers of educational scholarships to the Confucian centres where Chinese Mandarin is taught are indications that Bangladeshis are magnetized by the employment opportunities available thereafter, given the high demand for Mandarin speakers worldwide. Hence there is a ‘financial motive’ among Bangladeshis interested in learning Mandarin or going to China on an educational scholarship. It is true that Bangladeshi students in India will also have financial considerations. However it is significant that India offers a free and open environment for academic discussions and exchange of ideas. In fact, according to sources who prefer remaining anonymous, students from abroad in China studying for their PhDs are encouraged to work only on topics that benefit China’s knowledge base, especially on the BRI. Some students who have visited China claim that their candid views on Chinese polices were met with hostile reactions, such as hacking of their Chinafocused blogs, or their Chinese peers telling them, outside the classroom, to return to their country. In other words, students who visit China, be it from Bangladesh or other nations, are pressurized into walking the tightrope of ‘political correctness’. Moreover, such treatment of visiting scholars by China would only repel the youth from wanting to visit or reside in China for long terms. On the facet of China mediating between Bangladesh and Myanmar on the Rohingya refugee crisis: a source who does not wish to be named states that it is an open secret in Bangladesh that the Sheikh Hasina government made a deal with China regarding the Rohingya issue in exchange for enabling greater garment exports from Bangladesh to China. Such developments can cloud the perceived intentions of Chinese soft power. With regard to fellowships for Bangladeshi journalists visiting China, these are likely to be under a tightly regulated environment. Besides, there are issues of a few journalists and bloggers in Bangladesh being attacked for their candid views on elections or protests in the country. In this scenario, China’s fellowships for Bangladeshi reporters are only aimed at promoting the BRI and China’s growth story,

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not for promoting values of press freedom, a concept which does not exist in the Chinese domain.

Tomorrow is in today’s hands India can catalyze impact in the state-to-state soft power domain by bringing in private players to carry out its initiatives. India already has some of the world’s brightest minds in advertising and marketing who can package Delhi’s deals to make them irresistible. Private investment can be requested in Indian schemes to fund soft power strategies such as Mausam. This employment of the private channel will help the Indian diplomatic staff who are facing pressures due to limited human resources. It is an oft-mentioned suggestion that the Indian Foreign Service can be expanded to include more personnel. This can be substantiated with the aspect that the diplomatic community need not wait for more helping hands. If they can imbibe a spirit of learning to do more with less, it will contribute immensely to India’s soft power. For example, making well-designed, attractive and easily navigable websites for the Indian cultural centres, with constant updates, can be a simple yet effective module of soft power. Similarly, tapping social media is imperative. This would offer India a profound advantage over China, a country that steers clear of open and free social media platforms. Besides there can be greater visibility in new media and social media about existing Indian soft power achievements. It is not helpful when such promotions occur mostly when high-level visits occur. India can keep sharing tweets and posts on its cultural centres’ activities, the training given for developing skills in English and IT, the scholarships given to international students especially from South Asia and other milestones on the diplomatic front which the media does not cover adequately. While it is desirable to be unique, it cannot be helped to commend the US diplomatic missions’ use of social media. These at times even forge an immediate link with followers, by sharing experiences of the US diplomats who immerse themselves in local cultures, or have light moments. This bring to fore another reminder for India, that it has the ‘emotional quotient’ to be a successful soft power. This may be in contrast to the Chinese dynamic, whereby it is well known that the East Asian country’s people mostly avoid facial expressions. They are also a closed society which does not assimilate easily with other communities abroad. On the other hand, foreigners may prefer Indians who convey emotions while communicating; it indicates a transparency and openness which is lacking in Chinese overtures. Soft power cannot be a complete success if there is an environment of suspicion and mistrust. Another crucial step necessary for improving India’s overall soft power is to increase institutionalization of India’s existing treasures of culture and promote them with zest abroad. These must not be limited to elements accessible only to the upper classes of other countries. For instance, yoga classes have mass appeal abroad but are an expensive activity. They can be made more affordable via Indian

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centres. Indian entrepreneurs are cashing in within the country on the rediscovered mantra of rural handicrafts and products, which are being tailored for the urban classes. These can be given incentives for export to other countries. Even China will have willing customers for these products as its people’s interest in art is being encouraged by the Chinese government. This way India will spread visual impact of its cultural appeal (via art) and also imbibe into foreigners’ lifestyles (via yoga). This will further improve the subconscious affinity towards India among international societies. China needs to facilitate people-to-people soft power channels. Take the case of social media. A new social media platform can be set up whereby Chinese people can interact on ideas and opinions with the rest of the world preferably in English. It is inevitable that China will carry out heavy surveillance of such a forum. Perhaps the Chinese are already attuned to self-regulation to such an extent that they need little ‘moderation’ by Chinese authorities. China’s state-to-people soft power can see brighter prospects by allowing a greater trickle-down effect of its aid, and serious pursuit of environmental regulations in the recipient country. The reason this author is providing suggestions for improving China’s soft power is a matter of India’s interest. If China becomes a great power without consolidating soft power, it means it will result in what this author terms as ‘cultural miscommunication’. This in turn will damage China’s economic linkages with the rest of the world, thereby adversely affecting India as well. A stable China is in all countries’ interest, including India’s. Similarly, an influential India that is partially propelled by soft power will garner support in the international arena in terms of economic and geopolitical angles. If Beijing allows India’s people-to-people, state-to-people and state-to-state soft power to permeate China’s borders, then China will definitely make way for India to join the United Nations Security Council and the Nuclear Suppliers Group. This is an utopian scenario for now. Until a fraction of it is achieved, India and China will do well to increase their soft power with the rest of the world. That way, India and China will both become influential great powers and be forced to concede to each other as friendly rivals or competitors. Pax Indica and Pax Sinica are not utopian ideals in themselves. They are highly probable if applied with meticulous effort. The question remains whether Pax Indica and Pax Sinica, when achieved, will overlap smoothly across the world atlas, in ‘peaceful co-existence’.

References Anderlini, Jamil. 2008. ‘China’s Angry Youth Vent their Feelings’, Financial Times, May, www.ft.com/content/69ffade2-185f-11dd-8c92-0000779fd2ac (accessed on 17 March 2017). Baru, Sanjaya. 2009. ‘The Influence of Business and Media on India’s Foreign Policy’, India Review, 8(3): 266–285.

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Cai, Peter. 2016. ‘India’s Edge over China on Soft Power’, The Australian, 26 September, www.theaustralian.com.au/business/opinion/indias-edge-over-china-on-softpower/news-story/7ce855bae1e240d8922c23ca26ac2ecc (accessed on 17 March 2017). ‘CBI Project’. 2017. China Book International, www.chinabookinternational.org/aboutcbi/ Project/ (accessed on 10 March 2017). Cohen, David. 2013. ‘Xi Jinping: China’s First Social Media President?’, The Diplomat, 8 January, http://thediplomat.com/2013/01/xi-jinping-chinas-first-social-mediapresident/ (accessed on 10 March 2017). d’Hooghe, Ingrid. 2005. ‘Public Diplomacy in the People’s Republic of China’, in Jan Melissen (ed.), The New Public Diplomacy: Soft Power in International Relations (pp. 88–105). New York: Palgrave Macmillan, http://culturaldiplomacy.org/academy/ pdf/research/books/soft_power/The_New_Public_Diplomacy.pdf (accessed on 20 February 2017). Jacob, Jayanth. 2017. ‘Govt Plans Revamp of India’s Soft Power Outreach’, Hindustan Times, 9 January, www.hindustantimes.com/india-news/govt-plans-revamp-of-india-s-softpower-outreach/story-0VQn1YODU3NiG1L39oZTJO.html (accessed on 21 February 2017). Jintao, Hu. 2007. ‘Report at the CCP 17th Congress’, China.org.cn, www.china.org.cn/ english/congress/229611.htm (accessed on 10 March 2017). Masood, Asma. 2013. ‘India-Myanmar Relations: The Superglue of Skills-Based Education’, Myanmar Business Today, 31 December, www.mmbiztoday.com/articles/indiamyanmar-relations-superglue-skills-based-education (accessed on 17 January 2017). ‘Myanmar’. 2016. Freedom House, https://freedomhouse.org/report/freedom-press/2016/ myanmar (accessed on 17 March 2017). Nye, Joseph S. 2015. ‘The Limits of Chinese Soft Power’, Project Syndicate, 10 July, www. project-syndicate.org/commentary/china-civil-society-nationalism-soft-power-byjoseph-s-nye-2015-07 (accessed on 23 March 2017). Paul, T.V. 2016. ‘The Accommodation of Rising Powers in World Politics’, in T.V. Paul (ed.), Accommodating Rising Powers: Past, Present and Future (pp. 3–32). New Delhi: Cambridge University Press. Potter, Philip. 2016. ‘Globalization, Interdependence and Major Power Accommodation’, in T. V. Paul (ed.), Accommodating Rising Powers: Past, Present and Future (pp. 53–69). New Delhi: Cambridge University Press. Ruan, Lotus. 2016. ‘The New Face of Chinese Nationalism’, Foreign Policy, 25 August, http://foreignpolicy.com/2016/08/25/the-new-face-of-chinese-nationalism/ (accessed on 20 March 2017). Shambaugh, David. 2015. ‘China’s Soft-Power Push’, Foreign Affairs, July/August issue, www.foreignaffairs.com/articles/china/2015-06-16/china-s-soft-power-push (accessed on 17 March 2017). Sinha, Aseem. 2016. ‘Partial Accommodation without Conflict’, in T.V. Paul (ed.), Accommodating Rising Powers: Past, Present and Future (pp. 222–245). New Delhi: Cambridge University Press. Tandon, Aakriti. 2016. ‘The Modi Government and India’s Projection of Its Soft Power’, The Roundtable, 29 February, www.commonwealthroundtable.co.uk/commonwealth/ the-modi-government-and-indias-projection-of-its-soft-power/ (accessed on 10 March 2017). Venkatesh, Shruthi. 2015. ‘China’s Art Boom’, Chennai Centre for China Studies, 27 May, www.c3sindia.org/china/5055 (accessed on 20 March 2017).

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Zhou, Yuan and Zhihao, Zhang. 2016. ‘China Boosts Soft Power by Training Foreign Journalists’, China Daily, 17 October, www.chinadaily.com.cn/beijing/2016-10/17/ content_27097626.htm (accessed on 30 March 2017). ‘Ziganwu’. 2013. China.org.cn, 27 December, www.china.org.cn/china/2013-12/27/content_ 31021911.htm (accessed on 17 March 2017).

3 SINO-INDIAN ECONOMIC RELATIONS Cooperation or conflict? Sriparna Pathak

Introduction The economic growth rates of India and China, particularly in the 21st century, have led to the coining of the term “Asian Century (亚洲世纪, Yazhou shiji)”. India and China both have emerged as significant players in the international system; and beyond their own positions in the system, they are also shaping discourses at the international level through their individual capacities as well as through multilateral regimes that they are part of. However, their similar stances on several issues and their mere geographical location within Asia do not mean the bilateral relations between the two are not fraught with tensions. Beyond the boundary dispute, imbalance in trade relations is a persistent irritant in bilateral relations. While the boundary dispute is a leftover from history, trade deficit has become a relatively newer yet constant feature of Sino-Indian relations – particularly in the past decade. In 2003–04, the gap between imports and exports was USD (United States Dollar) 1098.13 million, with the balance tilting in China’s favour. In 2013–14, the deficit grew to USD 36,210.26 million, which was USD 51 billion in 2017 (Mallapur, 2018). The growth in deficit for India therefore in a span of ten years has been 319.74 per cent. If the current situation persists, India will experience an unsustainable trade deficit of USD 60,000 million. The high trade imbalance, therefore, is a major concern. While China often claims to face security concerns from the Indian side in market access for its products, Indian products simply face a range of tariff and non-tariff barriers in China. This chapter attempts to look at the thorny issues in Sino-Indian economic relations so as to understand a way forward for a smoother relationship in the economic realm between the two. The chapter is based on primary as well as secondary sources.

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The performance of the Indian and Chinese economies is exemplified through the unfolding of events during the global financial crisis. In 2009, when the global financial crisis was spreading across the globe with most other countries in the world witnessing negative growth rates, the exceptions were India and China – which registered growth rates of 8.5 per cent and 9.23 per cent respectively (Bajpai, 2011:3). Overall, India and China have been the two better performing countries in the world. However, while both India and China share similar developmental challenges, the fact remains that China has been a better performer in most indices of development than India. Nevertheless, even though extremely less in number, there are segments in which India performs better than China. Therefore, experience sharing and cooperation could definitely facilitate better outcomes for both. Table 3.1 compares India and China in a few select indicators. In the context of understanding the areas of cooperation between India and China, statements made by heads of state becomes an important resource. In 2018, Prime Minister (PM) Narendra Modi and Chinese President Xi Jinping met four times, and they concurred that there had been a “perceptible improvement” in bilateral ties after the Wuhan summit between the two sides in late April (NDTV, 2018). In addition to this, the then Prime Minister Dr. Manmohan Singh’s speech at the Central Party School in Beijing in October 2013 becomes important to understand plausible areas of cooperation between India and China (The Hindu, 2013). The areas of cooperation he had outlined brief ly are as follows: • •

Expanding and modernising infrastructure. Efficient managing of the process of mass urbanisation. City administrators in the two countries should share experiences and seek solutions in dealing with the physical, social, environmental and human challenges of mobility.

TABLE 3.1 Comparing India and China

Indicator

India

China

Gross Domestic Product (GDP) (current USD) [2017] Population [2017] Carbon dioxide emissions (metric tons per capita) [2014] Life expectancy [2017] Gross National Income (GNI) per capita (current USD) [2017] Growth rate [2019] Trade per capita USD [2012–14] Trade to GDP ratio [2012–14]

2.65 trillion

12.23 trillion

1.339 billion 1.73

1.386 billion 7.54

68.8 1790

76.4 8690

7.5% 822 53.6

6.2% 215,390 46.9

Sources: World Development Indicators Database; International Trade Statistics – World Trade Organization; World Bank; World Trade Organization statistics

Sino-Indian economic relations

•

•

• • • •

35

Drawing upon China’s strength in the manufacturing sector, which is vital for provision of mass employment. India has strengths in services, innovation and certain manufacturing sectors which can benefit China. Intensifying cooperation in energy security as well as joint development of renewable energy resources, along with working together in third-world countries. Working together to impart stability to the global economy and sustaining growth. Working together to make the international economic environment more conducive. Joining hands to ensure that the international response to climate change does not constrain our growth. Cooperating in the eradication of terrorism. Ensuring maritime security in the Pacific and Indian Ocean respectively.

In the light of the areas outlined by Dr. Singh, it can be held that in the last few years, India and China have struck common ground – be it at the Nairobi talks of the World Trade Organization (WTO), on the issues of special and differentiated treatment (SDT), the special safeguards mechanism to protect farmers from import surges from developed countries or in Paris at the Conference of Parties (COP) 21. In the context of Chinese investment, data reveals that Chinese investment in India increased to USD 2.3 billion in the past three months against USD 1.3 billion in 2000–16. During their meeting on the sidelines of the G-20 summit in Buenos Aires in 2018, President Xi referred to enhanced imports of rice and sugar from India, and the possibility of greater import of soya meal and rapeseed. He also expressed the hope that India would import more agricultural products from China (NDTV, 2018). However, the point to note in the context of investments is that investment of more than USD 2.3 billion has been in four Indian companies, which include ad tech start up Media.net, drug maker Gland Pharma and electrical equipment maker Diamond Power Infrastructure Ltd. In contrast to the USD 2.3 billion investment announced in the past three months, China routed only USD 1.35 billion in India by way of Foreign Direct Investment (FDI) between April 2000 and March 2016 (Sunkara, 2016). In the context of infrastructure creation, in 2016, China Railway Construction Corporation – one of the largest countries in the world – has shown interest in bidding for Rs. 35,000–40,000 crore worth of highway contracts in India (Arora, 2016). In the realm of addressing concerns of urbanisation, waste disposal and creation of smart cities, the following has taken place between India and China: • •

Agreement between Guangdong and Maharashtra on cooperation in the smart city mission. Visit of Chinese delegation to Solapur for its development as a smart city.

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•

A Memorandum of Understanding (MoU), pledging investments worth Rs. 19,000 crore to build a new smart city in Gujarat, signed between Gujarat government and China Small and Medium Enterprise Investment Limited (CSMEI) in 2015. MoU signed for bio-waste- and city-waste-based power projects in Gujarat. MoU signed by Guangdong’s Richwood Group and iNDEXTb for developing hospitality and tourism infrastructure at Gandhinagar, transport infrastructure in Surat and logistic parks at Kandla port, and Dahej Petroleum Chemicals and Petrochemical Investment Region (PCPIR). Another MoU signed between Gujarat government and Gao Xia, chairman, Hong Bang Finance and Investment Ltd. for infrastructure projects.

• •

•

Climate change, which has emerged as one of the major sources of concern in the international system, has also seen better cooperation between India and China. The Agreement on Cooperation on Addressing Climate Change was signed between India and China in 2009. An MoU between the governments of the two countries on Cooperation on Green Technologies was signed in 2010. In a joint statement issued during Prime Minister Narendra Modi’s visit to China in 2015, the two sides stressed the importance and urgency of implementing the outcomes of the Bali Road Map in order to increase the pre-2020 ambition and build mutual trust amongst countries. The two sides also urged the developed countries to raise their pre-2020 emission reduction targets and honour their commitment to provide USD 100 billion per year by 2020 to developing countries  (Modi, 2015). In 2014, India and China as part of the BASIC countries (Brazil, South Africa, India and China) in a meeting in New Delhi expressed disappointment over a “continued lack of any clear roadmap for providing USD100 billion a year by developed countries by 2020”. In particular, the countries demanded “immediate and substantial capitalisation” of the Green Climate Fund, which is seeking to raise USD 15 billion by the end of the year (Climate Change News, 2014). Thus, India and China have been collaborating actively on the issue of climate change not just at the bilateral level, but at the multilateral level as well. Ahead of the BRICS summit last year in 2015, Chinese President Xi Jinping stated, “China and India should work together to build a closer, more comprehensive and firmer partnership among the BRICS countries”. He added, China and India, both as staunch supporters and active builders of the BRICS mechanism, work together to forge a closer, more comprehensive and firmer partnership within the emerging-market framework so as to enable the BRICS countries to play a positive and constructive role, and contribute more to world peace and development. ( Xinhua, 2015) Similarly, in August 2016, PM Modi, during his meeting with Chinese foreign minister Wang Yi in New Delhi, stated that he cherishes friendship with

Sino-Indian economic relations

37

Chinese leaders and looks forward to exchanging views on further development of India-China ties with Chinese leaders on occasions including the G-20 Summit and the BRICS Summit (Xinhua, 2016). Within the ambit of the BRICS grouping as well, cooperation has taken place between the two. The purpose of foreign minister Wang Yi’s visit to India just before the G-20 Hangzhou Summit and the 8th BRICS Leaders Meeting, for example, was strategic communication with India. According to reports from the Press Trust of India, both sides agreed that the two countries have far more common interests than differences, far more aspects of cooperation than competition, and thus should place specific differences at a proper position in bilateral relations so as not to impact the overall friendliness (Navhind Times, 2016). On August 20, Lok Sabha speaker Sumitra Mahajan inaugurated the BRICS Women Parliamentarian Forum, where discussions were also held on implementation of the Sustainable Development Goals (The Indian Express, 2016). A rose garden has also been dedicated in New Delhi to the BRICS grouping (NDTV, 2016). In July, BRICS policy planning dialogue was conducted successfully in Patna, as there were fruitful exchanges of strategic assessments of prevailing international conditions and the regional situation of each member country (Times of India, 2016). Dialogues and communication through the BRICS platform, as seen in these mentioned cases, has also been a movement in the positive direction for Sino-Indian relations. However, despite the seeming bonhomie, camaraderie and intent for cooperation, the bilateral relations remain at best a mix of cooperation and conf lict, with conf lict at times outweighing the positives of cooperation. The following sections trace the causes of the conf lict to lay out a better understanding of the relationship between the two.

A brief history of economic ties A quick cursory glance at bilateral trade between the two sides in the last 30 years reveals that the relationship went through an initial slow growth in the first two decades, and then increased in the third decade. Growth in bilateral economic relations was minimal from 1981 to 1993. Even though the two sides concluded a comprehensive trade agreement and a mutual bestowal of Most Favoured Nation (MFN) status in 1984, the bilateral trade remained negligible in the 1980s. The signing of the Agreement on the Maintenance of Border Peace and Tranquillity in 1993 propelled the economic relationship to a new stage. At this point, the political agreement over border issues encouraged bilateral trade to grow. Another plausible explanation for the increase in that period is that India and China, at the time, possessed competitive rather than complementary economic structures (Garver, 1996:326). From 1993 to 2003, the bilateral trade showed signs of steadying growth. Figure 3.1 shows the bilateral trade between the two. As seen in Figure 3.1, bilateral trade between the two has been extremely low in the 1990s, especially when seen in contrast with the decade of the 2000s,

Exports

Bilateral Trade Between India and China: 1996–2015

Sources: China Statistical Yearbooks (1995–2018)

FIGURE 3.1

Total

Imports

Unit: USD 10,000

38 Sriparna Pathak

Sino-Indian economic relations

39

which sees a gradual but steady pick up. Additionally, this period also coincides with the two countries’ respective domestic policies of reforms and liberalisation. The renewed focus of both on the forces of globalisation to integrate their own respective domestic economies with the global economy also had at least a small role in ushering closer economic relations between India and China. After India liberalised its market in 1991 and went through structural adjustments, its total foreign trade began to grow in the 1990s, and grew much more rapidly after 2000. Meanwhile, China experienced an increase in its total foreign trade after it opened the market in 1978. Especially after Deng Xiaoping’s Southern Tour to the Shenzhen Economic Zone in 1992, China developed its manufacturing power, and become an exports-led economy. In 2003, the visit of the then Indian Prime Minister Atal Bihari Vajpayee to China accelerated the momentum for economic integration. The visit led to a pragmatic decision by both sides to cultivate economic ties without being constrained by the unresolved border dispute. After this, the two sides set up a joint study group to examine how India and China could expand trade and cooperation. With increasing trade between the two, the importance of the two in their respective lists of largest trading partner has also undergone drastic changes. In 1993 for example, China was at rank 13 in India’s list of trading partners. In 2015, China ranked at 1 in the same list. However, the reverse is not true, i.e. India does not figure in the most important trade partners for China. China’s largest trading partners include the US, the European Union (EU), South Korea, Taiwan and ASEAN. In 2001, Japan was China’s largest trading partner, followed by the US, the EU, Hong Kong, ASEAN, South Korea and Taiwan. In 2013, it was the US which ranked at 1, followed by Japan, South Korea, Taiwan and Germany. The constant feature is India’s absence in this particular list. However, the importance of India is particularly high in China’s trade in South Asia. India’s total trade with China ranked the top among all South Asian countries’ trade with China. The Sino-Indian trade is seven times greater than the Sino-Pakistani trade, the second biggest trade in 2010. Although India only counts about 2 per cent of China’s foreign trade so far, it is an increasingly important market and vital trading partner to China in South Asia. Figure 3.2 shows China’s trade with South Asian countries. The case of China’s total trade with South Asia (including that with India) is extremely dismal. China’s exports to the region accounted for 1.59 per cent of China’s total exports in 2001 and 3.44 per cent in 2012. In 2001, China’s imports from South Asian countries accounted only 0.95 per cent of China’s total imports, and in 2012, the ratio was merely 1.29 per cent. This is the case when trade with India is also included. If the component of total trade with India is excluded, then it is seen that in 2013, China’s total trade with South Asian countries accounted for only 0.106 per cent of China’s global trade. In short, imports and exports from South Asian countries (with the exception of India) are of minimal importance to China’s overall trade profile. However, within China’s South Asia trade relations, those with India become pertinent. In 2013

China’s South Asia Trade

Pakistan

Sources: China Statistical Yearbooks (2011–2018)

FIGURE 3.2

India

Bangladesh

Nepal

Maldives

Sri Lanka

Afghanistan

Bhutan

Unit: USD 10,000

40 Sriparna Pathak

Sino-Indian economic relations

41

for example, China’s total trade with SAARC stood at USD 92.99 billion, and trade with India represented 70.32 per cent. In this context, India stands as a bright spot in China’s trade relations with South Asian countries.

The persistent trade deficit In 2008, China replaced the US as India’s largest trading partner. China has an edge over India in terms of manufacturing exports more than India does. With an increase in the two-way trade between the two, what has also been witnessed is an exponential increase in the trade deficit for India. While the uncovered trade gap was reported at USD 602 million in 1998, it increased alarmingly to USD 39.2 billion in 2012 (Mohanty, 2014) and to USD 48 billion in 2015 (The Hindu, 2015). Figure 3.3 shows the trade deficit for India in the last five years. As seen in Figure 3.3, the worst trade deficit has been ever increasing. While the trade deficit reduced in 2013–14, it is far from being a sustainable one for India. In 2014–15, India’s exports to China stood at USD 11.95 billion while imports were USD 60.39 billion (The Hindu, 2015).

China’s new normal and implications for India After years of double-digit GDP growth rates, the Chinese economic model, which was primarily reliant on exports and investment, is now attempting a shift to a model based on internal consumption as a growth driver, along with reinforcing the tilt towards the services sector. The “New Normal (新常态, 6000000

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3000000 2010 2011 2012 2013 2014 2015 2016 2017

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1000000

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FIGURE 3.3

2011

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The Trade Deficit

Sources: China Statistical Yearbooks (2011–2018)

2013

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Xinchangtai)” also means a growth rate of 6.6 per cent, which has been made a target in the country’s 13th five-year plan. Given that China is the world’s largest manufacturer and trader, a top commodity buyer, a significant outward investor and inward FDI destination, and a huge emerging market, management of its slowing economy bears crucial implications for the shape of the global economy in the future. As an increasingly integrated member of the global economic community and a large economy in its own right, India is also likely to feel the impact (Kantha, 2016). India’s export basket (exports to China) is dominated by commodities like cotton, copper, cement and mineral fuels, and these are commodities the prices of which are likely to remain subdued. Exports to China are not likely to hold up in the next few years. As stated by Sharmila Kantha of the Confederation of Indian Industries, unfortunately, exports of machinery and electrical equipment – which also figure in the top ten exports from India to China – have also failed to maintain their volume and value (Kantha, 2016). In a situation where China wants to spur its own domestic consumption and address its own problems of prevailing oversupply, import reduction is not unimaginable. In fact, imports have already begun to shrink, and India is likely to see its trade deficit with China rising in the near future. The only ways that the slowdown in China may impact India positively are that it may bring more investment for India, as there is a movement of global FDI out of China and into India, and second, through increasing Chinese investments in India. Increasing FDI from China is one of the most favourable ways to address the trade deficit. An opportunity has also emerged as the trade war between the US and China escalates. For example, China’s 25 per cent import tariff on US soya beans creates a trade diversion opportunity for India. However, the fact remains that currently, India is not an exporter of soya beans to China despite a removal of tariffs (from 3 per cent to zero) on soya beans import from five Asia-Pacific Trade Agreement countries – Bangladesh, India, Laos, South Korea and Sri Lanka (Hindu Business Line, 2018). To reap economic benefits for its own national interests, India could continue negotiations with China to increase the imports of soya beans, in India’s export basket to China. India is the 10th largest global soya bean exporter, and it exported USD 166.13 million worth of soya beans to the world in 2017 ( Workman, 2019). It could definitely leverage this to further advantage. (Pathak and Kumar, 2019) Another thorn that has been a source of irritation in India-China economic relations is that of counterfeit goods. Knock-off commodities from China being passed off as Indian goods pose a serious threat to Indian manufacturers. As stated by a report by the Organization for Economic Cooperation and Development (OECD) and the European Union Intellectual Property Office, there is an estimated half-trillion-dollar global knockoffs market, with China taking up the lion’s share as the origin of the knockoff brands (OECD, 2016). Knockoff brands are the bane of the Indian branded market, and the scenario has existed for decades, with India being fifth on the list of fake-goods markets.

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The extensive penetration of counterfeit goods is detrimental to brand equity. Beyond this, counterfeiting in the cosmetics and pharmaceuticals industry is dangerous to the health and wellbeing of customers. At the macroeconomic level, fake goods pose a severe threat to India’s attempt at transitioning to a manufacturing-led economy, as exemplified by the “Make in India” policy. According to a 2015 report by the Federation of Indian Chambers of Commerce and Industry (FICCI) prepared by the Committee Against Smuggling and Counterfeiting Activities (CASCADE), losses to the Indian government were close to 60 billion rupees (USD 880 million) due to the knockoff market in the FMCG (fast-moving consumer goods) space alone. Almost 22 per cent of the packaged-goods industry was lost to the grey market (FICCI, 2018).

Counterfeiting and China In 2016, it was reported that the Indian Embassy in Beijing complained of several Indian brands being hit by Chinese fakes. The most popular brands included Natraj, Raymond, Fevicol, Onida, Godrej, JK Files and Dabur among a long list of others (Economic Times, 2016). In 2013, it was reported that complaints had been received regarding copyright and/or trademark violations by Chinese companies. The Indian brands that raised the issue included Nataraj, BoroPlus, Raymond, Onida and JK Files among others. What is noteworthy is that even after the complaints were raised, nothing changed in the span of three years, and the brands that faced International Property Rights (IPR) violations at the hands of Chinese companies were the same ones raising the issue in 2013 as well as in 2016 (Rediff, 2013). Prior to this, in 2007, Nataraj had complained to the Indian Embassy in Beijing about counterfeiting of its products by Chinese companies in which the Nataraj pencils had lead-laden paint. This shows the lack of redress of companies filing complaints of counterfeiting in China. The same Indian companies’ goods in China have been counterfeited over the years despite several complaints being raised (Business Line, 2017). After the Indian Embassy raised the complaint in 2016, the Chinese side acted upon a “few cases” by allowing the Indian companies to register with the State Administration for Industry and Commerce of China, as stated by India’s commerce and industry minister at the time, Nirmala Sitharaman (Economic Times, 2016). The onus of trademark registration and protection in China lies on the aggrieved enterprise, and according to the rules in that country, individual enterprises have to file a case in the relevant forum by hiring law firms on the reported instances of trademark and copyright infringements. This is what happens when Indian brands are counterfeited in China. In addition to this, there are two other ways in which counterfeit Chinese goods hurt and threaten the health of not just the Indian economy but also that of the customers who fall prey to the goods.

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The first is seen when counterfeit goods enter India routinely through ports. An example of this was when 12,000 pairs of shoes worth approximately 35 million rupees were confiscated from a container in Chennai that came from China in 2017 (Prabhakar, 2017). The dishonest importers of such consignments purposely declare them as unbranded products, such as ladies’ purses or car hangings, for example, while the shoes are of popular brands like Adidas, Nike and Reebok. The manufacturers print a fake unique product code (UPC) that is similar to the ones the original brands have, making it difficult for customers to ascertain the authenticity of the goods. However, in the specified case in Chennai, after the seizure, the patent holders confirmed that the UPCs of the shoes were fake. The process is tedious and it is uncommon, thereby leading to Chinese manufacturers exploiting the tediousness of the process. In a case reported in 2009, Chinese-made anti-malarial drugs Maloxine and Amalar with “Made in India” tags were seized by the Nigerian Drug Regulatory Authority (Times of India, 2009). In 2010, complaints were made about an antiseptic cream under the BoroPlus trademark being sold in Russia and neighbouring countries with the same design and packaging scheme of the original BoroPlus antiseptic company (Business Line, 2017). Beyond the health risk such counterfeiting poses, knock-off commodities from China being passed off as Indian goods pose a serious threat to Indian manufacturers, and this is the third way at the macroeconomic level that counterfeit Chinese goods are detrimental to the Indian economy. Counterfeit Chinese goods can also pose a risk to the defence and security of the country, as exemplified by a 2017 case, wherein a Delhi-based company sold Chinese parts camouf laged as “Made in Germany” parts to the Indian Army for the manufacture of the Dhanush gun (Economic Times, 2017). A new and emerging arena for counterfeit Chinese goods in India is the online market. Products sold on the Internet are generally distributed in small parcels via postal and express freight services directly to the customer, leading to an expanding role of technologies in IPR crimes. While India has launched a scheme for IPR awareness and even has a national IPR policy, violations continue. Counterfeiting is more prevalent in rural and semi-urban areas as compared with urban areas. Companies are increasingly spending money and resources to fight counterfeiters operating in India. Some pharmaceutical companies have even started using digital authentication apps that allow users to send images of medicines available online in order to detect the genuineness of the seller. However, the need is to increase such initiatives across all industries. While tackling IPR violations within India is still within the scope of imagination, dealing with the violations in third countries is still problematic, and the only way is to take the issue up on a repeated basis either with China or at the WTO. For Indian companies operating within China, it is essential that a greater emphasis is placed on the companies’ awareness of the “first to file” system,

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which means that the rights of trademark belong to the first person or company that properly registers the trademark in China (Brandstock, 2017). According to lawyers, many international companies are often too slow to register their brands in China, which gives faster-moving counterfeiters a chance to establish a legal claim first. As stated by the Office of the US Trade Representatives’ 2016 report to the Congress on China’s WTO compliance, IPR holders in China face an extremely complex and uncertain enforcement environment, besides a pressure to transfer IPRs to Chinese enterprises through a number of government policies and practices. For India, which already faces several challenges in its economic relationship with China, it is pertinent that awareness creation for Indian companies seeking to operate in China is undertaken on a wider scale. In 2017, China started a nationwide campaign to protect foreign firms’ international property rights, and Premier Li Keqiang, in a speech in March 2017, even promised to protect the rights of foreign companies investing in the Chinese economy (Tang, 2017). However, the Ministry of Commerce stated that China was a developing country and did not have a perfect system to protect IP, acknowledging that there was much work to do (Clark and Hagan, 2018). Thus, for India it is pertinent to keep this in mind and while expecting a better Chinese system that respects IPRs of foreign firms, it needs to continue spreading more awareness on IPRs among its own companies, business professionals and customers.

Addressing the trade deficit The reason as to why India does not fare in the list of top trading partners is because of its lack of comparative advantage in producing goods, especially in comparison with countries such as the US, Japan and Taiwan, for example. However, in the goods in which India does have a comparative advantage, pharmaceuticals for example, there exists tariff as well as non-tariff barriers for Indian products in China. While licences and registrations for Chinese Active Pharmaceutical Ingredients (API) are granted by the Indian Drug Regulatory Authority in about four months, it takes roughly about five to six years for established Indian pharma firms to register their products in China (Economic Times, 2014). Even in the case of IT/ITES and agricultural commodities, there exist a series of non-tariff barriers for Indian exports. Indian IT services are unable to make a breakthrough in China’s opaque State-controlled and State-owned enterprises. Additional issues faced are those of banking and foreign exchange remittance procedures, lack of intellectual property standards and the lack of transparency. A series of MoUs have been signed in the past on allowing more bovine meat, IT services and pharmaceuticals from India to enter China. However, ground realities are that no progress has taken place at all. Despite assurances given by China several times to address the trade deficit, nothing has taken place so far. Given

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the slowdown in the Chinese economy amidst the New Normal, demand from China is only set to decrease, and signals a worse spell of trade deficit for India as far as bilateral trade is concerned. A plausible way to address the trade deficit is through increasing levels of FDI in India. In 2015, according to reports from FDI intelligence, a division of Financial Times, India emerged as the top destination for FDI, replacing China – which had been at the position for several years in a row. An increase in the number of investment projects in coal and power in India helped in surpassing China (Huang and Karnik, 2015). As far as investment from China is concerned, it ranks at 17th in India’s list of countries which have foreign investment in India. Chinese investment in India, as of September 30, 2015, was to the tune of USD 1.24 billion, which is 0.47 per cent of the total FDI inf low in India in 2015 (Department of Industrial Policy and Planning, 2016). Overall, cumulative direct investment from China stood at just USD 2.05 billion till June 2018, according to consolidated figures from the Department of Industrial Policy and Planning. Interestingly, this is less than the USD 2.7 billion investments by Italy or tiny Luxembourg (Chakraborty, 2018). Figure 3.4 shows the FDI received from China from 2000–01 to 2014–15 (up to September). As seen in Figure 3.4, FDI has been close to zero largely up to 2007–08, after which it has shown a very weak take-off. The low levels of FDI get highlighted further when contrasted with the total FDI inf low received by India, as shown in Figure 3.5. 600

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FIGURE 3.5

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Even in 2014–15, while the total FDI inf low for India amounted to USD 30,931 million, India received only USD 494.75 million as FDI from China. The maximum FDI equity f low from China was in the financial year of 2011–12. The previous high was in the financial year of 2008–09. Between 2011–12 and 2012–13, the decline in FDI inf low from China was 56.62 per cent. The increase in trade deficit in the same time period was that of 3.96 per cent. Overall, the period only saw declines, which have not been in India’s favour. Therefore, in case the persistent trade balance actually has to be rectified, an urgent look at increasing FDI from China needs to be stressed.

What else could be done? A theoretical perspective In 2003–04, the gap between imports and exports was USD 1098.13 million, with the balance tilting in China’s favour. In 2013–14, the deficit grew to USD 36,210.26 million, and the balance still tilts in China’s favour. The growth in deficit for India, therefore, in a span of ten years has been 319.74 per cent. If the current situation persists, then India will experience an unsustainable trade deficit of USD 60,000 million. The high trade imbalance between India and China is a long-lasting concern. Trade facilitation between any two countries can be optimised in two methods. First, export promotion wherein domestic manufacturing is endorsed. Most commonly used arguments for trade promotions are the infant industry argument, quantitative restrictions and tariff impositions. In the case of trade between India and China, all these measures seem to have failed given the huge trade deficit. India has overused infant industry arguments for the manufacturing industry and in some cases of primary industry which has led to immature industries after decades of protections. A second method is by indigenous production of import substitutes in which case imports are reduced and local commodities are used. This diversification of manufacturing also helps in trade diversification in the long run. India has failed to provide enough time and concern towards what is entering the country. The cheaper prices of Chinese imitation commodities have captured domestic markets. Concerns over Banarasi silk imitations and rice crop improvisation show what can happen in future trade scenarios. In the long-cherished goal of “Make in India”, India highly focuses on exportable commodities but equivalently important are imported goods. The lack of domestic options of imported commodities helps foreign producers to capture domestic markets and the home country to lose a level playing ground. According to the Hecksher-Ohlin trade theory, a country should produce commodities that have input factor abundancy (Blaug, 2009:187). Given the multilateral trade situation, it is not only difficult to stick to a list of commodities but also essential that constant growth in disadvantageous segments is undertaken to build up pace in competition. The most pertinent method to fix the trade deficit would inevitably be increasing India’s exports to China, particularly in those commodities in which

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India has a comparative advantage over China. These would definitely include India’s pharmaceuticals, IT services, automotive components, media, entertainment, outbound tourism and farm products. However, the past experience that companies dealing with these products have had, shows there are high levels of non-tariff barriers existing for Indian companies in China. In the case of pharmaceuticals, for example, while license and registration timelines for Chinese API are granted by the Indian Drug Regulatory Authority in a time span not exceeding six months, it takes about five to six years for established Indian pharma firms to register their products to China. China insists that there are no barriers for Indian firms to enter. However, according to interviews conducted with various Indian companies operating in the industrial city of Yiwu, Zhejiang, entry is very difficult in the Chinese market, which is heavily skewed in favour of multinational firms, which have an overbearing presence in China. As such, Indian companies are averse to risk-taking due to issues of market access, pricing and drug registration. Indian drugs in advanced economies of the US and EU are cleared by the Food and Drug Administration. In the interview conducted in Yiwu, 20 Indian business entrepreneurs and investors were asked questions on various aspects related to their business undertakings in China. While 50 per cent had conducted businesses in China for more than five years, 50 per cent had done the same for less than five years. All had a Chinese partner. Ninety-eight per cent knew (even if it was vaguely) of the Catalogue for the Guidance of Foreign Investment in Industries (CGFII). Ninety-five per cent encountered problems in registering the enterprise, 95 per cent faced problems in importing goods from their countries or from anywhere outside China, while none faced any issues in exporting goods. Eighty per cent stated that the legal system was not reliable, 90 per cent stated IPR protection was weak, only 5 per cent agreed that rules were clear, and 95 per cent of the respondents complained of the duties on imports as being too high. Clearly, a lot of non-tariff measures exist in the Chinese market.

Conclusion India clearly has emerged as one of China’s largest markets. However, the situation which has emerged in the relationship between the two countries as far as trade is concerned is not a win-win situation, and is not viable for India. For India, there is an urgent need to change the trade basket and to introduce elements where India has a proven competence. However, if these are being restricted, then it is time that India resorts to import substitution and reduces the volumes imported from China. A high trade deficit weakens the fundamentals of the economy as it is complicated to finance the excess demand for foreign exchange which in turn destabilises the Indian rupee. In 2013–14 itself, the trade deficit with China works out to a quarter of India’s deficit with all other trading

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countries, and this is clearly not economically viable for India, and needs a serious rethink on India’s foreign trade policies with China, which has only seen deficits in the last decade.

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Organization for Economic Cooperation and Development. 2016. ‘Global Trade in Fake Goods Worth Nearly Half a Trillion Dollars a Year – OECD & EUIPO’, 18 April 2016, www.oecd.org/industry/global-trade-in-fake-goods-worth-nearly-half-a-trilliondollars-a-year.htm (accessed on 18 January 2018). Pathak, Sriparna and Kumar, Saurabh. 2019. ‘Changing Dynamics of India-U.S. Relations: A time for Introspection’, The Geopolitics, 10 January 2019, https://thegeopolitics.com/ changing-dynamics-of-india-u-s-relations-a-time-for-introspection/ (accessed on 11 May 2019). Prabhakar, Siddharth. 2017. ‘12,000 Pairs of Fake Branded Shoes Seized’, Economic Times, 2 September 2017, https://timesofindia.indiatimes.com/city/chennai/12k-pairs-offake-branded-shoes-seized/articleshow/60330746.cms (accessed on 10 January 2018). Rediff. 2013. ‘Popular Indian Brands being Copied and Sold in China!’, 20 March 2013, www.rediff.com/business/slide-show/slide-show-1-indian-brands-being-copied/ 20130320.htm (accessed on 8 January 2018). Sunkara, Keshav. 2016. ‘Chinese Investment in India Shoots to $2.3 bn in Past 3 Months Against $1.35 bn in 2000–16’, 30 August 2016, www.vccircle.com/news/ economy/2016/08/30/chinese-investment-india-shoots-23-bn-past-3-monthsagainst-135-bn-2000-16 (accessed on 1 September 2016). Tang, Frank. 2017. ‘China Launches Campaign to Protect Foreign Intellectual Property Rights as US Probes Alleged Thefts’, South China Morning Post, 20 September 2017, www.scmp.com/news/china/economy/article/2111929/china-launches-campaignprotect-foreign-intellectual-property (accessed on 5 January 2018). Times of India. 2009. ‘Customs Seize Chinese Cargo with Fake ‘Made-in-India’ Products’, 17 July 2009, https://timesofindia.indiatimes.com/city/chennai/Customs-seizeChinese-cargo-with-fake-made-in-India-products/articleshow/4787032.cms (accessed on 2 January 2018). Times of India. 2016. ‘BRICS Policy Planning Dialogue Ends on a Successful Note: MEA’, Patna, 26 July 2016, http://timesofindia.indiatimes.com/city/patna/BRICSpolicy-planning-dialogue-ends-on-a-successful-note-MEA/articleshow/53400199. cms (accessed on 12 September 2016). Workman, Daniel. 2019. ‘Soya Beans Exports by Country’, World’s Tope Exports, www. worldstopexports.com/soya-beans-exports-country/ (accessed on 8 January 2019). World Bank, ‘CO2 Emissions (metric tons per capita), https://data.worldbank.org/indi cator/EN.ATM.CO2E.PC (accessed on 29 April 2020). World Development Indicators (WDI) | Data Catalog – World Bank Data, http:// datatopics.worldbank.org/world-development-indicators/ (accessed on 29 April 2020). World Trade Organization, ‘Trade Profiles 2017’, https://www.wto.org/english/res_e/ booksp_e/trade_profiles17_e.pdf (accessed on 29 April 2020). Xinhua. 2015. ‘BRICS: Xi Seeks Sino-Indian Efforts’, 9 July 2015, www.chinadailyasia. com/nation/2015-07/09/content_15287703.html (accessed on 1 September 2016). Xinhua. 2016. ‘China, India Agree on Mutual Support to Successfully Host G20, BRICS Summits’, 14 August 2015, http://news.xinhuanet.com/english/2016-08/14/c_135594231. htm (accessed on 1 September 2016).

4 IRONY OF INDIA-CHINA ENGAGEMENT AT THE GLOBAL FORUM Krishna Kumar Verma

When we talk about international relations, we start discussing the engagement of the USA, China, Germany, Japan, Brazil, South Africa and India with each other. These are the present relationships among countries either in terms of economic cooperation or military cooperation and so on. Currently, the two largest economies of the world are the USA and China. However, India and China will be the two largest economies by 2030. This expectation gives us scope to discuss how these countries are behaving at international forums or at the bilateral level. Within it, global forums are greatly important because these forums will decide their engagement level towards each other. While India-China engagement dates back to the League of Nations, the focus of the present study is to trace out their engagement in the 21st century at global forums, especially in the last 15 years.

Indian and Chinese engagement at the United Nations India’s performance at the UNSC during the years 2011–2012 has been noteworthy. India tried to address some important global issues like the debate on responsibility to protect, counter-terrorism, combating piracy and concerns of troop-contributing countries to peacekeeping operations. India before entering in the Council in its latest tenure was willing to put in “value” in Council proceedings; it sought to prove herself as a creditable candidate for a permanent seat and perform as a mediator between member states. However, for permanent membership, it was required to get approval of permanent members, but India stuck with its norm of autonomy and did not compromise (Kumar and Mishra, 2013:02).

UNSC reform When India was admitted in UNSC as a non-permanent country, it focused on the reform of UNSC and said that it must ref lect the 21st-century global realities.

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Further, India said that reform of the United Nations is necessary including the enlargement of the UNSC because it still ref lects the 2nd World War geopolitical architecture. Brazil and India are the most prominent supporters for UNSC enlargement. India continues to be an energetic backer of the United Nations and UNSC, including during the time that the body was established. India (former member of the League of Nations) effectively pushed to get permanent membership in the UNSC in the Conference of San Francisco in 1945; at the end it failed, in light of the fact that it was not an autonomous nation yet. The UN was expanded only once in 1963 to add four non-permanent members; since 1963 membership increased from 113 to 193 (UN, 2017:1). However, the African region has not been represented as a permanent member while 75% of the work of the UN focused on this region. India argues that there is a need for better representation from the developing countries. India has proposed a reform of UNSC, which will increase the size by 25 members (India, 2017:1–2). Within it, six new members will be included as permanent members: two seats for Africa, two for Asia, one for Latin America and Caribbean countries, and one for Western Europe. However, this proposal also speaks about increasing seats for nonpermanent members, which could be either 14 or 15 by giving one seat for Asia, one for Eastern Europe, one for Latin America and Caribbean countries, and one or two for Africa (Kumar, 2012:1). G-4 nations argued that expansion only in non-permanent members will not solve the problem of the Council, whose structure and organisation is out of date in the present day and does not represent the new world order. Developing countries who are not permanent members of the Council, for example Brazil and India, feel that they are excluded from the most honourable institution of the world. Brazil, India, Japan and Germany (G-4) expect a permanent seat on the Security Council and threaten to decrease their economic and military troop contributions to the UN if their demand is not met. The US, China and Russia are suspicious and don’t want India and other new permanent members to have powers equivalent to them. Because of numerous ongoing new conf licts and crises, there is a need for reforming and enlarging the UNSC (Sonia, 2016:35). Those aiming for permanent membership argue that there is no justification why the P-5 still have rights to permanent seats in the Council. In the globalised world there are many other strong and important members who do not have that right; for example, India and Brazil are strong and important regional and global powers. Brazil has been invited as a mediator in African conf licts where Western countries were not welcome, for example in Guinea-Bissau. Indeed, the reform also demands the better relationship between UNSC and United Nations General Assembly (UNGA) as well as demands transparent working methods of UNSC with UNGA (Thielges et al., 2011:2).

UNSC and P-5 India’s relations with P-3 (the US, France and Brazil) continue to be destabilised on issues like Syria and Libya. In some areas it has been seen that India-US worked closely in the UN; UN peacekeeping is one of the areas where India as a third

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largest troop-contributing country ref lects its peacekeeping capacity and commitment. Terrorism and arms control are also areas of cooperation between the US and India because of their similar approach on it. In the West Asian issues, especially Syria and Libya, the US and India had different positions. However, in 2011 most of the resolutions on the Middle East were passed unanimously. On humanitarian intervention, India has serious differences with Western countries and the US, who had visual presence with the no-f ly zone resolution for protecting civilians in Libya by UNSC. But, after the pressure from the US, India abstained along with Brazil and Germany. Finally, the resolution was passed with ten votes in favour (the US, the UK, France and Lebanon voted in favour). The Western countries saw this opportunity to act militarily against the Qaddafi regime, pushing to the sidelines the original promise on protection of civilians. The West, especially the US, asked India to vote in favour of the Libya resolution rather than abstention, but India was immutable on its decision that it would not support the use of force and it raised its voice in favour of sovereignty and non-intervention (Chowdhury, 2015) (Sonia, 2016:40). An Indian permanent representative to UN, Manjeev Singh Puri, said, We deplore the use of force, which is totally unacceptable and must not be resorted to fulfil the interests of some. (UNSC Meeting 6498, 2011:5) On the Syrian issue, when senior officers of India, Brazil and South Africa visited Damascus in August 2011, India reaffirmed its dedication to sovereignty, condemned violence from all sides and urged President Assad to end savagery. Thereafter in October, India abstained from the UN Human Rights Council vote over Syria. The resolution was not adopted due to veto by China and Russia. But later India cast an affirmative vote for the UNSC resolution on February 2012. The reason behind Delhi’s decision was due to Western pressure because the death toll was increasing in Syria. Russia is opposed to any resolution that goes against the Assad government and is the major ally of the Assad regime because it has national interests with the Assad regime. China continues to support Russia’s stance because China wants to stay allied with Russia in the UNSC, and China is extremely apprehensive of normalising regime changes because of human rights violations, when China itself faces domestic problems (Higashi, 2012:12). The Palestine issue also became a stone between India and the US because the US was not in a favour for Palestine membership at the UN and India voted yes for full Palestinian membership. India has generally sided with the U.S. on issues that are important but not passionate; it has taken the other side on issues that generate greater political heat. (Blarel, 2011:5) Teresita Schaffer, former US State Department official, spoke about US thinking for a permanent Indian seat, but she also said that India and the US followed

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different agendas in the United Nations and this might bring conf lict in the UNSC’s work (Chowdhury, 2015). Both countries do not agree on the UNSC reform process and have conf licts in country-specific issues although the US supports India’s bid for permanent membership in the UNSC. After the election in 2012 India also welcomed Pakistan in the Council and said the admission of Pakistan is an opportunity to work on areas such as peacekeeping operations and counter-terrorism. However, it is also significant to note that India and Pakistan have worked four times together since the inception of the United Nations (Dikshit and Joshua, 2011) (Sonia, 2016:56).

Counter-terrorism efforts Upon its entry as a non-permanent member to the UNSC, India’s ambassador, Hardeep Singh Puri, was given the opportunity to administer the CounterTerrorism Committee (CTC) as a chairperson. Not only this, but India got to occupy many more committees which work on terrorism, such as the UNSC Working Group (established by UNSC resolution 1566 in 2004, resolution 751 in 1992 and resolution 1907 in 2009) compensates the victims of terrorist activities. It’s natural to say that counter-terrorism efforts are priorities in India’s agendasetting during its latest tenure because terrorist attacks have affected India very badly. India advocated for global, nuclear, chemical and biochemical understanding of terrorism. It uttered its “unshakable obligation” for restricting explosion of biological, chemical, nuclear and other weapons (Sonia, 2016:65). India also recognised the risk of important technologies and materials being transferred in control of terrorists and non-state actors (Kumar and Mishra, 2013:6). During debate and discussion, India also suggested that by enhancing law alone terrorism cannot be countered but it can be prevented through development, education, respect for human rights, integration, etc. India celebrated the foundation of the Counter-Terrorism Committee and stood up for strengthening the regime for fighting terrorism. However, it also raised its hand for building a global convention (Kumar and Mishra, 2013:7). India has been facing difficulty at the United Nations Security Council because a China procedural veto blocked the declaration of Masood Azhar as a terrorist. In 2016, China used veto power twice and made India’s fight difficult to declare Azhar a terrorist despite the fact that he is chief of Jaish-EMohammad (a terrorist organisation operating in Pakistan). Jaish-E-Mohammad was involved in two terrorist activities, the first instance in April and the second earlier in October 2016. Azhar had been declared a terrorist by India for his involvement in two terrorist attacks – a Parliament attack on 13 December 2001 and the Pathankot attack on 2 January 2016. Officially, China does not support any kind of terrorist activities, yet it does not declare Azhar a terrorist by technical hold. As reported, out of all 15 countries of the UNSC, it is only China which refused to do so whereas Saudi Arabia supports India’s bid.

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Possible explanations for China’s veto on Masood Azhar One explanation is, given that China and Pakistan are “all-weather friends”, Beijing’s efforts are aimed at keeping its ally in South Asia happy. India is seen as an opponent and even a threat by China and needling India in this way keeps India “boxed in” by problems in South Asia, leaving it with little leeway to focus on issues away from its immediate neighbourhood. Any breakthrough in South Asia in terms of peace with Pakistan or penalising Pakistan with support from other countries would mean India being relatively free to concentrate further afield. Pakistan’s support for China within groupings like the Organisation of Islamic Cooperation (OIC) and others like the Non-Aligned Movement where China has no representation could be another reason for Beijing extending support to Pakistan through the UNSC, where it is a powerful veto-wielding member. In the past, Pakistan has reportedly shielded China in the OIC against caustic remarks on Beijing’s crackdowns on its Muslim Uyghur community in its restive Xinjiang province. Another reason could be India’s growing proximity to the US that China definitely sees as a major challenge. India’s warming relations with the US in the past decade, the high-water mark of which was the 2008 civil nuclear deal, has been variously debated and discussed as moves by the US to find a counterweight to China in Asia. Another reason could be China’s pique with India for sheltering the Dalai Lama who Beijing considers a “subversive” and a “splittist”. The Dalai Lama is the temporal head of Tibetan Buddhists (Sonia, 2016:34). Last but not least is the key role played by Pakistan in China’s One Belt One Road plan. China has pledged US $51 billion in projects and investments in an economic corridor that literally runs across the length of Pakistan – linking China’s Xinjiang area to the Arabian Sea port of Gwadar.

Anti-piracy efforts Day by day, pirates’ attacks are increasing around globe. Pirate activity has become a concern for parties in the region of the Aden Gulf and Somalian coast as they are hindering the trade. In this regard, India, China and Japan have already been coordinating in anti-piracy efforts. Indian exports and imports via the Gulf of Aden are about US $50 billion and US $60 billion respectively, so the maritime security domain became a primary concern for India (Sonia, 2016:36). For combating piracy, India has also joined hands with the EU, Saudi Arabia, Sri Lanka and the Maldives. India was one of the first countries which initiated anti-piracy operations under UN mandate (Roy, 2012:1).

United Nations peacekeeping operations As a signatory of the UN Charter, India has supported purposes and principles of the UN Charter and it made contributions to implementing UN’s principles

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of peace and security in the world, particularly in the field of United Nations Peacekeeping Operations (UNPKOs). India has been actively contributing to the UN missions since its independence. It started contributing during the Korean War in the 1950s and continues to actively contribute today. In the period of presidency month of India, it chose to organise public debate and discussion on peacekeeping. During the debate, India advocated for increasing assets and legal support for UN peacekeeping operations in the world. There are more issues of concern for India, e.g. the issue of divergence regarding its resource, mandate and operations because after the Cold War, the nature of the conf licts has changed. It is increasingly being asked to do more than its traditional mandate. It recommended moving forward cooperation among Troop Contributing Countries and Police Contributing Countries (TCC/PCC). Another issue of concern for India is United Nations Peacekeeping (UNPK) mandate formulation under UNSC without consulting of troop contributing countries (Mohan, 2013:1–2). Abhishek Singh, First Secretary in the Permanent Mission of India to the UN, said, It is not only the formulation of the mandates but also the change of mandates mid-stream which is a source of concern for India. (Singh and Dube, 2014:1)

Climate change The 21st century is facing many challenges, including climate change. It is a global problem which needs a global solution. Since 1992 India has been constantly singing the same song, “it’s our turn to grow now”. India demands fair contribution to the climate solution. It said the West consumed energy in the past and now the same should be permitted in developing countries. However, India’s view to the climate change issue has changed considerably in a few years. Not only has India developed a comprehensive climate change program domestically, it has adopted a new stance in the international negotiations that has earned it the reputation of being a “deal maker”. (Rastogi, 2011:127) During the climate talks held in Paris in 2015, 196 countries submitted their country-specific targets to reduce their greenhouse gas (GHG) emissions by 2030, including the US, EU, Brazil and China. India committed to cutting its carbon intensity to 30–35% by 2030 (Aggarwal, 2015:1). Its decision has been encouraging because it is the third largest GHG emitter after the US and China. There have been some reasons behind India’s changing position on climate change: its stronger relation with the US because of its desire to become a permanent member in the UNSC and also its vulnerability to climate change (Mohan, 2015:4396 Kindle).

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NSG The Nuclear Supplier Group (NSG) was formed in order to prevent further proliferation of nuclear weapons after India’s nuclear test in 1974. The name of the test was “Smiling Buddha”, where it was made clear that nuclear energy will be used for peaceful purposes. However, it was perceived by existing nuclear powers and others as a threat to world peace. The test proved that non-weapons technology can be transformed into weapons. Big powers such as the five permanent powers decided to set down rules to control export-import of nuclear technology and materials. Further, the benefit was that France could be brought in, which was not a Non-Proliferation Treaty (NPT) signatory.

China, India and NSG China is excluded from the Missile Technology Control Regime (MTCR) and it urgently wants MTCR membership. China did apply to the MTCR in 2004, but could not get it, as it has bad non-proliferation records. One of the US government officials said in October 2004 that Chinese entities are sharing sensitive technologies of missiles with North Korea and others (Varma, 2017:1). The aim of MTCR is to seek measures to prevent further transfer of technology. Importantly, in May 2004 China was admitted to the NSG. Though this move was not supported by many law makers, Democrats and Republicans, it was favoured by then President G. W. Bush. Further, China received membership in NSG by consensus because it had already signed a NPT. Only a month after the October 2004 meeting, the US brought down eight Chinese companies which were accused of missile proliferation, so the path to become a MTCR member became harder and almost impossible for China. There are a few explanations for the Chinese block of India’s entry in NSG. First, China wanted to get membership to MTCR through revoking the block of India entry in NSG. Second, China has become an all-weather ally of Pakistan, so it wanted Pakistan to enter. However, Pakistan is unable to get admission in NSG as it has bad non-proliferation records. A. Q. Khan (a mastermind of Pakistan’s nuclear technology) had an established proliferation network. The proliferation group was created to get information on electronics resources for centrifuge machinery at the Engineering Research Laboratories (ERL) by Khan in the 1970s. This atomic group afterward helped Libya, North Korea, Iran and China by the sale of Uranium Hexaf luoride (UF6) gas and Highly Enriched Uranium (HEU). He was therefore responsible for illegal trading of nuclear technology overseas. If India becomes a NSG member, India can raise this issue to block the Pakistan bid in NSG entry, where China has concern for its all-weather ally, Pakistan. Third, China acquired the top position in Asia for nuclear technology. If India enters the NSG, this will change the supremacy of China in Asia on nuclear technology, which will adversely affect the powerful Chinese position.

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Beijing is not willing for New Delhi to get full legal acceptance as a nuclear power and become an equal partner for the formulation of a regime of nuclear technology. Many strategists say that China’s veto at NSG is just a single part of a larger battle which is being fought in South Asia. China passionately did not approve the 2008 nuclear deal, but could not succeed in the face of US and Indian pressure.

Shanghai Cooperation Organisation (上海合作组织, Shanghai hezuo zuzhi ) SCO is a Beijing-based international organisation which aims to counter the North Atlantic Treaty Organisation (NATO) establishment in the West. It was established in 1996 by five countries: China, Russia, Kazakhstan, Kyrgyzstan and Tajikistan. Uzbekistan was included in 2001. Pakistan and India also applied to become members of SCO. They signed a memorandum in 2016 to reward membership. Further, SCO officially rewarded full membership on 9 June 2017 (MEA, 2019). On the security front, SCO aims to fight terrorism and religious extremism. It further enhanced India because India has been a victim of terrorism for 30 years. Terrorism has badly impacted not only Afghanistan, which is ref lected in ongoing conf licts, but there are other terrorist organisations such as Hizbut-Tahrir in Uzbekistan which threaten security in Central Asia. While this has been minimised by Chinese economic roads and the Russian security umbrella, Central Asian countries still remain volatile. It is also important for China, because the Uyghur movement is creating a problem. Furthermore, Russia and India can cooperate to prevent these activities. The curse of fundamentalism also looms large over the region, with the increasing power of the Islamic State of Iraq and Syria (ISIS). Many from the Taliban, Al-Qaeda and other established militant groups got into the Islamic State’s ranks. However, numerical statistics are tough to come by; supposedly many thousands of youth and women have left their homes in Central Asia to advance the ISIS army that is enhancing its grip on Central Asia, Pakistan and Afghanistan. In the coming years, the SCO must step up to cover and assume duty to afford protection in Afghanistan in the wake of the exit of US and NATO forces. India, along with China and Russia, will have a chance to stabilise the problem in Afghanistan, which is presently on an alarming path with reports of the growing contact and weight of the Taliban.

G-20 G-20 is a forum for leading economies of the world to come together to set the agenda for global economic governance. Largely, this group is a collection of states which are either industrialised or in the process of industrialising. More

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than two-thirds of the population and more than three-quarters of the world’s GDP comes from these countries (IMF, 2016). Though it was established in 1999 for promoting sustainable development and reducing poverty in the world, after the 2008 financial crisis, it took the shape of a structure to regulate international economic order or f low. Earlier, it was only six countries making the G-6, but after the inclusion of Canada, it became G-7, and after the inclusion of Russia, it became G-8. However, it could not solve the financial crisis in 2008, and later, the members proposed to include emerging countries into it, and then it became the G-20 in 2009. The G-20 meets twice a year. The G-20 Summit gives an opportunity for a much-required frame for the Sino-Indian partnership, permitting these countries to concentrate on collective objectives. China and India have a responsibility to assist poor countries in economic reforms by working together on development. In addition to the G-20, India and China must use the inf luence of BRICS to make more democratic world organisations and global financial governance. Especially in the 21st century, India and China are able to assert their voices for restructuring existing international organisations (International Monetary Fund and World Bank) and this is possible because of increasing cooperation between two rising economies. Further, it has been intensified by foundations of New Development Bank and Asian Infrastructure Investment Bank. India should take part in an active role in achieving the goals of the G-20 Summit, and try to negotiate differences with its own neighbours. In the case of China, it should take part in constructive negotiations for solving the South China Sea dispute through consensus. Further, China should support India at the global level, so that it would be able to prevent India from falling to the side of US.

WTO, India and China The World Trade Organization was established through the Uruguay Round of negotiations of General Agreement on Tariffs and Trade (GATT) in 1995. India became a founding member as it was part of the GATT round of negotiations since the inception, whereas China was admitted into the WTO in 2001. The purpose of the WTO is to regulate international trade through providing a forum for negotiations, implementation and monitoring of trade rules, dispute settlement, building trade capacity for developing or leastdeveloping countries and provide a platform to non-government organisations, parliamentarians, other organisations, the media and general public on various aspects of the WTO (WTO, 2017). Generally, three principles of the WTO are considered as central: Most Favoured Nations, national treatment and reciprocity. These two countries became self-governing territories around the same time (India in 1947 and China in 1949). First, these countries started establishing selfreliant industry for import substitution, but China opened its economy in 1978

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and India in 1991 to the outside world. Both economies were earlier developing themselves by a plan-based economic development model. In other words, in the early period these countries were dependent on self-reliance, but they moved to become market oriented and forward looking. Two-way trade has grown by 25% after China joined the WTO in 2001. India exports to China increased by 26%, whereas Chinese exports were increased by 24% during 2000–2004 (Bhatt et al., 2006:3–5). However, India’s imports only constitute for 1% of Chinese global imports, whereas imports from China to India is 5% (Bhatt et al., 2006:6–9). Through this it seems that India is an important destination for China, but China is not for India. On the other side, India looks forward at China’s manufacturing strength enviously, whereas China wants to succeed in IT services, which India leads. There is one major sector where these two countries have come together to protect their interests, which is agriculture subsidy. The recent fall of global trade talks have given the opportunity for India and China to come together as they found common interests. WTO negotiations were stalled because of disagreement over agricultural subsidy on 29 July 2008. This halt was stated by the US as a mutual understanding between China and India, whereas Japan says that India and China are focusing too much on their own interests. In 2012, a case was filed against the US in the WTO dispute settlement body by India and China. A panel was set up, and the panel came up with the verdict that US tariff imposition had violated WTO trade rules. In a separate ruling, it said that the US should remove tariff imposition on India steel products and it also said that action not taken accordingly would be liable to further disciplinary action. In a separate case filed by the US on 24 February 2013, the WTO panel gave a verdict in favour of the US on the Jawaharlal Nehru National Solar Mission (WTO, 2017). In this plan, India made a compulsory clause which forced companies to use only home-made indigenous products and this was claimed by the US as a violation of WTO rules. In this situation, India was supported by China’s stance: “We support India in their appeal against the WTO ruling. We support the domestic industry to manufacture products for the solar industry”, said Xie Zhenhua, Special Representative for Climate Change of China. (Aggarwal, 2016:1) India’s position in this case was supported by China in the BASIC ministerial meeting on climate that took place in New Delhi. The US had complained in 2013 in the WTO against India’s National Solar Mission. The US says that India’s imposition of domestic content requirements (DCR) rules have violated WTO trade rules. WTO Dispute Settlement Body (DSB) set up a three-member panel to look into cases in 2013. The verdict of the panel did not favour India. On appeal, India gave an argument in defence of DCR measures, saying that it promotes sustainable development.

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BRICS This forum was set up in 2009 and included Brazil, Russia, India and China, but South Africa became member of the group in 2010. The purpose of this forum is to generate new means of finance and also to reform existing financial organisations and further seek to cooperate in different areas for a prosperous future. Their announcement for a need for new global reserve currency has ref lected not directly, but indirectly, to reduce the dominance of the US dollar ($). BRICS Bank was created in 2015 through signing an agreement in 2014. Now, the name of the bank has been replaced by New Development Bank (NDB). This bank has three governing structures: Board of Governor, Board of Directors, President and Vice-Presidents. The first president of NDB elected is K. V. Kamath from India. The primary focus of the bank is to lend for infrastructure and sustained development projects. This bank has been authorised by agreement to finance US $34 billion annually (BRICS, 2017). Also, it has moved forward to create a capital equal to US $50 billion which will be increased to US $100 billion, as each member will contribute US $10 billion (BRICS, 2017). During 2011 in the UNSC, the BRICS nations came together (Russia and China as permanent members and the rest as non-permanent members), which was an opportunity for them to work together on international peace and security. The last few years has shown coordination among the BRICS nations. In the UNGA and in the UNSC, the BRICS solidarity is much more solid than that of the P-5 but less than that of IBSA (India, Brazil and South Africa). The BRICS behaviour in the UNSC, analogically, is different from the Western countries led by the US. In UNSC resolution 1973 in March 2011 on the Libya issue, the BRICS nations abstained, along with Germany. This showed their unanimity and also raised questions on US hegemonic world order (Kheli, 2011:7). The BRICS step also showed their long-time aversion to Western-led military operations. They are afraid about future international action which may interfere in their internal politics. India’s abstention is explained by Manjeev Puri’s statement that The resolution authorizes far-reaching measures with relatively little credible information on the situation on the ground in Libya. (Kheli, 2011:1) India also worried about financial measures in Libya that would affect its trade and investment. The BRICS showed their consistency through voting at UNSC. However, the BRICS member states have voted in a similar manner on 37 instances out of 38 till 1 September 2011 (UN Documents, 2017:1). Other cases of the BRICS ideology and voting alike are the numerous climate change arrangements and strategies towards Iran and Syria. On 4 October 2011, Russia and China blocked UNSC’s resolution ending Syria’s crackdown on protesters, while South Africa, Brazil and India abstained together. The BRICS acted in

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a strategic grouping to stop a Western call for regime change in Syria (United Nations, 2017:21).

TPP (Trans Pacific Partnership) trade agreement vs. RCEP (Regional Comprehensive Economic Partnership) The TPP proposed a free trade agreement in 2006 by a few countries bordering the Pacific Ocean, but excluded China. Further, it was only strengthened when the US joined this group in 2008 as Barack Obama assumed office. The TPP accounts for 40% of world economic output and 20% of world trade (IMF, 2016). RCEP was a proposed regional economic forum by China for fostering trade and boosting growth in 2012 in a region in which India is included. It also accounts for 45% of world GDP and 30% of world trade (IMF, 2016). RCEP is a Chinese initiative to counter the TPP on an economic front to the US trap or economic hegemony. Though other countries have already reduced their import duty, India has not done so because it fears that reducing tariffs will lead to loss of 63,500 crores, which constitutes 6% of total government revenues (Seshadri, 2017:20–24). Further, there is still a possibility that reducing tariffs will form a regional value chain for goods and related jobs. The total of the RCEP import was around US $1.13 trillion of services in 2015 after including China and Japan who are major importers (Seshadri, 2017:5–7). Bulks of these import services are commercial and business services, travel, charges, transport which link with IP rights, etc. Only a small share of the service order from the RCEP countries is in the area of IT, ITS, financial services, etc. The question now is whether RCEP can really help India in expanding its services markets. For example, Vietnam lately has put a restriction on the import of groundnuts from India. The same ban was revoked in 2015 after consultations took place through various Standard Operating Procedures. As a result, there is an inspection procedure for groundnut exports that is checked by APEDA (Agricultural and Processed Food Products Export Development Authority) in India. The imports were also being inspected by the Plant Quarantine department of Vietnam. Despite such mechanisms and lack of any major complaints by buyers in Vietnam, the ban has been re-instated. But, as India joined it fully, it will help to sort out issues with Asian countries.

AIIB (Asian Infrastructure Investment Bank) In 2009, the vice chairman of a Chinese think tank on foreign exchange suggested creating AIIB. The initial situation was to use reserve Chinese currency for tackling the global financial crisis which took place in 2008. First, it was launched by Chinese President Xi Jinping at a time when he visited Indonesia in October 2013. This move was taken to challenge the existing economic order being dominated by IMF, the World Bank and Asian Development Bank, which basically represent Western and Japanese interests.

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In June 2014 China suggested creating a capital bank with capital for lending nearly US $50–100 billion (AIIB, 2017). China requested many countries to join, including India. Meanwhile, a memorandum was signed by 21 countries in Beijing on 24 October 2014. Later, Indonesia also signed the MoU on 25 November 2014. Five Chief Negotiators Meetings (CNMs) negotiated the articles of agreement during November 2014–May 2015. However, the agreement and the legal structure were finally made clear by the fifth meeting of CNM. Through an agreement, AIIB Bank came into existence in December 2015. The Board of Governors convened an inaugural meeting in Beijing on 16 January 2016. Bank President Jin Liqun was elected for five years. Seventeen states hold together 50.1% of the initial subscriptions of capital stock which it is to deposit as an instrument of ratification (AIIB, 2017). The AIIB bank voting power given to China is 26.06%, Russia 5.92% and India 7.51% (AIIB, 2017). However, the AIIB bank has appointed an Indian as first head of the bank, D. J. Pandian.

Conclusion Cooperation between India and China is changing with the times depending on the demands of the time. It is evident that on many occasions they have cooperated, but on some other occasions, their positions or stance contradict. For example, China is blocking the India membership at NSG on the one hand, but on the other, they have invited India to join SCO, which is headquartered in Shanghai. Here, the argument is that their preferences change according to their interests. Notably, the Chinese invitation towards India to join AIIB Bank is a ref lection of the increasing importance of India in the case of financial governance as it is one of the two fastest-growing countries in world. Even Chinese strategists know that sidelining India would make US penetration deeper. Further, it had made clear that establishment of the AIIB is to resist the dominance of US and Western-led financial organisations. It is very much clear that India’s principal position has been always to resist any type of dominance of any single country. In other words, India has always been a fan of democratic economic governance and financial systems.

References Aggarwal, Mayank. 2015. ‘India Pledges 33-35% Cut in Carbon Emission Intensity by 2030’, https://www.livemint.com/Politics/ZD2z2vwZktGNlzhrLujmyO/Indiaunveils-emission-targets-for-2030-in-UN-climate-submis.html (accessed on 23 June 2017). Aggarwal, Mayank. 2016. ‘China Supports India in Solar Dispute at WTO’, www.livemint. com/Politics/11yE8Bz6bgZZ6LhXXlB8eL/WTO-panel-rules-against-India-in-solardispute.html (accessed on 23 July 2017). AIIB. 2017. ‘AIIB Annual Report’, www.aiib.org/en/news-events/news/2017/annualreport/common/pdf/AIIB-Annual-Report-2017.pdf (accessed on 23 June 2017).

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Bhatt, T.P., Guha, Atulan, and Paul, Madhua. 2006. ‘India and China in WTO: Building Complementarities and Competitiveness in the External Trade Sector’, http://planningcommission.nic.in/reports/sereport/ser/stdy_indch.pdf (accessed on 26 June 2017). Blarel, Nicolas. 2011. ‘The Palestinian Quest for Statehood at the United Nations: International Reactions and India’s Position’, IDSA, www.idsa.in/system/files/IB_ ThePalestinianQuestforStatehoodattheUnitedNations.pdf. BRICS Bank. 2017. ‘BRICS Bank Document’, www.ndb.int/about-us/essence/history/ (accessed on 14 April 2017). Chowdhury, Jhinuk. 2015. ‘India’s UNSC Dream: Is it Worth the Sweat?’, Swarajya- Read India Right, http://swarajyamag.com/world/indias-unsc-dream-is-it-worth-the-sweat (accessed on 16 June 2017). Dikshit, Sandeep, and Joshua, Anita. 2011. ‘Pakistan Acknowledges India’s Support Yet Again’, The Hindu, 30 October 2016, www.thehindu.com/news/national/pakistanacknowledges-indias-support-yet-again/article2580241.ece (accessed on 2 June 2016). Higashi, Daisaku. 2012. ‘Battle at the UN Security Council on Peace Enforcement in Libya and Syria: Focusing on the Strategies of BRICS’, https://gdoshisha.files. wordpress.com/2012/06/daisaku-higashi-paper.pdf. IMF. 2016. ‘GDP Data’, www.imf.org/en/Data (accessed on 8 September 2017). India. 2017. ‘Joint Press Statement at the Meeting of Foreign Ministers of the G-4 Countries’, www.mea.gov.in/bilateraldocuments.htm?dtl/28962/Joint_Press_Statement_at_the_ Meeting_of_Foreign_Ministers_of_the_G4_Countries_Brazil_Germany_India_and_ Japan_on_United_Nations_Security_Council_Reform (accessed on 5 January 2017). Kheli, Sherin Tahir. 2011. ‘UN Security Council Vote on Libya: Why BRICS Countries Abstained’, www.thedailybeast.com/un-security-council-vote-on-libya-why-briccountries-abstained (accessed on 25 July 2017). Kumar, Keerthi Sampath. 2012. ‘India’s Past Year at the UN Security Council’, IDSA, www. idsa.in/idsacomments/IndiasPastYearattheUNSecurityCouncil_KSKumar_070212 (accessed on 18 March 2017). Kumar, Keerthi Sampath and Mishra, Saurabh. 2013. ‘India’s Two Years at the HorseShoes Table’, IDSA, www.idsa.in/issuebrief/IndiasTwoYearsatheHorseShoeTable_ KeerthiSaurabh (accessed on 12 March 2017). Ministry of External Affairs (MEA). 2019. ‘Brief on SCO’, Government of India, https://mea. gov.in/Portal/ForeignRelation/SCO_Brief_May_2019.pdf (accessed on 12 March 2020) Mohan, Archis. 2013. ‘India and the United Nations’, Ministry of External Affairs, Government of India, http://mea.gov.in/in-focus-article.htm?22231/India+and+the+United+Nations (accessed on 10 February 2017). Mohan, Raja C. 2015. Modi’s World: Expanding India’s Sphere of Influence. New Delhi: HarperCollins Publishers. Rastogi, Namrata Patodia. 2011. ‘Winds of Change: India’s Emerging Climate Strategy’, The International Spector, 46(2): 127–141. Roy, Angana Guha. 2012. ‘Indian Navy’s Anti-Piracy Operations’, Indian Council of World Affairs, www.icwa.in/pdfs/Ang6032012.pdf. Seshadri, V.S. 2017. ‘Regional Comprehensive Economic Partnership: Need for Strategy’, www.ris.org.in/sites/default/files/Publication%20File/DP_209%20.pdf (accessed on 24 April 2017). Singh, Suresh P. and Dube, Memory. 2014. ‘BRICS and the World Order: A Beginners Guide’, SSRN, http://Papers.ssrn.com/sol3/papers.cfm?abstract_id=2443652# (accessed on 17 June 2016). Sonia. 2016. ‘Explaining India’s Role as a Non-Permanent Member in the United Nations Security Council, 2011–2012’, Thesis submitted at Jawaharlal Nehru University, New Delhi.

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Thielges, Sonja, Petersen, Hannah, Mildner, Stormy-Annika and Lauster, Gitta. 2011. ‘The 2011 GIBSA Conference on the United Nations Security Council: Position, Demand, Shared Interests’, Stiftung Wissenschaft und Politik (SWP). United Nations. 2011. ‘UNSC Meeting 6498’, http://responsibilitytoprotect.org/Security% 20Council%20meeting%20on%20the%20situation%20in%20Lybia%2017%20 March%202011.pdf (accessed on 4 July 2017). United Nations. 2017. ‘Member States’, www.un.org/en/member-states/ (accessed on 27 June 2017). United Nations. 2017. ‘The Situation in Libya’, www.un.org/en/sc/repertoire/2010-2011/ Part%20I/2010-2011_Libya.pdf (accessed on 23 June 2017). Varma, K.J.M. 2017. ‘China in Touch with Russia Over India’s NSG Bid: Official’, www. livemint.com/Politics/PwvBRvvICS5F5AWlNM4APL/China-in-touch-with-Russiaover-Indias-NSG-bid-official.html (accessed on 9 February 2018). WTO. 2017. ‘India: Certain Measures Relating to Solar Cell and Solar Modules’, www. wto.org/english/tratop_e/dispu_e/cases_e/ds456_e.htm (accessed on 23 June 2018).

5 RISE OF THE BRICS AND CHANGING WORLD ORDER Role of India and China Junuguru Srinivas

Introduction Two decades of globalisation have led to many changes in the economic status of countries. Countries of the European Union have faced stagnation and recession, while several southern countries have shown high growth and economic development. Russia stabilized its economy after the shocks of Soviet disintegration by leveraging oil sales and weapons export to induce growth. The fast-growing economies of China, India and Brazil stand out in this regard. These changes have impelled changes in the international system, which shifted after the end of the Cold War bi-polar system, where one superpower – the United States (US) – dominated international politics. The international forums and institutions, both formal and informal like the World Bank, International Monetary Fund (IMF) and G-8 and G-20, respectively, continued to be dominated by the Western countries, especially the US and European Union. Even though Europe faced economic crises, and the economic strength of others increased, this domination did not change. So, the need for new formations resulted in the formation of the group called BRICS (Brazil, Russia, India, China and South Africa). In this context India has greater opportunity to manoeuvre its foreign policy in the group to become one of the decisive actors in world affairs.

Changing nature of international politics The disintegration of the Soviet Union in the early 1990s is a watershed event in contemporary international relations. It led to not just major changes in power relations amongst states but also to a paradigm shift in international relations. This change was characterized by contrasting tendencies in world affairs, one comprising the rise of hegemonic ambitions of the US, the other involving

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globalizing phenomena with active involvement of non-state actors and the third involving the nascent rise of multipolarity with the ascendancy of emerging powers like China, India and some other southern world countries. Though the US retains its military supremacy, in terms of economic powers, however, it is clearly more of a diffused picture with multiple states and institutions contending for power. William C. Wohlforth (1999:5–41) stated that the 19th century was not just ‘Pax Britannica’. During the period 1815 to 1853 it was Pax Britannica et Russia. Then from 1853 to 1871, there was no concept of Pax. Between 1871 to 1914, it was a Pax Britannica et Germanica. Similarly, we can compare this to the world system during the Cold War period that had characteristics of both Pax Americana and ‘Sovietica’. However, international scholars emphasized that the rise of a unipolar world would not last long and is an illusion. The multipolar world order is inevitable with the rise of third-world countries as global powers (Pape, 2009:21–34). The reality has come true with the rise of countries like China, India and Brazil. Thus, it is a very intrinsic phase of world politics at present. But then, this is also a novel change which was never witnessed in world politics. Several factors are at work in determining the trajectory of contemporary world order. First, no single actor, howsoever powerful, can alone substantially inf luence the ongoing international economic and political structure. Multilateralism, including non-state actors, is the key to international politics. Second, inter-governmental and international institutions are emerging as significant actors. And finally, issues in world politics are increasingly converging and integrated, for instance economics, culture, security are becoming interrelated (Kumar and Dirk, 2010:xvii–xviii). A number of scholars of contemporary international politics are using a variety of terms to define the current structure of global politics. They emphasize detente, dependence or the development of a multipolar world. And sometimes they compare it with 19th-century politics, which was mostly based on a nation-state concept; 20th-century politics is mainly defined based on ideology (Bajrectarevic, 2011:8–18). But the current structure is completely different. This is probably the first time that the world is moving with different trajectories and causes. The emerging nations like China, India, Brazil and the evolution of middle powers like South Korea, Indonesia, South Africa and Turkey have initiated a new trend in world affairs (Toloraya, 2013:1). These emerging countries like China, India, Brazil and South Africa claim equal stake in global decision making, especially in financial institutions like the World Bank and IMF. Their economic performance is quite impressive since the recent past. In 2010 China’s economy stood at $4.909 trillion, Brazil’s economy at $1.572 trillion, India’s economy at $1.296 trillion and Russia’s economy at $1.231 trillion (Badannath, 2010). Furthermore, the IMF’s 2015 World Economic Outlook report says these rising powers have increased their share in global economy over the period, and their positive growth projections in the near future demonstrate that these nations are becoming decisive for the first time in world politics. The report

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said that Emerging Markets and Developing Economies (EMDE) are rising fast as compared to Advanced Economies (AE) over the period. The data was given from 1980 onwards, where the report clearly says that the EMDEs are steadily crossing the AEs in the coming decade; from the year 2015 onwards EMDEs would overtake the AEs. The growth of the EMDEs was at 35 percent in the global economy in 1980; whereas the AEs’ collective contribution to the global economy was 63 percent. This was all in PPP (Purchasing Power Parity) terms where income levels in different countries are compared worldwide based on purchasing power. However, the EMDEs’ share in the global economy gradually increased. The data shows they grew to 40 percent in 1992 and 42 percent in 2000. From 2015 onwards the share of the EMDEs was more than the AEs contribution to the global economy as it stood at 55 percent, whereas the AEs’ contribution was around 42 percent only. The important aspect of this growth is that this trend will continue in the future. In another report brought out by the World Bank in 2015, the data explains how the developing countries’ GDP growth rate has been increasing since the recent past. The data given in Table 5.1 by the World Bank’s “Global Economic Prospects” indicates that the emerging players will be the key players in upcoming international relations, whereas the so-called developed countries’ share in the global economy is constantly going down year by year. While registering positive growth rate over the years, these countries realized the importance in coming together. In the process these rising powers started establishing regional and inter-regional organizations to put forward their interests and concerns collectively. The quintessential groups that emerged as a result TABLE 5.1 Global Real GDP Growth

Countries

2013

2014

2015

2016

2017

2018

High Income United States Russia China Japan India South Africa UK Brazil Indonesia Turkey Egypt Nigeria Mexico EU

1.2 1.5 1.3 7.7 1.6 6.9 2.2 2.2 3.0 5.6 4.2 2.1 5.4 1.4 −0.2

1.7 2.4 0.6 7.3 −0.1 7.3 1.5 2.9 0.1 5.0 2.9 2.2 6.3 2.3 0.9

1.6 2.5 −3.8 6.9 0.8 7.3 1.3 2.4 −3.7 4.7 4.2 4.2 3.3 2.5 1.5

2.1 2.7 −0.7 6.7 1.3 7.8 1.4 2.4 −2.5 5.3 3.5 3.5 4.6 2.8 1.7

2.1 2.4 1.3 6.5 1.9 7.9 1.6 2.2 1.4 5.5 3.5 4.4 5.3 3.0 1.7

2.1 2.2 1.5 6.5 1.3 7.9 1.6 2.1 1.5 5.5 3.4 4.8 5.3 3.2 1.6

Source: The World Bank, Global Economic Prospects. 2016

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were IBSA, BRICS, G-20, RIC, etc. Amongst all these groups, BRICS turned out to be more powerful and a game changer in the international arena. The reason behind this was due to its inter-continental representation.

Theoretical underpinning In the present international scenario, it becomes relevant to analyze the significance of BRICS (Brazil, Russia, India, China and South Africa). The evolution of the BRICS group has always been ‘uncomfortable’ or an exceptional case for international relations theorists. The IR theorists primarily tried to apply the study of the BRICS as an institution (Sergunin, 2015:74). They thought that there is no reason to apply any theory on the rise of BRICS, as it has all empirical data to explain. However, we can apply one theory to this phenomenon. The popular neo-realist theory of ‘power transition’, which was developed by Organeski in his book World Politics (1958) and by his followers Wittkopf (1997) in the book called World Politics: Trends and Transformation and Tammen et al. (2000) in Power Transitions: Trends and Strategies, is the most suitable to explain the rise of the BRICS in international relations. It primarily argues that: This theory aims at explaining the causes of international conf licts and wars by the rise of emerging powers that are discontent with international rules established by the dominant powers. (Sergunin, 2015:1) According to this theory states can be classified into two groups, those favouring to maintain ‘status quo’ and others trying to be ‘revisionist’. The BRICS group symbolizes a revisionist tendency. However, these countries do not want to restructure the global order; rather the group wants to reform the loopholes of the existing order. And also, the BRICS wants to establish democratic world order, unlike power-centric global politics. In this phenomenon, all countries have equal say and equal rights on any global issue. And that is what BRICS is trying to do with their annual summit declarations and regular meetings.

Rise of the BRICS The BRIC acronym was first created by Goldman Sachs economist Jim O’Neill in 2001 while projecting their growth rate in the near future, which had the potential to overtake developed countries. O’Neill argued that the West should shift their economic policies towards the BRICS countries region, as these countries would become a safe haven for investments from advanced countries (O’Neill, 2001). Furthermore, the World Bank report of 2010 claimed that China became the world’s second largest economy and second largest economy in global exports. The report also said Brazil would become the sixth largest economy in the world in 2011, while India would maintain a sustainable growth

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TABLE 5.2 General Information About BRICS by 2014

Countries

Area of Territory (1000 sq. km)

Capital City

Mid-Year Population (in Millions)

Density of Population (Persons per sq. km)

National Currency

Brazil Russia India China South Africa

8516 17,098 3287 9600 1221

Brasilia Moscow New Delhi Beijing Pretoria

203 146 1239 1364 54

23.8 8.4 391 142.1 44.2

Real-R$ Rouble (Ru) Rupee Renminbi-RMB Rand-ZAR

Source: BRICS Joint Statistical Publication (2015)

rate and become the ninth largest economy. Russia has recovered her self-esteem by becoming the eleventh largest economy in the world. See Table 5.2 for general information about BRICS by 2014.

Economic strength of the BRICS Kataria (2013:142–144) said that the BRICS countries have 43.03 percent of the world’s population, 18 percent of the nominal GDP, 25 percent of the GDP per capita, 25.91 percent of the planet’s land area and 46.3 percent of the global growth from 2008 to 2010. In 2015 the BRICS published the “BRICS Joint Statistical Publication 2015”, which shows how BRICS countries increased their foreign exchange reserves over the period. This is the important indicator of the role of foreign trade in stabilizing a country’s economic strength. The data explains that from 2000 to 2014, Brazil’s foreign exchange reserves increased from $33011 million in 2000 to $358108 million in 2013 (see Table 5.3). Russia’s foreign exchange reserves was $24263 million, by 2013 it increased to $456447 million. India’s foreign exchange in 2000 was $38036 million, whereas it got expanded to $292046 million in 2013. Likewise, China’s foreign exchange reserve in 2000 was $165574 million; it mushroomed to $3821315 million. And South Africa’s foreign exchange reserve in 2000 was $7534 million, but it reached $49587 million. Furthermore, the IMF’s World Economic Outlook database in 2015 explained how BRICS countries would surpass the G-7 group countries by 2020 in global GDP share in PPP terms. Figure 5.1 shows how the BRICS contribution to global GDP gradually surpassed the dominant global economic group G-7. The figure states that BRICS contribution to the global economy in 1992 was only 15 percent, whereas the G-7 contribution to global economy was nearly 50 percent. This trend consistently changed with the rise of the economies of the BRICS countries. By 2010, the BRICS group contribution to the global economy reached 27 percent, whereas G-7 contribution to the global economy was nearly 30 percent.

33011 24263 38036 165574 7534

Brazil Russia India China South Africa

53799 175690 141514 818872 20650

2005

85839 295277 151622 1066340 25613

2006

Source: BRICS Joint Statistical Publication (2015)

2000

Countries 180334 466376 199179 1528249 32979

2007 193783 410695 309723 1946030 34099

2008

TABLE 5.3 BRICS Countries Foreign Exchange Reserves (Million US$)

238520 405825 251985 2399152 39706

2009 288575 432948 279057 2847338 43834

2010 352012 441162 304818 3181148 48860

2011

373147 473110 294398 3311589 50735

2012

358108 456447 292046 3821315 49587

2013

363551 327727 304223 3843018 49102

2014 Rise of the BRICS and changing world order 73

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Junuguru Srinivas 50

Percentage

38

25

13

0 1992

2000

2010 BRICS

FIGURE 5.1

2015

2020

G-7

Share in Global GDP (PPP Basis)

Source: International Monetary Fund (2015). The data for 2015 to 2020 is an IMF projection.

That shows the gap had been reduced hugely. Later, BRICS share in the global economy was 28 percent, whereas G-7 contribution remained at 29 percent only. Furthermore, the BRICS would be surpassing G-7 contribution in the global economy by 2020. It says the BRICS contribution to the global economy would be crossing G-7 and would be registered at 30 percent, whereas the G-7 contribution to the global economy would be reduced to 28 percent. That underscores the importance of the BRICS group in the global political economy in upcoming world politics. Again, the Organization for Economic Cooperation and Development brought out a report in 2014 which also says that the coming decades of the 21st century would be dominated by southern world countries, especially BRICS, who would have a larger say in the global political economy. See the report’s chart in Figure 5.2. The report said that BRICS contribution to the global economy was 33 percent in 2014, whereas the G-7 contribution to the global economy was 45 percent in 2014. However, by 2030 BRICS contribution would surpass the G-7 group and reach 41 percent, whereas G-7 share would be reduced to 37 percent. By 2060, the BRICS contribution would reach 48 percent, while that of G-7 would be around 30 percent. That shows the 21st century would be dominated by BRICS.

BRICS stand on global issues BRICS was shaped in 2006 during the UN General Assembly session, where the foreign ministers of all the BRIC countries met in New York City. It was

Rise of the BRICS and changing world order

75

63

Percentage

50

38

25

13

0

2014

2030 BRICS

FIGURE 5.2

2060

G-7

Projected Structure of the Global Economy (2014–2060)

Source: OECD (2014). The data is calculated in percentile.

the beginning of the series of high-level meetings amongst the BRIC countries. Since then, the BRICS entity evolved into a multilateral grouping. The first cooperation amongst BRIC group countries started at the level of deputy ministers and heads of government agencies. In fact, Vladimir Putin was the first person to take initiative in propelling this group as more of a political group, and wanted to coordinate the group for more democratic world order with the multipolarity concept in international relations (Akulov, 2012:1). The 1st Summit was held in Yekaterinburg, Russia in 2009. South Africa became an official member of BRICS in the Sanya Summit (Zhang, 2011). The annual summits tradition started in 2009. Every summit takes place with a certain theme. It stresses mostly on prevailing global problems and lacunae in the international system. Since then, there have been eight summits held. The 2nd Summit was held in Brasilia, Brazil in 2010. The 3rd Summit was held in Sanya, China in 2011. The 4th Summit was held in New Delhi, India in 2012. The 5th Summit was held in Durban, South Africa in 2013. The 6th Summit was held in Fortaleza, Brazil in 2014. The 7th Summit was held in Ufa, Russia in 2015. The 2016 Summit was held in Goa, India. Further, the 2017 Summit was held in Xiamen, China, and the 2018 Summit was held in Johannesburg, South Africa. The 2019 Summit was held in Brasilia, Brazil and the 2020 Summit will be held in St Petersburg, Russia. The BRICS group has been getting international fame with their active involvement in global affairs. When a Security Council meeting was held in 2011 to pass resolution number 1973, which permitted NATO to bombard Libya, Brazil, India, China and Russia abstained while South Africa accepted

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it (United Nations, 2011). Thus, the BRICS group started to raise their voice in global affairs in unison, intensifying their unity through the regular interval conventions. In a way BRICS is a beacon for Russian and Chinese foreign policy interests. Every year the BRICS meeting has been taking place with a new agenda based on existing global issues; for instance, in 2012 in New Delhi, the theme was “BRICS Partnership for Global Stability, Security and Prosperity”, dealing with the Iranian nuclear issue and Afghanistan (Ministry of External Affairs, 2012), and in the Durban Summit in South Africa, in which BRICS countries declared that the international community should reject further militarization of Syria because the problem could only be resolved through formal dialogues (Ministry of External Affairs, 2013).

How India-China see BRICS There are frequent debates on Chinese-Indian foreign policy roles in the BRICS group. Both the countries are considered to be founding members of BRICS. At the time of decline of US-dominated unipolar world order, many believed that the emerging nature of global order would be ‘non-polarity’ in a postAmerican world ( Panda, 2012:175). The BRICS platform gave space for both the countries to come closer once again from being Asian adversaries to global powers and also for both countries to demand a fair and democratic world order with the help of perennial anti-Western Russia. Since the beginning, both the countries recognized the importance of BRICS to promote their interests as BRICS had become a representative group of emerging countries. Furthermore, over the passage of years the power politics game started between these two countries over many issues. However, China-India remained bounded by the norms and ethos of the BRICS objectives to transform the global order. Dr. Panda (2012:181), research fellow at the IDSA, says the complexities of the Indian and Chinese ambitions of becoming regional and global powers and their frequent bilateral frictions makes the future of BRICS and also its vision of a multipolar world order unsustainable. In this context, first I will focus on India’s role in the BRICS, and later, explore China’s objectives to be in BRICS. And will conclude by exploring the possible benefits both countries have with their association with the BRICS group.

India’s choice to be in BRICS Since the 1990s India has gone through the multiple changes in their foreign policy formulation according to changing situations in international relations. As we all know, the collapse of the USSR led to the end of the Cold War in world affairs. All these changes instigated India to change their policy structure to become actively involved in global affairs. Furthermore, acute domestic and international problems compelled India to reframe their foreign policy according to the pragmatic considerations (Biswas, 2011:1). However, in today’s era of

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economic globalisation and multipolarity, it has improved its relations with the US and Western world, established relations with other southern world countries and embraced multiculturalism to solve their economic, social, political and cultural problems. The changes which took place were unprecedented and quite a contrast to rigid bi-polarity and the East-West ideological rivalry period. Nonetheless, this has been marked by ambiguity among Indian foreign policy makers with regard to transnational cooperative arrangements (ibid.). It is well-known fact that after the end of the Cold War, multilateralism and globalisation have gained momentum in world politics. Naturally India had to inculcate multilateral diplomacy in their foreign policy. Likewise, India became part of G-20, IBSA, G-4, BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation), IOR-ARC (Indian Ocean Rim Association for Regional Cooperation), BRICS and other such organizations. Amongst all of the organizations, BRICS has the prominent place in Indian foreign policy. India is also the founding member of the BRICS group and it was there with the BRICS group throughout its thick and thin. India has always stood by BRICS policy statements with the other group members. During the Ufa BRICS summit’s opening remarks by all heads of the states, Indian Prime Minister Narendra Modi (2015) said that the BRICS vision has been symbolized by its New Development Bank, the Currency Reserve Arrangement, and strategy for BRICS economic cooperation. He also went on to say that 2016 would be India’s chairmanship of the BRICS group and the theme of the summit would be “Building Responsive, Inclusive and Collective Solutions”. Thus, the Goa summit gave India the opportunity to discuss security issues and political shortfalls of the BRICS group. India made good use of the Goa summit to bring the terrorism issue to the mainstream discussion of the BRICS policy statements, and also succeeded in drawing China and Russia’s attention to this issue. In this regard China’s media also appreciated Indian foreign policy strategy to use this platform to discuss the grave threat of terrorism as well as India’s positive developmental projection (Lancha, 2016). At the 2016 Goa summit, India also stressed its interests while accepting the limitations of the BRICS group.

China’s foreign policy basis to be in the BRICS group The rise of China is a dramatic and unprecedented incident in contemporary world politics. After the end of Cold War, Chinese foreign policy makers proposed for just and rational international political and economic order, and called for multipolar world order. However, Chinese policy makers were clueless about how to define it. Since the exposure of the outside world, Chinese foreign policy was primarily constructed on the basis of domestic economic development and social stability (Hu, 2010). China’s cooperation in the BRICS was the result of the innovation in Chinese diplomatic theory and practice in the post-Cold War period. While facing the changes that have been happening in the international

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system since 1990, China proposed a series of diplomatic ideas which include establishing a fair and reasonable democratic world order, a concept of multipolarity, an emphasis on being a responsible power and deploying the concept of Harmonious World (和谐世界 Hexie shijie) (Cui, 2013). While the whole world was under the inf luence of the global financial crisis, the BRIC countries met at Yekaterinburg (Russia) on June 16, 2009. During the summit meeting, Hu Jintao, then China’s president, offered a four-point proposal for dealing with the financial crisis: 1 2 3 4

An early recovery of the world economy. Intensifying the reform of the international financial system. Implementing the UN Millennium Developmental Goals (MDGs). Ensuring food security, energy resources and public health.

As part of this, Hu also argued all the BRIC member countries should seize this historic opportunity to strengthen unity and promote cooperation among the member countries. He also said that the BRIC should jointly safeguard the overall interests of developing countries. Every year China would bring economic and trade objectives of China foreign policy to the BRICS group. However, since the recent past, China has started giving immense importance to the BRICS group with the changing global environment. Then, the question that arises is why China was so positive about BRIC at that critical juncture? What made China extensively promote BRIC as a global player? Research fellow Wang Yusheng (2010) observed that there are five glittering points which made China more positive about the BRIC. 1

2

3 4

5

All the BRIC countries were considered to be big emerging economies and relatively huge countries as well, with fast development, great potential and varying degrees of sustainability. The foreign exchange reserve of all four countries combined exceeds $3 trillion, which is equivalent to over 40 percent of the world’s total, thus making them the most important players in the international financial system. All the BRIC countries independently chose their own model of development on the basis of their national traditions and requirements instead of simply accepting the ‘Washington consensus’. BRIC countries hope and call for the establishment of a more equitable, just and reasonable international economic and political order. All BRIC countries want a peaceful international environment, promote democratization and equality in world affairs and disagree with the old Cold War mentality and confrontational policies. One of the most significant aspects of the BRIC group is that despite their different social systems and ideologies, all the BRIC countries share a common strategic goal of constructing a more democratic and just multipolar world, with the UN playing the central role.

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On the 9th of July, during the Ufa summit in 2015, Chinese President Xi Jinping stated that BRICS should work together for further cooperation and to bring prosperity to the group countries. He stressed that these emerging economies have greater potential to overcome the continuing economic recession conundrum. He also said that China will endorse the positive signal sent by the group for maintaining global peace and stability and push forward the democratization of international relations including the group’s important role in improving global governance and enforcing multilateralism (Mengjie, 2015; Xuxin, 2015). Haibin Niu (2015) said that it was high time for China to regard BRICS at the political and soft power level rather than just an economic entity. It is also in China’s interest to use BRICS’ collective voice to inf luence the reform and the decision-making process in major international institutions. China also considers that BRICS would safeguard the international peace and security by promoting cooperation in the aspects of cyber security and anti-terrorism among group members. China believes that BRICS has the opportunity to shape a better world order and to be global players. According to Kondapalli (2016): While the political leadership’s views are generally bland, Chinese officials, party intellectuals and scholars are more forthcoming on their countries’ participation in the BRICS. Many of these views are highly articulate, with global power configurations in mind and exploring how China could further advance its national interests and overall profile through the BRICS mechanism. These perspectives are linked to the subjective understanding of the international system, pattern and the order that the Chinese prefer. They have brought about the differing perceptions, objectives of China in the BRICS, global political and economic governance issues, and power equations with the United States, China’s ambitions for power transition at the global and regional levels, invoked China’s diplomatic concepts of ‘Seeking Common Ground (求同存异 Qiutong cunyi)’, united front tactics and ‘Setting up a different Kitchen (另起炉灶 Ling qi luzao)’ and other ideas. (Kondapalli and Pandit, 2016:15) Likewise, Sakshi Anand (2016:204) quotes scholars Li Xing and Cheng Zhijie’s arguments that: China, India and Russia can form a troika in the construction of ‘One Road, One Belt’ in Asia and Europe. In this China and Russia will be the core and Brazil and South Africa would be the periphery. However, Chinese interests in BRICS mostly revolve around economic and trade relations of the BRICS members. Furthermore, China can stress more for its currency implementation in the transactions of the BRICS members. While signing the documents of BRICS development bank to make Shanghai the headquarters on February 26, 2016, Chinese Foreign Minister Wang Yi said that the New

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Development Bank will serve for the development and connectivity of the BRICS. The Bank aims at funding infrastructure and sustainable development projects. He stressed that China will work with all the group members for the economic and political cooperation. While commenting on the downward trend in the BRICS group, he clarified that not only BRICS countries, but the whole world is affected by the economic recession. Wang concluded by saying that the group is poised for growth and enhancing its role in international political and economic affairs. While the Trump administration is imposing additional tariffs, BRICS group members are trying to save China and are pushing for more global governance reforms in IMF, the World Bank and WTO (Monteiro and Batha, 2018:1–3).

What India should do in this context? It is true that China has more economic and political strategies in the group. But India just wants to reform the global financial and security institutional structure such as International Bank for Reconstruction and Development (IBRD), IMF and UNSC. Though China stands for the reform of the global institutions, when it comes to UNSC reforms, it is not sure how far China is okay with India’s membership in the UNSC. In this regards, India’s foreign policy should make novel strategies to convince China to process the reform of the UNSC. India’s former Prime Minister Man Mohan Singh (2011) argues that India is for the reform of political and security governance of the United Nations, reform of international trade, economic and financial institutions. Thus, it would transform the status quo world order. Dr. Panda (2012:183–184) observes that: Neither is Indian foreign policy objectives linked exclusively with BRICS nor has India tried to politicize the BRICS gathering in addressing global strategic issues that will affect India’s relations with the West. India’s views and global objectives may not be entirely different from those of China, but where BRICS is concerned, obvious differences emerge. New Delhi sees the BRICS formulation as an instrument to promote an equitable world order between North and South. Scholars like Samir Saran (2013) say that India eventually has a platform to assert its might and rewrite the rules of global, political and economic governance. While cooperating with other BRICS group countries, India must check China’s aggressiveness in the group. By 2050 GDP of the BRICS quintet member-states will overwhelm half of the total world GDP, thus, its significance should not be undermined by the Indian policy makers . . . and the important thing is that Fortaleza summit declared that an Indian would be the first President of the New Development Bank headquarters in Shanghai. (Khazhakian, 2015)

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Singh (2014) argued that China is the most powerful economy in the BRICS group; however, India will play a more active role in shaping the policy issues such as terrorism and climate change and can push for greater people-to-people contact between citizens of BRICS group countries and the setting up of the BRICS group university. The most important aspect is that India will encourage increasing sub-regional exchanges within the BRICS group countries, which includes cities and provinces. However, when it comes to the issue of terrorism, Russia-China seem to be divided on India’s stand on Pakistan. Indian Prime Minister Narendra Modi, during the speech at the Goa summit, mentioned that Lashkar-e-Taiba and Jaish-e-Muahammad should be regarded as international terrorist organizations. However, Russia and China did not mention these organizations in their speeches (Swami, 2016). At the same time India’s UN Security Council membership seems rhetorical only from both these countries’ point of view, so India should develop a nuanced approach to convince these big powers to come together in quenching terrorism. However, eventually, on May 1, 2019, India was successful in designing Pakistan-based Masood Azhar as a global terrorist in UNSC (The Economic Times, 2019). It should be a good indicator for India and China relations. Furthermore, another positive sign for India’s stature in the BRICS is that the World Economic Forum’s report (Schwab, 2017) “Global Competitiveness Index” stated that India has become the second most competitive BRICS country. India’s competitiveness also improved considerably, jumping 16 places to rank 39 among 138 countries on the index (The Economic Times, 2016; Schwab, 2017). Another important aspect of India’s image in international relations is that India has surpassed the UK in global economy and became the sixth largest global economy in terms of GDP. Thus, in this phase India should use this rank to further diffuse its power in the BRICS group as well as in world affairs to become a global power. More importantly, the report brought by BRICS New Development Bank in 2017, titled “The Role of BRICS in World Economy & International Development”, indicates that the BRICS group contribution to global growth is greater than others. It is time for the BRICS group to focus on cooperation and coordination to fulfil the wishes of the world. When both India and China are facing the brunt of the Trump administration’s policies, India and China can build their relations strongly and cooperate in global trade and economy so that both countries will benefit. See Table 5.4.

Conclusion The structure of international relations has been continuously changing with a plethora of incidents in the recent past. These changes have been driven by many unconventional reasons. Particularly, since Donald Trump became president of the US, international relations became topsy-turvier. The major decision that

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TABLE 5.4 Historical and Projected Annual Growth Rates of GNP per Capita (%) (2005

$PPP) Area and Country

2008–2017

2018–2022

2023–2030

World US Europe Other Developed Countries BRICS Other Emerging Countries Developing Countries

1.7 0.7 0.6 0.8 5.4 1.1 2.6

2.4 1.4 1.5 1.2 4.7 2.8 2.5

2.5 1.3 1.8 1.4 4.5 2.8 2.9

Source: New Development Bank (2017)

Trump took was lessening America’s contribution to global financial institutions like the World Bank, IMF and UN. Further, the US withdrew membership from multiple global institutions like UNESCO (United Nations Educational, Scientific and Cultural Organization), UNHRC (United Nations Human Rights Council) and major international treaties like the Paris climate agreement and the Iran nuclear deal. Moreover, Trump’s decisions on global trade and WTO policies is threatening the WTO’s existence and the UN’s importance in emerging global affairs. Mr. Trump is imposing draconian tariffs on China, and many of America’s allies are making the world slip into trade wars. Likewise, President Trump, exhorting India and many EU countries to stop importing oil and petroleum from Iran, has been causing a f lutter in international relations. In this scenario, India and China can work on strengthening their relationship to balance the trade deficit that has been created by the sanctions imposed by the Trump administration. Both countries must convince the other BRICS members of the impact of the US’s policy in present global trade so that all countries will benefit in this critical situation. Recently, India has become very active and pragmatic trying to maintain and strengthen relations with the Western world as well as the southern world. At the same time the BRICS has become a prominent group in the context of changing world politics. This group has a larger scope for greater cooperation amongst the nations on a number of global issues. Indian Prime Minister Modi said that: BRICS acts as a vital pillar of hope for this world full of political challenges, safety related challenges and economic related challenges. (Modi, 2015) India and China should grab the opportunity to drive its foreign policy towards solving the global glitches in the group. Apart from that, Indo-China relations should play a key role in building the BRICS group. The BRICS group is not acting up to its strength because there are still some misconceptions in the group amongst its members. So, India and China should play the role of

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mediator by taking the initiative to resolve them and bolster the BRICS group activities. At the same time India should take up the interests and concerns of the southern world countries at a global level through BRICS. This would be the greater opportunity for Indian foreign policy makers to make use of the platform to put forward its foreign policy ambitions in the coming period. India can solve their trade, economic and political issues with the other group members in a lucid manner. Furthermore, India can push for the institutionalization of the BRICS group and the strategy for combating the growing terrorism menace in the world.

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6 INDIA AND CHINA IN CONTEMPORARY TIMES Interactions and challenges in the Indian Ocean Mohor Chakraborty

The ascending stature of India as an Indian Ocean power is by no means a recent acknowledgement. India’s geographical location, jutting out for a thousand miles into the Indian Ocean, and being walled off on three sides by land, has endowed it with a strategic security sphere over the entire Indian Ocean Region (IOR). This geo-strategic salience of India’s situation, acting as a security umbrella over the countries of Southeast Asia and the greater Asia-Pacific, vindicates Lord Curzon’s posturing, since he envisaged a predominant role for India, bearing the seeds of an Indo-centric vision of the region. The imperative of India safeguarding the IOR emerges from its extensive coastline of over 7516 km, an Exclusive Economic Zone (EEZ) of 2.172 million sq. km and a continental shelf of more than 1 million sq. km beyond the EEZ. The modern vision of the country’s responsible power profile in the IOR has been outlined by the Indian Naval Doctrine (inaugurated in 2004 and modified subsequently in 2007 and 2009) and the Indian Maritime Security Strategy (IMSS) inaugurated in 2015, which constitute an important edifice of India’s ‘Look East’ policy, precursor of the present ‘Act East’. Given this premise, the chapter analyses India’s role as a responsible Indian Ocean power, as well as takes stock of its stature as a balancer to China’s graduating military and strategic assertiveness in the region. The policy responses to China are viewed from the following perspectives: first, the maritime guidance document, christened ‘Ensuring Secure Seas: Indian Maritime Security Strategy, 2015’; second, the renewed emphasis of the Indian Navy in securing the IOR, while acknowledging the Navy’s central role as a net security provider; third, the proactive role of ‘Act East’ policy; and finally, by projecting its soft power through ‘Project Mausam’.

India in the Indian Ocean: geo-strategic significance The Indian Ocean has remained a strategically significant locus since the colonial and pre-colonial era. The Indian Ocean, which covers at least a fifth of

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the world’s total ocean area, provides critical sea trade routes that connect the Middle East, Africa and South Asia with the broader Asian continent to the east and Europe to the west. It serves as the ‘host to the world’s busiest waterways’ and almost 75% of its traffic is headed for destinations beyond the region, thus transporting half the world’s container shipments, one-third of its bulk cargo traffic and two-thirds of its oil shipments (remarks by External Affairs Minister of India Sushma Swaraj at the 3rd Indian Ocean Conference, 2018). Furthermore, the strategic salience of this Ocean is magnified by the presence of a number of important choke points, including the Straits of Hormuz and Straits of Malacca, through which 18.5 and 16 million barrels, respectively, of crude oil and petroleum liquids are transported per day, accounting for nearly 55% of the world’s maritime oil trade (as of 2016) (World Oil Transit Chokepoints, 2017:2). Besides, the IOR is believed to have rich deposits of energy, and nearly 40% of global offshore petroleum is produced here, while the coastal beach sands and offshore waters are loaded with heavy mineral deposits (Albert, 2015). Since the Indian Ocean is f lanked on three sides by land, it is often called ‘half ocean’ or ‘land-locked ocean’, providing geographical contiguity to its surrounding lands. Such a unique geopolitical seascape has been likened to a ‘bowl whose rim is formed by the bordering lands. . . . This rim has both protected and isolated the region and major invasions have come through the break in it or across the ocean highways’ (Defence and Security in the Indian Ocean Area, 1957:26). The geo-strategic significance of the Indian Ocean has been the principal factor responsible for transforming it into an arena of rivalry and one-upmanship between India and China. Beijing’s attempts at expanding its footprints in the region have been borne out by the increasing frequency of anti-piracy deployments, naval exercises and the growing investments in maritime infrastructure projects. In 2014, reports pointing to the docking of two Chinese naval vessels at Colombo South Container Terminal, a deep-water facility built, controlled and run by a Chinese company, the China Merchants Holdings (International), succeeded by the docking of a Chinese submarine at Colombo, strengthened Indian concerns that the People’s Liberation Army-Navy assets were being allowed privileged access to Sri Lankan ports funded by Chinese investments (Aneja, 2014). Around the same time, the issue gathered steam with reports about China’s plans for constructing 18 Overseas Strategic Support Bases in the IOR, stretching from the Seychelles through Pakistan to Djibouti, with facilities for fuelling and material supply bases for peacetime use; relatively fixed supply bases for warship berthing, fixed-wing reconnaissance aircraft and naval staff ashore rest; and fully functional centres for replenishment, rest and large warship weapons maintenance (Singh, 2015). In July 2017, China inaugurated its maiden foreign military base at Djibouti, with facilities including a naval port, large helicopter base and accommodation for 10,000 troops (Brewster, 2018). Furthermore, China’s planned build-up of its second military base at Gwadar and an expansion of the existing airport on the Jiwani Peninsula (Chan, 2018) symbolise its militarisation of Pakistan.

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Besides, the intention behind China’s Maritime Silk Road (MSR), an umbrella term referring to maritime infrastructure projects in the Indo-Pacific region, may be viewed as a supplement of the ‘string of pearls’ strategy aimed at encircling India and challenging the Indian Navy’s role and stature in the region. On October 2, 2013, the Chinese President, Xi Jinping, in his address to the Indonesian Parliament, unveiled the blueprint for strengthening cooperation with the member-states of Association of Southeast Asian Nations (ASEAN), by making proper use of the China-ASEAN Maritime Cooperation Fund set up by Beijing and particularly developing vigorous maritime partnership in a joint effort to build the 21st-century MSR. (Chinese President, Xi Jinping’s Speech, 2013). The 21st-century MSR – the maritime component of China’s ambitiously grand Belt and Road Initiative (BRI) – is complemented by its over-land counterpart, the Silk Road Economic Belt or SREB (丝绸之路经济带, Sichou zhi lu jingjidai) envisioned to be established along the Eurasian land corridor from the Pacific coast to the Baltic Sea. The extensive domain of the ‘belt and road’ architecture runs through the continents of Asia, Europe and Africa, connecting the vibrant East Asian economic circle at one end and developed European economic circle at the other. While the SREB focuses on bringing together China, Central Asia, Russia and Europe (the Baltic), linking China with the Persian Gulf and the Mediterranean Sea through Central and West Asia and connecting China with Southeast Asia, South Asia and the Indian Ocean, the 21st-century MSR is designed to take off from China’s coast to Europe through the South China Sea and the Indian Ocean in one route, and from China’s coast through the South China Sea to the South Pacific in the other. Served by a network of roads, high-speed railways, fibre-optical lines, transcontinental submarine optical cable projects and satellite information passageways, the initiative is poised to shift the centre of geo-economic power towards Eurasia, and challenge the ‘Asia Pivot’ strategy of the United States (Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road, 2015).

MSR architecture and China’s rationale The MSR’s principal rationale is the leveraging of Chinese economic, geostrategic and soft power clout and ensuring the security of Sea Lanes of Communication (SLOC) in the Indian and Pacific Oceans, the littorals it passes through. In other words, it is a geo-strategic posture of exploring, using, protecting and managing the Oceans, involving maritime security, especially the protection of the islands claimed by China in the South and East China Seas, in addition to securing and safeguarding the vast energy and trade lanes. The Chinese leadership projects the initiative as the country’s means of opening up and economic diplomacy, and solutions for furthering world peace and development. In other words, it translates to fostering a geo-economic cooperative design, as opposed to a geopolitical or geo-strategic one, based on the five pillars of policy coordination, connectivity facilitation, unimpeded trade, financial integration and

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forging of people-to-people bonds. Notwithstanding its projected role in delivering the economic promises, the initiative poses a direct challenge to India’s stature as a security provider in the IOR, particularly with China’s aim of making a ‘benevolent entry’ through its spree of building infrastructure, ports, deep water ports and container terminals, proposed to connect with the mainland through a string of road and railway corridors, logistical stations, storage facilities and free-trade zones in India’s primary area of interest (Singh, 2014). Besides, India has candidly argued that connectivity initiatives, as an integral part of BRI, must be based on universally recognised international norms, good governance, rule of law, openness, transparency and equality (Official Spokesperson of India’s Response to a Query on Participation of India in the BRI Forum, 2017) which the architecture transgresses. The China-Pakistan Economic Corridor or CPEC (中国-巴基斯坦经济走廊, Zhongguo bajisitan jingji zhoulang), an integral part of the project is being laid through Pakistan Occupied Kashmir (POK), overriding concerns of India’s security and sovereignty. It will link Kashgar in Xinjiang in north-western China and a deep sea port at Gwadar in Pakistan’s Balochistan province. Although the Chinese government’s posture has been intent on allaying India’s concerns with respect to the massive outreach and implications of MSR, calling upon its National Democratic Alliance-II government, New Delhi is wary of China’s geo-strategic imperatives behind this ambitious project, and has expressed reservations against specific parts of its neighbour’s strategy with a friendly, open, cooperative attitude. New Delhi has naturally been cautious and calculative in making headway on the issue. The Indian Prime Minister Narendra Modi raised concerns over the CPEC in course of his bilateral meeting with Xi Jinping on the sidelines of the Group of 20 (G-20) summit in September 2016, asserting that the two countries had to be ‘sensitive’ to each other’s strategic interests, besides calling for specific actions to ‘prevent growth of negative perception’ (The Indian Express, 2016). India’s boycott of the BRI Forum in 2017 and 2019 consecutively bear witness to the adherence to its clear and consistent posture that connectivity initiatives must be based on universally recognised international norms, good governance and rule of law (Patranobis, 2019). China follows a similar pattern by investing millions in airports, roads, ports and other infrastructure in Sri Lanka, Bangladesh, the Maldives and Nepal to develop inf luence throughout the IOR. During his September 2014 tour of South Asia, Xi Jinping signed an agreement with the Maldives to upgrade its airport and build a bridge, housing project and road. Subsequently, in December 2014, Sri Lanka and the Maldives joined Pakistan to lobby the upgrading of China’s status from observer to member in the South Asian Association for Regional Cooperation. However, India’s opposition scuttled the move (Hiro, 2015). In April 2016, China and Sri Lanka decided to redefine the controversial Colombo Port City project by making it an international financial outpost in the Indian Ocean, as part of the Framework Agreement on Promoting Investment and Economic Cooperation (The Guardian, 2016). This Framework Agreement, signed

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in May 2017, aligns with the MSR initiative as the two sides propose to employ the BRI as an opportunity to further advance infrastructure development and proceed on the China-Sri Lanka Free Trade Area negotiations, promote joint ventures and expand cooperation in the areas of economy, culture, science and technology and people-to-people contacts (China, Sri Lanka Sign Framework Agreement on Promoting Investment and Economic Cooperation between the People’s Republic of China and the Democratic Socialist Republic of Sri Lanka, 2017). In addition, the establishment of a Special Economic Zone and the proposed construction of a US$ 3.9 billion oil refinery near the Hambantota port (Marlow and Sirimanne, 2019) which has been handed over on a 99-year lease to a State-owned Chinese company, would feed into the gradual unfolding of the ambitious MSR. Chinese plans to develop seaports with a submarine base in Chittagong (Bangladesh) and a deep seaport at Payra (by 2023) are causing much concern in Indian diplomatic circles. In the backdrop of announcing and popularising the BRI and China’s insinuation in Bangladesh through a series of investments demonstrated by US$ 1.1 billion and US$ 3.1 billion deals to strengthen its power grid and construction of the 170-km railway line, respectively, the momentous visit of Xi Jinping to Dhaka in October 2016 was heralded as a diplomatic ‘milestone’ of ‘historic significance’. Within the framework of this momentous presidential sojourn, 15 agreements spanning financing infrastructure, energy, information and communication projects and 12 loan and mutual agreements were signed between the two sides. The implications and the positive outcome of this visit were manifested in the convergence on the decision to elevate ChinaBangladesh ties from a ‘comprehensive partnership of cooperation to a strategic partnership of cooperation’ (The Daily Star, 2016). China has also been advancing its plans and projects for closer linkages with Nepal. As many as ten landmark agreements spanning transit, trade, commerce, energy, cross-border connectivity and cooperation on physical infrastructure developments were signed between the two countries in March 2016, the most significant being the Transit Transport Agreement that gave the landlocked Himalayan nation access to the sea from China (Haidar and Bhattacharjee, 2016). These agreements came on the heels of a trade embargo on Nepal imposed by India that brought Nepal’s trade and transit to a near standstill in September 2015. Nepal and China also agreed to enhance cooperation under the BRI framework, by adequate development planning and conducting major projects in a bid to strengthen a three-dimensional connectivity network across the Himalayas through port, railway, road, air and communication links. In this context, among the 14 different agreements signed between them in 2018, the proposed agreement on constructing a railway link connecting Tibet with Nepal is significant, as it would facilitate trade and transport (The Times of India, 2018). Outside the immediate South Asian neighbourhood, China’s strategic ties with Myanmar received a major fillip following the former’s access to ports like Sittwe, Kyaupkyu, Mergui, Bassein and Yangon and naval installations, including

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building radar and refuelling facilities at Hainggyi, Akyab and Zadetkyi, providing it a monitoring pedestal over the regional SLOC, in addition to accentuating its inf luence in the IOR. In particular, the agreement to develop an industrial park and a deep-sea port in Kyaupkyu worth US$ 1.3 billion (Business Standard, 2018) has amplified Beijing’s pitch to deepen its stakes in Myanmar, besides reducing its dependence on the Straits of Malacca. Furthermore, a military base in Djibouti is defining the contours of China’s MSR, since the country is strategically located on the junction of the Indian Ocean and the Red Sea, a gateway to the Suez Canal via the strait of Bab Al-Mandab. Djibouti would become an ideal location for securing sea lanes in the vicinity, which radiate from this area towards Africa’s Indian Ocean coastline and the Arabian Sea. In March 2016, China signed a deal with Djibouti to build a 48 sq. km free-trade zone, by providing the bulk of the US$ 12.4 billion that Djibouti intends to invest by 2020 (Sujuan and Muyao, 2016).

Indian maritime security strategy and the Indian Navy’s role: pivotal response to MSR The centrality of the IOR in India’s ‘Act East’ policy has been abundantly demonstrated by unveiling the maritime guidance document, Indian Maritime Security Strategy-2015 (IMSS-2015) in order to bolster the Navy’s operational sphere and inf luence. In keeping with the principles and concepts of national security and maritime power, enunciated in the Joint Doctrine (Indian Armed Forces) and the Indian Maritime Doctrine, IMSS-2015 builds upon the Indian Navy’s Vision Statement and Guiding Principles (2014), which highlight the strategic ‘way points’ for the next decade. It reviews the key maritime strategic imperatives and inf luences, articulates the national maritime interests and maritime security objectives, in addition to deriving corresponding strategies for attaining them. On the one hand, while acknowledging the hybrid nature of maritime challenges, exacerbated by the almost overlapping nature of traditional and non-traditional threats, the document harps on the imperative of envisaging a seamless and holistic approach, advocating greater coordination among different maritime agencies. On the other hand, it justifies the significance of the Indian Navy as the primary security provider of the oceanic neighbourhood. Towards this end, the IMSS-2015 has recommended a four-pronged strategy under the present and emerging circumstances: first, it has advocated steady increase in the Indian Navy’s operational footprints across its areas of maritime interest, with a growing cooperative framework and contributions as a net security provider in the neighbourhood, for maintaining ‘the state of actual security’ available in an area, upon balancing prevailing threats, inherent risks and rising challenges in the maritime environment, against the ability to monitor, contain and counter all of these, including deployments for anti-piracy, maritime security, non-combatant evacuation operations and humanitarian assistance and disaster relief operations; second, an expansion in maritime operational engagements,

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with increased number and complexity of exercises with foreign navies, coordinated mechanisms for maritime security operations, and enhanced training, technical and hydrographical cooperation with friendly maritime forces; third, continued development of regional cooperative approaches for enhancing maritime security in the IOR, including operational interactions like ‘MILAN’, Indian Ocean Naval Symposium (IONS) and emergence of maritime security cooperation as a priority area for the Indian Ocean Rim Association (IORA); and fourth, the growth and development of the Indian Navy’s force levels and maritime capabilities, with steady focus on indigenisation. IMSS-2015 dilates the geographical scope of India’s maritime focus, expanding the two areas of interest southwards and westwards by bringing in the South-West Indian Ocean and Red Sea within its primary area and the western Coast of Africa, the Mediterranean Sea and ‘other areas of national interest based on considerations of Indian Diaspora, overseas investments and political reasons’ within its ‘secondary area’ of interest. This acknowledgement clearly transcends the Indo-Pacific region, with the 2004, 2007 and 2009 editions of the Maritime Doctrine expounding the northern IOR as the ‘primary area’ of interest. IMSS-2015 includes two additional chokepoints: the Mozambique Channel and Ombai-Wetar Straits, which are strategically located at the far end of the south-western and south-eastern Indian Ocean respectively, thereby formally reiterating the Indian Ocean’s geostrategic ‘exclusivity’ for India (Ensuring Secure Seas: Indian Maritime Security Strategy, 2015:11–12). The Indian Navy’s expanding footprints in recent years through overseas deployments indicate that the maritime force is developing capabilities to implement its intent. Strikingly enough, the focus of IMSS-2015 on India’s strategy for deterrence and response against traditional/conventional military threats and corresponding capability development, has a bearing on the ambitions of the MSR, laying it threadbare that the concept of maritime security would be operational across the entire array of interests and forays by regional or extraregional navies. Even before the IMSS-2015 was officially unveiled, Narendra Modi’s visit to the Seychelles, Mauritius and Sri Lanka in March 2015 demonstrated the region’s niche in New Delhi’s policy priorities. Indian Navy ships and aircrafts are regularly deployed for surveillance of the EEZ of the Maldives, Mauritius and the Seychelles at the request of host governments. While endorsing the vision for IOR, rooted in advancing regional cooperation as well as using ‘our capabilities for the benefit of all in our common maritime home’, Modi highlighted the imperative of deepening regional economic and security cooperation, particularly with India’s maritime neighbours and island states and undertaking collective action and cooperation to best advance peace and security in the maritime region for ensuring better preparedness to respond to emergencies and challenges, ranging from piracy, terrorism, natural disasters, etc. Towards this end, he acknowledged India’s existing maritime security cooperation with the Maldives and Sri Lanka (Trilateral Initiative) and hoped that Mauritius, the Seychelles and other littoral nations would join the initiative. He also

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emphasised the need to promote a more integrated and cooperative future in the region that would enhance the prospects for sustainable development; facilitate greater collaboration in trade, tourism and investment; promote infrastructure development, marine science and technology, sustainable fisheries, protection of marine environment and fuel overall development of the Blue Economy (Narendra Modi’s Remarks at the Commissioning of Offshore Patrol Vessel in Mauritius, 2015). Further fillip was added when the Indian Minister of External Affairs, Sushma Swaraj, visited the Maldives in October 2015, underscoring the need to qualitatively enhance ‘the multifaceted relationship between India and Maldives and in addressing the common challenges in the Indian Ocean Region’ (Sushma Swaraj’s Speech at the Maldives, 2015). Another significant step undertaken by the present administration in expanding its sphere of inf luence in the IOR was manifested in the holding of the 3rd India-Africa Forum Summit in October 2015 (New Delhi), in course of which Narendra Modi acknowledged the dependence of ‘large sections of our peoples of Africa and India on Oceans which have emerged as the new frontier for the development’ and the ‘significance of Oceans for global or regional trade and its marine resources as a contributor to the economic prosperity of our people’. He harped on forging closer collaboration through training, capacity building and joint projects in a host of areas like developing sustainable fisheries, maritime connectivity, managing marine resources, exploring non-marine resources, promoting eco-tourism, developing renewable energy, fostering disaster risk reduction through modern early warning tools, pollution control and other coastal and ocean studies as well as pursuing cooperation in port operations and marine transport, addressing illegal and unregulated fishing and hydrograph surveys, with his counterparts. His statement clearly revealed the imperative of bolstering cooperation among the stakeholders and members of the Forum for sustainable development of Blue Economy, as part of a ‘larger Blue Revolution to reclaim our blue skies and blue waters, as we move on the path of clean development’ (Narendra Modi’s Closing Remarks at the 3rd India-Africa Forum Summit, 2015). Another significant achievement was Narendra Modi’s historic visit to the South Pacific Island of Fiji in November 2014 – the first by an Indian prime minister in 33 years. Fiji is not only located strategically, but is also host to 37% people of Indian origin among its population. Following up on the heels of this endeavour, in August 2015, leaders from 14 Pacific Island countries, namely Cook Islands, Fiji, Kiribati, Marshall Islands, Micronesia, Nauru, Niue, Samoa, Solomon Islands, Palau, Papua New Guinea, Tonga, Tuvalu and Vanuatu, participated in the Forum for India Pacific Cooperation Summit, which had been launched during Modi’s Fiji sojourn. In course of this Summit, Modi expressed India’s resolve to support the realisation of the Pacific Island nations’ vision of ‘Pacific Regionalism’, besides anchoring it as an inspirational model of cooperative regionalism ( Narendra Modi’s Opening Remarks at Forum for India Pacific Island Countries Summit, 2015).

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Furthermore, the then Indian President Pranab Mukherjee’s official visit to Papua New Guinea in April–May 2016 has been another path-breaking feature. His visit to Papua New Guinea constituted the first high-level visit from India in two decades, succeeding that of Rajiv Gandhi. In course of this visit, the Indian president sought to encourage freedom of navigation, peace and stability in the SLOC, in addition to calling for strengthening bilateral ties and ensuring energy security. Significantly, India offered a US$ 100 million line of credit to Papua New Guinea towards the development of infrastructure. India also offered its technology, financial wherewithal, skilled manpower and institutional support to harness the mineral-rich country’s abundant natural resources and establish mutually beneficial economic and commercial ventures (India-Papua New Guinea Joint Statement during the State Visit of President to Papua New Guinea, 2016). Finally, the operational deployment in May 2016 of four ships from the Indian Navy’s Eastern Fleet for more than two months to the South China Sea and north-western Pacific (Economic Times, 2016), followed up with a repeat deployment of warships for the same period have provided a geo-strategic push towards a region labelled as that of vital strategic importance by the Defence Ministry (Economic Times, 2018). These expeditions were widely interpreted as India’s direct response vis-à-vis the growing spree of Chinese regional maritime dominance.

‘Acting East’: bilateral and multilateral naval collaboration The ‘Act East’ policy highlights the imperative of building cooperative maritime security linkages with the littoral countries of Southeast and East Asia, with regard to common aspirations and challenges, manifested through expanding bilateral and multilateral interactions through joint exercises, patrolling, anti-terror operations and dialogue. Resultantly, the maritime outlook of collaboration provides a holistic stress on the development of India’s naval policy as well, in a bid to form alliances and conduct joint exercises with the littoral navies not only of ASEAN member-states, but also with the countries of East Asia and beyond, particularly Japan, Australia and New Zealand. For instance, the sustenance of ‘MILAN’ joint exercises among the navies of India and a majority of the littoral ASEAN countries like Singapore, Malaysia, Thailand, Indonesia and Vietnam, is a case in point. Although the ‘MILAN’ had taken off as a multilateral naval forum for India, Indonesia, Singapore, Thailand and Sri Lanka, it has presently been extended to embrace Australia, Brunei, Malaysia, Myanmar, New Zealand, the Philippines, Vietnam, Bangladesh, the Maldives, Mauritius and the Seychelles as new members. Besides focusing on boosting interoperability in the medical and disaster response capabilities, in May 2016, ‘INS Airavat’ participated in the ASEAN Defence Ministers Meeting (ADMM) Plus Exercise on Maritime Security and Counter Terrorism – a multinational exercise under the aegis of ADMM Plus consortium – in Brunei and Singapore, undertaking various drills and exercises in the South China Sea (ADMM Plus Exercise on Maritime Security and Counter Terrorism at Brunei and Singapore, 2016).

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The Indian Navy’s association with ‘Exercise RIMPAC’ commenced in 2006 in its capacity as an observer. ‘Exercise RIMPAC’ is the largest multilateral naval exercise in the world and is held biennially. In 2014, Indian naval participation was enhanced with deployment of ‘INS Sahyadri’ in its 24th edition, providing it an opportunity to interact with other ASEAN navies (Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand) and non-ASEAN navies ( Japan, South Korea, etc.) towards increasing interoperability and development of common understanding critical to ensuring the SLOC. The professional exchanges in harbour and the diverse range of activities at sea, including complex surface, sub-surface and air operations also enable sharing of best practices and honing of operational skills among the participants. The latest (26th) edition, held in 2018, was witness to the display of capabilities from 47 participating navies, ranging from disaster relief and maritime security operations to sea control and complex war-fighting exercises, including a mass casualty drill, replenishments-at-sea, submarine search and rescue, aircraft refuelling and multiday diving operations ( Exercise Rim of the Pacific 2018 Concludes, 2018). In addition to the multilateral exercises, India has also undertaken bilateral naval war games with ASEAN countries. The bilateral exercises conducted on a regular basis include passage exercises (PASSEX) with Singapore, Cambodia, etc.; coordinated patrols (CORPAT) with Indonesia, Malaysia, Myanmar and Thailand; and occasional exercises like HADR and high-level maritime strategic interactions with the ASEAN member-states. Among the regional navies, the Indian Navy has offered to assist the littoral states in the implementation of the ‘Eyes in the Sky’ programme for patrolling the pirate-infested Straits of Malacca. Therefore, the dimension of maritime collaboration has evoked a greater strategic significance, within the framework of which the Indian Navy has engaged in sending warships, tankers and submarines to littoral neighbours like Japan, South Korea, Thailand, New Zealand, Indonesia and Vietnam for joint exercises. The Indian Navy has raised the goodwill quotient through regional confidence-building and cooperative mechanisms like regular participation in institutions of regional governance like the ASEAN Regional Forum, East Asia Summit, ADMM, IONS, etc. and signing of agreements like the Regional Cooperation Agreement on Combating Piracy and Armed Robbery against Ships in Asia. This maritime diplomacy has undoubtedly brought the countries of Southeast and East Asia on a common strategic pedestal, in addition to raising their consciousness about the potential of New Delhi as a balancer to China’s rising regional stance and MSR architecture.

India’s ‘soft’ tread: Project ‘Mausam’ In a ‘soft’ power-based response to Beijing’s MSR, India launched ‘Project Mausam: Maritime Routes and Cultural Landscapes across the Indian Ocean’ during the 38th World Heritage Session in Doha in June 2014. A transnational initiative meant to revive its ancient maritime routes and cultural linkages with 39 countries in the IOR which were linked through sea trade routes in the past, the project collates archaeological and historical research in order to document

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the diversity of cultural, commercial and religious interactions, extending from East Africa, the Arabian Peninsula, the Indian subcontinent and Sri Lanka to the Southeast Asian archipelago. While at the macro level it aims to reconnect communication among these countries through enhanced understanding of cultural values and ethos, at the micro level the focus is on understanding national cultures at the regional promenade. The project also aims to tie up regional researchers and academics on a common platform to shed more light on the subcontinent’s maritime history, by reviewing archaeological sites, architectural and industrial heritage and cultural landscapes along the Indian Ocean coast. Furthermore, the project promises to promote research on themes related to the study of maritime routes through international scientific seminars and meetings and by adopting a multidisciplinary approach as well as encouraging the production of specialised works and publications with an attempt at promoting a broader understanding of the concept of a common heritage and multiple identities (Project ‘Mausam’Mausam/Mawsim: Maritime Routes and Cultural Landscapes, 2014). The duration of the project has been extended up to 2020, with the pre-approved fund of Rs 60,039,297 (Project ‘Mausam’ Extended up to 2020 with the Pre-approved Fund of Rs 60,039,297: Dr. Mahesh Sharma, 2018). Although the project focuses on re-inventing ancient maritime interactions between countries and communities connected by the Indian Ocean ‘world’, the strategic dimension of the same cannot be overlooked, as it offers an alternative to counter-balance Beijing’s MSR endeavour by assembling a majority of the regional countries in a quest for their shared cultural heritage.

Conclusion It follows from this chapter’s analysis that the 21st-century MSR is a cause for major concern in New Delhi as it provides a basis for Beijing to increase its geo-strategic footprints in the IOR. Although China has been sensitive to India’s outlook on the MSR, even seeking to dispel doubts by asserting that the initiative is aimed at benefiting both countries, implemented through a friendly, open, cooperative attitude, New Delhi has been keen on pushing for a rational strategic dialogue with China, to ensure that the kernel of sea-based commerce is preserved and expanded, without the militarisation of the regional waters, with countries such as Myanmar, Sri Lanka, Bangladesh and the Maldives willingly serving as the nodes. If the Indian Ocean, as the former Indian Foreign Secretary S. Jaishankar pointed out, has to be revived as a geopolitical concept with a sharper and more integrated personality that brings the continents of Australia and Africa closer in a ‘pan-oceanic framework’, it is imperative that India, which is its centre of gravity, serves as a ‘facilitator rather than an obstruction’ (Remarks by Foreign Secretary at the Indian Ocean Conference, 2016). This statement justified the emphasis on efforts at ports and port-led development, with India taking over the operationalisation of the Chabahar port in Iran, enhancing maritime logistics in Sri Lanka, Maldives, Mauritius

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and the Seychelles and increasing regional security cooperation and sustainable development through institutional mechanisms like Security and Growth for All in the Region (SAGAR), IONS and IORA as conduits of creating a common ethos. It is in this context that the Indo-United States Logistics Exchange Memorandum of Agreement becomes significant, as it allows the two countries to use each other’s military facilities for refuelling, food and medical services, among other benefits, besides multiplying the Indian Navy’s potential reach by extending access to American bases in Djibouti and Diego Garcia (George, 2016). Therefore, whether India would honour China’s initiation to embark on the MSR endeavour still hangs in the balance, as it remains in two minds over the twin conf licting alternatives of either collaborating as a partner in the project or restraining Beijing’s expanding silhouette in the IOR. As the present dynamics indicate, the balance gravitates towards the latter, clearly signalling that it would be a long wait before Sino-India relations are manifested in terms of being smooth and unruff led.

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in/media-briefings.htm?dtl/28463/Official_Spokespersons_response_to_a_query_ on_participation_of_India_in_OBORBRI_Forum (accessed on 23 June 2017). Patranobis, Sutirtho. 2019. ‘China Stresses Cooperation, Ties after India Boycotts BRI Forum’, Hindustan Times, 20 April. ‘PM Modi Raises India’s Concern over CPEC Which Runs through PoK’. 2016. The Indian Express, 4 September, http://indianexpress.com/article/india/india-newsindia/prime-minister-narendra-modi-raises-indias-concern-over-cpec-which-runsthrough-pok-3013260/ (accessed on 4 March 2017). Project ‘Mausam’ Extended up to 2020 with the Pre-approved Fund of Rs 60,039,297: Dr. Mahesh Sharma. 2018. New Delhi: Ministry of Culture, 17 December, http:// pib.nic.in/newsite/PrintRelease.aspx?relid=186490 (accessed on 29 April 2019). Project ‘Mausam’- Mausam/Mawsim: Maritime Routes and Cultural Landscapes. 2014. Indira Gandhi National Centre for the Arts: Research Programme 2014 to 2019. New Delhi: Ministry of Culture, http://ignca.nic.in/mausam_objectives.htm (accessed on 7 March 2017). Remarks by External Affairs Minister of India, Sushma Swaraj at the 3rd Indian Ocean Conference. 2018. Speeches and Statements. New Delhi: Ministry of External Affairs, 27 August, https://mea.gov.in/outoging-visit-detail.htm?30327/Remarks+by+Ex ternal+Affairs+Minister+at+the+3rd+Indian+Ocean+Conference+Vietnam+Aug ust+27+2018 (accessed on 24 April 2019). Remarks by Foreign Secretary at the Indian Ocean Conference. 2016. Speeches and Statements. New Delhi: Ministry of External Affairs, 2 September, www.mea.gov.in/ Speeches-Statements.htm?dtl/27356/Remarks_by_Foreign_Secretary_at_Indian_ Ocean_Conference_September_01_2016 (accessed on 7 March 2017). Singh, Abhijit. 2014. ‘The Indian Navy’s “China” Dilemma’, IDSA Comments. New Delhi: Institute for Defence Studies and Analyses, 28 April, www.idsa.in/idsacomments/ IndianNavysChinadilemma_asingh_280414 (accessed on 4 March 2017). Singh, Abhijit. 2015. ‘A “PLA-N” for Chinese Maritime Bases in the Indian Ocean’, Washington, DC: Centre for Strategic and International Studies, 26 January, http:// csis.org/publication/pacnet-7-pla-n-chinese-maritime-bases-indian-ocean (accessed on 3 March 2017). Sujuan, Wang and Sun Muyao. 2016. ‘China to Build Free Trade Area in Djibouti’, China Daily, 19 January, www.chinadaily.com.cn/beijing/2016-01/19/content_23262362. htm (accessed on 5 March 2017). Sushma Swaraj’s Speech at the Maldives. 2015. Speeches and Statements. New Delhi: Ministry of External Affairs, 11 October, www.mea.gov.in/outoging-visit-detail.htm?25911/Vis it+of+External+Affairs+Minister+to+Maldives (accessed on 6 March 2017). ‘Third in India’s Vicinity, China to Build $1.3-bn Deep-Sea Port in Myanmar’. 2018. Business Standard, 9 November. Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road. 2015. News Release. People’s Republic of China: National Development and Reform Commission, 28 March, http://en.ndrc.gov.cn/newsrelease/201503/ t20150330_669367.html (accessed on 4 March 2017). World Oil Transit Chokepoints. OPEC Revenues Factsheet. 2017. Washington, DC: US Energy Information Administration, 25 July, www.eia.gov/beta/international/ regions-topics.php?RegionTopicID=WOTC (accessed on 24 April 2019).

7 THE SAGARMALA PROJECT AND THE ONE BELT ONE ROAD PROJECT The convergence of India-China national interests Prosper Malangmei Background In 2013, Xi Jinping, the president of China, on his visit to Central Asia and Southeast Asia announced his intention to revive the old Silk Road and start the 21st-century Maritime Silk Route. Subsequently, these projects came to be known as China’s One Belt One Road (OBOR) Initiative or the Belt and Road Initiative (BRI). In March 2015, the National Development and Reform Commission (NDRC) of China officially published a document entitled “Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road”. This report gives a bird’s eye view of China’s OBOR Project. The OBOR broadly consists of six routes: China-Mongolia-Russia, Eurasian Land Bridge, China-Central Asia-West Asia, China-Indochina Peninsula, China-Pakistan Economic Corridor (CPEC) and the Bangladesh-ChinaIndia-Myanmar Economic Corridor (BCIM-EC). The 21st-century Maritime Silk Road envisions China connecting with Asia, Europe and Africa from China’s coast encompassing the East Asia economic zone from the South China Sea to Europe and in another through the Indian Ocean and South Pacific. The document also categorically mentioned Five Principles of Peaceful Coexistence: mutual respect for each other’s sovereignty and territorial integrity, mutual nonaggression, mutual non-interference in each other’s internal affairs, equality and mutual benefit, and peaceful coexistence (National Development and Reform Commission, 2015). India, on the other hand, operationalised the Sagarmala Project in 2015 that would enable port-led development. The idea was conceived back in 2003 by the then Prime Minister Atal Bihari Vajpayee, but the successive government was lukewarm about the project. The aim of Sagarmala Project is to incorporate port-induced direct and indirect development and to provide infrastructure to transport goods to and from ports quickly, efficiently and cost effectively. Hence,

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the project envisages to develop major and non-major ports of India. The project focuses on the three pillars of development, namely (1) supporting and enabling port-led development through appropriate policy and institutional interventions and providing for an institutional framework for ensuring inter-agency and ministries/departments/states’ collaboration for integrated development, (2) enhancement, including modernisation and setting up of new ports, and (3) efficient evacuation to and from hinterland (Press Information Bureau, 2015). The Ministry of Shipping, Government of India, published a National Perspective Plan entitled “Sagarmala: Building Gateways of Growth” on April 2016. It mentioned that the Sagarmala Project is a national programme with an objective to accelerate economic development of the country by harnessing the potential of India’s coastline and river network. It is projected that by 2025, the Sagarmala Project will have an infrastructure investment of INR 4 lakh crore, logistics cost saving per annum will be INR 35,000–40,000 crore, share of waterways-inland and coastal will rise by 6 per cent, it will boost exports by US$ 110 billion, and create 40 lakh direct jobs and 60 lakh indirect jobs. The Sagarmala Project has four pillars to ensure port-led development. First, port modernisation, which will provide port efficiency improvement. Second, port connectivity, which will ensure port and industrial connectivity, coastal and inland connectivity. Third, port-led industrialisation, which will lead to set up 14 coastal economic zones and identify 12 high potential industries. Fourth, coastal community development that will focus on skill development, uplifting fishermen and local communities and island development (National Perspective Plan, 2016:5,9). The Sagarmala Project will equip India to harness its 7,500-km coastline, 14,500 km of potential inland waterways, 10,000 km of last mile port connectivity, 12 new freight expressways, a rail corridor to transport coal, new pipelines for transporting crude and petroleum products (Press Trust of India, 2016). Under the Sagarmala Project, India will be developing six mega ports complementing the existing 13 major ports. The six mega ports are Sagar Island (West Bengal), Paradip Outer Harbour (Odisha), Sirkhazi (Tamil Nadu), Enayam (Tamil Nadu), Belikeri (Karnataka) and Vadhavan (Maharashtra). India’s 13 major ports are Kolkata port, Paradip port, Mangalore port, Cochin port, Jawaharlal Nehru port, Mumbai port, Kandla port, Visakhapatnam port, Chennai port, Tuticorin port, Ennore port, Mormugao port and Port Blair port. Both the projects, the Sagarmala and the BRI, are designed to reap economic benefits. The OBOR is mammoth in size, as it constitutes 65 countries, whereas the Sagarmala project is India-centric and is expected to develop coastal regions of India. Although both the projects have different objectives and magnitudes, there is a common agenda that both the projects seek to attain, i.e. economic growth. Heretofore, there is no official communiqué to interlink both the projects. The reason could be India is not comfortable with the CPEC and the BCIM-EC due to strategic undertones. The strategic distrust could hamper the CPEC and the BCIM-EC and leave India aloof from the OBOR project.

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As Professor B. R. Deepak in his interview in The Dialogue mentioned, “Huge capital is going out of China; it would be unfortunate if we (India) remain outside this (OBOR) global supply change. Rather we need to identify projects that could be docked to OBOR and reap benefits for the country” (Deepak, 2017). With such conjecture, the Sagarmala Project could be linked to the OBOR Project. The linking of these initiatives may shed some mistrust and open scope for more cooperation and partnership leading to regional stability and development partners in the region. The misconception of the OBOR Project within India has created lackadaisical response towards CPEC and BCIM-EC. This might be the reason China did not mention BCIM-EC in the 2nd BRI Forum. India sees it as the strategic gambit of China to enclose India on its f lank and gain strategic manoeuvre in the Indian Ocean. India must understand that it cannot remain hostage to its single-minded strategy of isolating Pakistan which has had no effect on China, Russia or the US. India would be illadvised to rely on the false comfort of the corridor being engulfed in crisis and a nonstarter. (Singh, 2017:3) However, India’s suspicious observations of the Chinese OBOR Project have merits. The CPEC and the BCIM-EC, which is an offshoot of the OBOR Projects, are strategically located, giving China access to the Indian Ocean. India resistance is more toward CPEC as it passes through POK (Pakistan Occupied Kashmir), which is a disputed territory between India and Pakistan, and ends at Gwadar port, Pakistan, which abuts the Indian Ocean. India considers it as interference on its sovereignty. China must understand that sovereignty is a sensitive issue for India. Politically, India and China admit to the existence of differences but at the same time, both encourage economic integration to propel the economy (Ghosh, 2015:5); if so, keeping aside political discord, India-China economic integration should be given priority. The Sagarmala and the BRI provide an opportunity for India and China to cooperate to rise above power politics and move towards symbiotic relations.

Scope for cooperation According to liberalism, the roles of state and non-state actors are given importance, and international politics is a positive sum game rather than a zero-sum game (Deng, 1998:316). There are certain specific tenets that international liberalism believes in: (1) the pacific effects of trade (commercial liberalism), (2) the pacific effects of republican government (democratic liberalism), (3) the importance of rules and institutions in affecting relations between countries (regulatory liberalism), and (4) the transformative effect of transnational contacts and coalitions on national attitude and definitions of interests (sociological

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liberalism) ( Nye, 1988:246). Basically, assumptions of international liberalism encourage cooperative relations based on international trade and regulatory international relations to avoid a zero-sum game in an anarchic world. The neoliberalism espouses for collaboration and interdependence that will lead to stability and peace. On the contrary, the realists see the world through the lens of self-help, survival, power politics, security, balance of power, zero-sum game and the world as anarchic. In such a scenario, cooperation is obsolete. Neorealists believe that cooperation is impossible in an anarchic world but neoliberalists are optimistic that cooperation is possible through international norms, regimes and institutions. Neoliberalism emphasises the role of market economy, free trade, institution, regime, norms, and the international organisation should be taken into account while conducting international relations. Moreover, neoliberalism emphasises the importance of institution as it provides information, reduces transaction costs, makes commitments more credible, establishes focal points for coordination and in general facilitates the operation of reciprocity. Thus, cooperation through institutions minimises fears of cheating, and it generates cooperation. Therefore, institutions eliminate fears of unequal gains from cooperation. Liberal institutionalism beliefs hold that world politics are constrained by state power and divergent interests; the international institutions created by reciprocity will be a vital feature of any lasting peace (Keohane and Martin, 1995:39–51). Additionally, neoliberalism assumes that international actors consider absolute gain factors while conducting international relations. Absolute gains are those longterm economic interests. It is this absolute gain, for neoliberalism, that pushes states towards cooperation (Powell, 1991:1304). Essentially, neoliberalism perspectives on international relations could be an inspiration for India-China relations to cooperate on economic interests. IndiaChina economic interdependence is an absolute gain for both the countries. India-China should refrain from relative gain, which is a short-term benefit interest like security and power, according to neorealism (Powell, 1991:1301). As India and China are rising powers, both see each others’ projects with a sense of doubt and interpret them as strategic gambits vis-à-vis the other. The BRI could only be successful if the neighbouring countries and countries participating cooperate with China. If China seeks cooperation from all quarters, it needs to allay fears of dominance by China through the BRI. Whereas the Sagarmala Project is limited to India, working with China and syncing it with the OBOR Project could result in a symbiotic relation between India and China. In India there are two schools of thought regarding the OBOR Initiative. The first argues that India should not entangle itself with China’s developmental projects until and unless India develops its regional connectivity and economic capacities within India. The second argues that India’s growth should not be over-dependent on the West and India should look for regional engagement and connections with the Asian neighbours (Z. D. Singh, 2017:3). Engaging the Sagarmala and the OBOR Projects fits with the second school of thought.

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Within the framework of engaging India and China, when neoliberalism talks about cooperation through institution, the New Development Bank (NDB), under the aegis of BRICS, and the Asian Infrastructure Investment Bank (AIIB) are the institutional platforms on which India and China could cooperate and engage positively. The NDB has “a vision to support and foster infrastructure and sustainable development initiatives in emerging economies. The Bank will also complement the efforts of other existing financial institutions to realize the common goal of global growth” (New Development Bank, n.d.). The NDB started with an initial capital of US$ 50 billion, and it is expected to reach US$ 100 billion in the next ten years. And the AIIB has 70 members including India. It is a financial institution based on the principle of multilateralism to carry out economic development in Asia by investing in sustainable development. The AIIB Bank has a capital of US$ 100 billion. Both these bank objectives are to fund infrastructure development. The Sagarmala and OBOR indeed require capital and the need could be fulfilled through these banks’ funding. India-China cooperating through these institutions and aiding each other’s infrastructure projects could mitigate mistrust. China has also instituted a Silk Road Fund or SRF (丝路基金, Silu jijin) to finance BRI. The SRF has a capital of US$ 40 billion. It has four investment principles, which are connectivity, economic reform, cooperation and openness. The SRF is a financial institution that seeks to cooperate and invest in connectivity to advance BRI projects in China and beyond. Although India has not agreed to BRI due to conf lict of interest, China could seek India cooperation in this economic endeavour. India being a major economic power in the region has a stake in the success of any project. The SRF principle ‘openness’ should be incorporated more in dealing with India to alleviate strategic rivalry. Thus, by bringing India into the fold of SRF and making India as a stakeholder, scope for dialogue could be widened. At the same time, China is looking at absolute gain by invoking economic reform. Consequently, this could lead to institutionalised cooperation between India and China. It must be seen that India and China, as developing countries, have mutual interest to cooperate in the international financial institution to speed up their infrastructure development projects. The NDB, the AIIB and the SRF are financial institutions set up as a counterweight to the Western-led Bretton Wood system and the Asian Development Bank. But then, there are key challenges for the founding countries of the NDB, AIIB and SRF to be able to establish governance structures and decision-making systems having a high degree of transparency, integrity and independence from political inf luence in making lending decisions (Biswas, 2015:9). The success of these financial institutions will depend on finding the common ground of interest. These institutions could be a platform for discussion, interaction and debate between India and China that has the potential to craft a new era of cooperative multilateralism. India-China cooperating on the multilateral forum through financial institutions may not necessarily solve the political differences, but the potential and latent conf lict

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could be managed and lessen the incentive to escalate any animosity. Further, it is the national interest of both the nations to have a stable region and encourage the liberal market economy to f lourish and improve development.

Shaping common national interests The national interests in international relations can be defined as “the perceived needs and desires of one sovereign state in relation to other sovereign states comprising the external environment” and the national interests can be broken down into “defence interests”, “economic interests”, “world order interests” and “ideological interest” (Nuechterlein, 1976:247–248). After the Cold War, Chinese thinkers started to believe that economic interests are more important than ideological differences (Deng, 1998:315). In addition to the national interests, China has “core interests”. Dai Bingguo, State Councillor of China, on 28 July 2009, on the occasion of the US-China Strategic and Economic Dialogue, defined “core interests” as upholding the basic system of China and protecting national security; second, the sovereignty and territorial integrity; and third, economic and social sustained development (Dai, 2009). It is evident that whether it is national interests or core interests of China, economic interest features in both cases. China has been consistent with its economic interests since Deng Xiaoping initiated economic liberalism in the 1980s. China’s foremost leader, Mao Zedong, considered ideology and sovereignty as China’s primary national interests. But for Deng Xiaoping, economic development was absolutely necessary and initiated ‘opening and reform’ of China’s economy. Next, Jiang Zemin continued to prioritise China’s economic development by advocating for a multipolar world order. Then, Hu Jintao, Jiang Zemin’s successor, also promoted ‘peaceful development’ that would be conducive for China’s economic growth without any major confrontation with the United States (Gupta, 2012:807–809). Taking forward the economic interests and objectives of China’s growth, Xi Jinping, the current president of China, announced the ambitious BRI in 2013. Likewise, India too opened its market to foreign investments in 1991 under the leadership of P. V. Narasimha Rao. This was the beginning of a new era for the Indian economy as the new jargon of Liberalisation, Privatisation and Globalisation (LPG) was introduced into India’s political economy. Since China’s opening and reform and India’s LPG, India and China have achieved exponential economic growth. At present, China is the second largest economy and India is the sixth largest economy of the world. In such a scenario, as an economic powerhouse of Asia and in the age of globalisation, economic growth is not possible in isolation. Apparently, the CPEC Project has the potential to economically benefit India if it integrates and cooperates with Pakistan and China. It is noted that CPEC “will have positive impact on Iran, Afghanistan, India, Central Asian Republic, and the region” because “geographical linkages having improved road, rail and air transportation system

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with frequent and free exchanges of growth” will result in “well connected, integrated region of shared destiny, harmony and development” (CPEC, n.d.). The CPEC highway runs from Kashgar, Xinjiang province of China to Gwadar port of Pakistan. Apart from the road, the economic corridor has a plan to build SEZs, an energy corridor, a rail network, an airport and develop Gwadar port. The nearest major port of India to Gwadar port is Kandla located in Gujarat state, which is a part of the Sagarmala Project. These two ports could be linked for a commercially viable economic venture. India’s obsession to see China-Pakistan relations as detrimental to India’s security interests may be unjustified. The unresolved border disputes should not be allowed to dictate the outcome of regional connectivity. By welcoming the revival of the old Silk Road, India would have more trade routes choices instead of depending on US-controlled routes (Bhardwaj, 2017:10). It would also lessen the friction and open up a new option for cooperation and regional trade to bloom. For instance, in Punjab, only Wagah-Attari is open for border trade between India and Pakistan. In addition to it, the Feroz-Kasur and Fazilka-Sahiwal border points in Punjab could be connected for land-based trade route between India and Pakistan. These regions are famous for leather tannery goods, petroleum products, and textile and agro-industries. Further, the route could be extended up to Rajasthan and Gujarat. In the later stage, this route can be connected to BCIM-EC through the Amritsar-Kolkata Industrial Corridor ( Ranjan, 2015:14–17). The possibility is immense if only the regional stakeholders, India, Pakistan and China, could translate economic imperatives into actual economic cooperation. For India, BCIM-EC is a lesser evil of the two OBOR Projects encapsulating South Asia. India has agreed to cooperate in the BCIM-EC Project but with less vigour. The BCIM-EC or K2K (Kolkata to Kunming) is a 2,800-km long highway, which originates in Kolkata and passes via Benapole/Petrapole on the India-Bangladesh border, then passes through Dhaka and Sylhet in Bangladesh and enters India again through Silchar and crosses through Imphal. In Myanmar, it takes the route of Tamu-Kalewa Road or India-Myanmar Friendship Road and traverses through Mandalay and Lashio. Finally, it crosses over to China through the border town of Ruili and travels via Longling and Dali and ends in Kunming (Yunnan, China) (Sajjanhar, 2016:2). This economic conduit covers four countries, interlinking South Asia and the Southeast Asia market along with China. India’s discomfort with BRI is explicit from the fact that it failed to attend both the 1st and 2nd BRI Forum. The BCIM-EC as a regional grouping enables the countries to take advantage of available resources, labour and established international sea routes. This region is relatively poor and lacks development. Integrating and cooperating with each other’s countries will result in economic development and poverty alleviation. It also acts as a land bridge connecting the Pacific Ocean and the Indian Ocean. The success of BCIM-EC will result in peace and stability in Asia (Hussain, 2014:4). Apart from the economic corridor, there are infrastructure projects such

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as port building, an energy pipeline and a special economic zone developed in the region by China. China is building Kyaukpyu, a deep-water port in Myanmar. Along with it, China is building a gas pipeline that will transport energy to Kunming in the Yunnan province of China. Close to Kyaukpyu port, India is building Sittwe port, also called the Kaladan Multimodal Transit Transport Project (KMTTP). The KMTTP envisages providing a seaport to landlocked northeast India and reducing pressure on the Siliguri Corridor. It is also slated to connect the nearest eastern port of India to Sittwe port of Myanmar, thereby moving cargo to northeast India through Myanmar. It provides an alternative route for India to its northeastern region and serves India’s strategic purpose and at the same time, it contributes to Myanmar economic development and integration with India (Press Information Bureau Government of India, 2015). The KMTTP has different segments, which are connecting Kolkata port to Sittwe port (539 km), connecting Sittwe to Paletwa (158 km) by inland water transport through Kaladan River, and then connecting Paletwa to the Indo-Myanmar border (110 km) by road and, finally, reaching to NH.54 (Lawngtlai) (100 km) in India (Ministry of Development of North Eastern Region Government of India, 2014:1). Apart from developing the port, China is building a special economic zone in Kyaukphyu. Not to be left behind, India has a plan to build a special economic zone in Sittwe on 1,000 acres of land, which is located at a distance of 80 km away from Chinese Kyaukphyu port and special economic zone (Chaudhury, 2016). These port developments and infrastructure developments are interpreted as a strategic rivalry between India and China. Although located in the same Rakhine state of Myanmar, there is no initiative by India and China to collaborate and gain benefits of each other’s infrastructure existence. China’s interests in Myanmar are an extension of the Southern Silk Route initiative and India’s interest in Myanmar is a continuation of its ‘Act East’ Policy. Instead of resorting to protectionism, India and China should chalk out a standard operating procedure to make use of the infrastructure at their disposal. This would enable India and China to streamline their development agenda in the region. Deng says, China views the world as almost exclusively an arena of interactions between sovereign states engaged in merciless competitions. They view the growing transnational and multilateral networks through a state-centric prism, only focusing on how China could take advantage of these new external environments to protect and maximize its national interests. ( Deng, 1998:311) China’s national interests should not undermine India’s interests but both should complement each other’s interests. The Guizhou International Investment Cooperation (GIIC) investment of US$ 500 million in Kakinada SEZ is a right step toward more cooperation and port-led economic development. The

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development of India’s eastern coast and China’s rapid development of its harbour and ports are leading towards integration of the Sagarmala Project and the Maritime Silk Road (Aneja, 2016). This linkage is an indication that Sagarmala Project can be extended to link with OBOR Initiatives and make it more tenable and commercially more lucrative. Verily, India and China have more to benefit if their relation is based on cooperation rather than on strategic rivalry. The Kolkata port is a major port in eastern India, which falls under the purview of the Sagarmala Project. If there has to be regional economic integration, the success will depend on how the development of Kolkata port under the Sagarmala Project is linked to BCIM-EC and the Kyaukpyu port and how China takes advantage of the Sittwe port and Kolkata port to make a foray into South Asia and the Indian Ocean. Likewise, even on the western front, India and China could look for cooperation to develop Gwadar port and Chabahar port in Iran built by India. Under the aegis of Sagarmala, India is developing Kandla port located in Gujarat state. A framework could be set up to link the Chabahar port, the Gwadar port and the Kandla port. Isolating each other port not only raises suspicion but also it is a disadvantage for trade and commerce. Complementing to the Sagarmala Project is a Bharatmala Project. The success of Sagarmala is linked to the development of Bharatmala Project, as the Ministry of Road Transport and Highway will work to improve road connectivity to coastal areas, the border region, remote areas, tourist and religious destinations; to widen bridges and improve connectivity to districts headquarters (Ministry of Road Transport and Highways Government of India, 2016). So, the development of the coastal region and major ports of India is provided with better connectivity from the hinterland through the Bharatmala Project. With better ports and connectivity, trade is expected to surge. In this way, goods and merchandise can be easily transported to India from China and vice versa provided the Sagarmala Project and the OBOR Project are linked. The business prospects will be higher if these development projects are linked and brought under the patronage of regional economic integration. Yet, there are interplay of geopolitics and geo-economic factors that need to be addressed to eschew political misunderstanding.

Geopolitic and geo-economic factors The study of geopolitics considers the inf luence of geography on politics. Basically, Geopoliticians sought to understand how the new industries capabilities of transportation, communication, and destruction – most notably railroads, steamships, airplanes, telegraphy and explosives – interacting with the largest-scale geographic features of earth would shape the character,

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number, and location of viable security units in the emerging global international system. ( Deudney, 2006) In 1890, Alfred Thayer Mahan, American naval officer, in his book The Influence of Sea Power upon History, argued that the path to global power lies in naval power and control over the seas. The Maritime Silk Road of China is in tandem with Mahan’s argument. Taking forward the idea of the inf luence of sea, China has operationalised its naval base in Djibouti since 2017. Besides sea power, the importance of land dominance is aptly demonstrated in the writing of Halford Mackinder. Mackinder wrote, Who rules East Europe commands the Heartland: Who rules the Heartland commands the World-Island: Who rules the World-Island commands the World. (Mackinder, 1919:186) Rephrasing the statement of Mackinder, Spykman wrote, Who controls the rimland rules Eurasia; Who rules Eurasia controls the destinies of the world. (Spykman, 1944:43) This rimland, according to Spykman, is a coastal region that surrounds the heartland has to be controlled in order to gain world dominance and thus plays a vital role of a littoral region. This is the genesis of the US’s ‘containment policy’. The writing of Mahan, Mackinder and Spykman demonstrate the importance of geography to achieve state’s foreign policy objectives. On the other hand, geo-economics is the study of the inf luence of geography over the economy, commerce and international trade. Namrata Goswami, Research Fellow at the Institute for Defence Studies and Analyses, New Delhi, explains, Geo-economics is the study of how economics functions in an international environment. It is basically an academic study of the global move of capital, market, and labour. The concept of geo-economics thereby interacts with the geographic and demographic aspects of states and consequently inf luences their own policy with regard to international trade and commerce. (Goswami, n.d.) Taking into account the aspects of geopolitics and geo-economics, China’s OBOR Project has the propensity to allow China to control seas, coastal regions and the heartland around the globe. Naturally, with such development, China’s inroads into South Asia raises concern and apprehension in India, especially in the case of China’s bonhomie with Pakistan. India sees China-Pakistan relations and cooperation as a strategy to constrict India in its backyard. India is not

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comfortable that China is gaining easy access to the Indian Ocean through Pakistan and Myanmar. The Gwadar port and the Kyaukphyu port are entry ports for China into the Indian Ocean, a traditional domain of India’s naval power. The Chinese presence in the Indian Ocean dents India’s preponderance and checks India’s dominance in the region. China has consistently maintained that China’s port projects are solely for economic and commercial purposes. This argument may hold true, but the dual nature of the port cannot be ruled out either. In 2014, China had docked its submarine in Colombo port in Sri Lanka to which India issued a démarche. During a conf lict, Gwadar port and Kyauphyu port could be used by China. Chinese presence in India’s western, southern and eastern fronts is a real concern for India. The geopolitical motivations behind China’s CPEC interests are to provide its ally Pakistan with economic support to bring in stability. Second, China, wanting to diversify its trade routes and reduce dependence on Malacca Strait, which could be choked by the US and its allies, finds Pakistan to be a suitable option. Third, China can use Pakistan as a crossroad to connect western China to the Indian Ocean, Gulf countries and Europe and in the future potentially use Gwadar port for Chinese naval operations (Ritzinger, 2015:2–3). Moreover, Gwadar port is strategically located and it is only 400 km away from the Strait of Hormuz, thereby reducing China’s energy import route from 12,000 km to 3,000 km. A Pakistan strategic location is vital for an economic corridor to link with Central Asia, West Asia and South Asia. Geographically, Pakistan is an important nodal point for regional trade. And if CPEC is extended to India, it could boost regional trade volume (Ali, 2016:1–2). India’s reservations against CPEC are due to conf lict of interests and geopolitical reasons. India is averse to CPEC passing through Pakistan Occupied Kashmir (POK). India considers POK as an integral part of India’s territory. For India, Chinese investment in POK is tantamount to infringement of Indian territory. China has defined its “core interest”, and for China its “core interests” include sovereignty and territorial integrity, which are non-negotiable in nature ( Jinghao, 2019:33, 41). In this case, China has ignored India’s sovereignty aspect. Also, India is wary of China’s project of port development in South Asia, considering it to be a geopolitical agenda of encircling India, and not one of economics (Maini, 2016:23–24). Besides, India has not endorsed China’s Maritime Silk Route because outwardly, China has projected it as a commercial venture but China is not willing to release details of the project, which creates a scope for “suspicions of geopolitical gameplay by China” (Singh, 2014). Therefore, according to Jayant Prasad, Director General of the Institute for Defence Studies and Analyses, India and China should come together based on culture and commerce, and for projects to succeed, a Sino-Indian conf luence is significant ( Prasad, 2016:3). The conf luence for India and China should be trade and commerce and China could adhere to respecting India’s sovereignty. Unlike India’s opposition towards CPEC, India is more comfortable with the BCIM-EC. There is not must tussle between India and China concerning the

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BCIM-EC, but India is watchful of Chinese presence in Myanmar and Bangladesh. China is gaining access to the Indian Ocean through Myanmar. This is another cause of concern for India’s strategic thinkers. India is possessive about the Bay of Bengal and considers it as a part of its domain. This sea is also an important sector for international trade and commerce. China making an inroad into the Bay of Bengal is a matter of concern to India. Thus, India would like to keep China abeyance from its areas of dominance (Suryanarayana, 2016:2). India perceives China’s OBOR Initiatives as a revised version of a ‘string of pearls’, a strategy of setting up naval bases the around Indian Ocean to protect Chinese interests and contain rival power. India interprets BRI as a euphemism of a ‘string of pearls’ strategy and foresees China containing India in the Indian Ocean. Moreover, through the geo-economics means of China’s OBOR, India fears that infrastructure development undertaken by China in South Asia and the Indian Ocean will allow it to gain dominance over India as a part of China’s ‘strategic encirclement’ strategy (Yu, 2016:14). Vice Admiral Anil Chopra argued that India should focus more on the SAGAR (Security And Growth for All in the Region) initiative rather than on the Sagarmala Project. The rationale behind such argument is that cooperation with China undermines India’s regional power. Therefore, India must focus on the six SAGAR initiatives, which are the Pyara deep water port project (Bangladesh), the Kyaukphyu and the Dawei port projects (Myanmar), the petrochemical complex at Trincomalee (Sri Lanka), maritime ties with the Maldives, the Duqm port project (Oman) and the Chabahar port project (Iran) (Chopra, 2016). With such a competing stance, India stands to lose out on major economic collaboration. India cannot take a protectionist and isolationist strategy when dealing with China because India needs to tap into China’s economic resources. It would be counterproductive for India to have a strategic rivalry against China. Moreover, the OBOR is an attractive proposition in two ways. First, the idea of international cooperation through OBOR is strengthened by the success of China’s economic growth and thereby uplifts many out of poverty. Second, China scripted its economic success by adopting its own path of development without incorporating the Western model of developing (He, 2017). China’s economic success is evident from the fact that it has overtaken Japan to be the second largest economy of the world. India should not stay out of OBOR for long to gain benefits from China’s economic growth. China’s economic miracle has made it audaciously invest around the globe. China’s geo-economy has five features, which are trade, investment, the One Belt One Road Initiative, multilateral financial institutions and internationalisation of RMB (Renminbi). It is seen that China is the largest trading partner of over 130 countries, China has been a major provider of foreign direct investment since 2012 onwards, only behind the US and Japan. Through China’s initiative, AIIB has been established, and BRICS’s NDB is functioning with the potential to rival Bretton Woods. China is encouraging use of its RMB in international trade. One Belt One Road is a demonstration of China’s economic expansion

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and implicitly showcases China’s geo-economic outreach (Xinbo, 2016:7–8). China’s geo-economic projection of its economic power in South Asia is eminent. The CPEC and the BCIM-EC are an illustration of China’s geo-economic interest in the region. India has a trade deficit with China, which is a major concern for India. All the South Asia countries have trade deficit with China, which is a geo-economic advantage for China. Tina Rabbani Khar, Minister of Foreign Affairs of Pakistan writes, “Within South Asia, India will continue to look at China’s growing inf luence as a direct threat to its path of emerging as a regional power” (Khar, 2016:22).

Conclusion Despite the fact that China’s building up in South Asia is geopolitically suspicious and calls for a further probe, it cannot be merely relegated as a strategic gambit against India. The economic factors should also be examined. The economic dividends from Chinese projects located at the periphery of India are complementary to India’s development and regional development as a whole, but geopolitically, Chinese projects are an impediment to India’s aspirations in the region. India should think in terms of absolute gains rather than relative gains. China should tread cautiously as it might prod India to take an antagonistic stand towards the OBOR Project, resulting in a confrontation. More dialogue forums can be created to bring on board all the regional stakeholders and create an aura of trusteeship. Unilateral execution of projects undermines the neoliberal principles of cooperation and reciprocity. At the same time, India could shed its fears of looking at China’s initiative with suspicion and find a way to link a project such as Sagarmala to cash in on a partnership with China. Xiaoping Yang, Visiting Scholar in the South Asia Program, wrote in the Carnegie Endowment for International Peace, If both countries make development their ultimate goal, this strategic competition does not necessarily hinder their ‘creative’ cooperation in economic and social development. The key is to properly reduce the negative impacts of their trust deficit, and creatively expand the pie of common interests. ( Yang, 2016:3) The national interests of India and China maximising its economic growth could be pull factors to attract India and China towards each other. Divergent views have crept into India-China bilateral relations that have drawn them asunder. China should respect India’s interest in POK. India too has to be aware of its smaller neighbour concerns. Otherwise, the smaller nations tend to play the ‘China card’. The solution lies in cooperation with sovereign nations and respecting each other’s aspirations. China should adhere to the Five Principles of Peaceful Coexistence while implementing its policy.

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Working together in a multilateral forum could result in mutual trust and common interests. India and China too could institutionalise their economic relations with a set of visions, objectives and principles. The NDB and the AIIB are areas in which India and China should cooperate to yield common ground of interests. China could make India privy to the OBOR Initiative while implementing projects in the Indian subcontinent. India should not shy away from attending BRI Forums. So far, India has missed two BRI Forums. By attending the Forums, India could raise the irritants issue and curb the vexed question, like the trade imbalance between the two nations. Balance of trade completely favours China and India has raised this issue too. China could make an effort to lessen the trade imbalance. China could make use of India’s Sagarmala Project and invest in it. The coastal development of India could be a boon for India and for China to import more from India and reduce the trade imbalance. India’s perception could change if China is accommodative of India’s interests. India’s best strategy against China would be to cooperate and obtain economic benefits and at the same time build its own strategy to tackle any contingency. Political differences should not be allowed to determine India-China economic relations. Constant parley should be held to guide the Sagarmala Project and the OBOR Project to conclusive mutually beneficial commercial initiatives. India and China should find a nodal point to blend the Sagarmala Project and the OBOR Project. It would be preposterous if the two economic giants of Asia chose to remain aloof from each other’s projects. The rise of China should not drag the region towards a ‘Thucydides trap’, a term coined by Graham Allison to depict the situation of the US (established power) and China (rising power), taking a hint from the Peloponnesian War fought between Athens (established power) and Sparta (rising power). The hostility between the established power and rising power led to the war. In this scenario, India is a dominant power in South Asia and China coming into South Asia through BRI might escalate rivalry. India and China should avoid the trap of insecurity and work towards economic cooperation. Amity through economic overture would be a positive sum game for India and China. Why shouldn’t India and China seek out each other’s market and cooperate to make the ‘21st century belong to Asia’ a reality?

References Ali, Akber. 2016. ‘China Pakistan Economic Corridor: Prospects and Challenges for Regional Integration’, Arts and Social Sciences Journal, 7(4): 1–2. Aneja, Atul. ‘The Hindu’, 4 December 2016, www.thehindu.com/news/international/ Changsha-meet-signals-fusion-of-Sagarmala-and-China%E2%80%99s-MaritimeSilk-Road/article16759011.ece (accessed on 6 March 2017). Asian Infrastructure Investment Bank. n.d. www.aiib.org/en/about-aiib/index.html (accessed on 2 March 2017). Bhardwaj, Atul. 2017. ‘India’s Opposition to China-Pakistan Economic Corridor is Flawed’, Economic and Political Weekly, LII(4): 10.

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Biswas, Rajiv. 2015 ‘Reshaping the Financial Architecture for Development Finance: The New Development Banks’, LSE Global South Unit Working Paper Series (The London School of Economics and Political Science), no. 2: 9. Chaudhury, Dipanjan Roy. 2016. ‘India Planning to Set Up SEZ in Myanmar's Sittwe’, http://economictimes.indiatimes.com/news/politics-and-nation/india-planning-toset-up-sez-in-myanmars-sittwe/articleshow/53496839.cms (accessed on 3 March 2017). Chopra, A. 2016. ‘Sagarmala or SAGAR: A Maritime Dilemma’, Gateway House, www.gateway house.in/sagarmala-or-sagar-our-maritime-dilemma/ (accessed on 2 March 2017). CPEC. n.d. ‘China Pakistan Economic Corridor’, http://cpec.gov.pk/introduction/1 (accessed on 3 March 2017). Dai, Bingguo. 2009. ‘U.S. Department of State, Closing Remarks for U.S.-China Strategic and Economic Dialogue’, 28 July 2009, https://20092017.state.gov/secretary/ 20092013clinton/rm/2009a/july/126599.htm (accessed on 6 May 2019). Deepak, B.R. 2017. ‘India Needs to Shift the Chinese Discourse from Security to Partnership and Cooperation: Noted China Expert B.R. Deepak’, The Dialogue, Interview by The Dialogue Staff, 24 January 2017. Deng, Y. 1998. ‘The Chinese Conception of National Interests in International Relations’, The China Quarterly, 315. Deudney, D.H. 2006. www.britannica.com/topic/geopolitics (accessed on 10 March 2017). Ghosh, P.K. 2015. ‘Linking Indian and Chinese Maritime Initiatives: Towards a Symbiotic Existence’, ORF Issue Brief, 121: 5. Goswami, Namrata. n.d. ‘Ravi Ranjan asked: What Is the Meaning of Geo-Economics and Geo-Strategy? What One Means by Strategic Engagement?’, https://idsa.in/askan expert/geo-economicsandgeo-strategy (accessed on 1 March 2017). Gupta, R. 2012. ‘China’s National Interests: Exploring the Domestic Discourse’, Strategic Analysis, 36(5): 807–809. He, Y. 2017. ‘China US Focus’, www.chinausfocus.com/foreign-policy/2017/0522/15025. html (accessed on 26 May 2017). Hussain, Z.H. 2014. ‘Initiative for “Southern Silk Route” Linking Bangladesh, China, India, and Myanmar’, ISAS Working Paper, 4. Jinghao, Zhou. 2019. ‘China’s Core Interests and Dilemma in Foreign Policy Practise’, Inha Journal of International Studies, 33: 41. Keohane, R.O., & Martin, L.L. 1995. ‘The Promise of Institutionalist Theory’, International Security, 20(1): 39–51. Khar, T.R. 2016. ‘China’s Geo-economic Role in South Asia. Geo-economics with Chinese Characteristics: How China’s Economic Might is Reshaping World Politics’, Regional Agenda, World Economic Forum, 22. Mackinder, Halford. 1919. Democratic Ideals and Reality: A Study in the Politics of Reconstruction. New York: Henry Holt and Company. 186. Maini, H.R. 2016. ‘The China-Pakistan Economic Corridor: Strategic Rationales, External Perspectives, and Challenges to Effective Implementation’, Visiting Fellow Working Paper, Stimson Center, 23–24. Ministry of Development of North Eastern Region Government of India. 2014. https:// mdoner.gov.in/infrastructure/kaladan-multi-modal-transit-transport-project-inland (accessed on 4 March 2017). Ministry of Road Transport and Highways Government of India. 2016. http://pib.nic. in/newsite/PrintRelease.aspx?relid=137248 (accessed on 4 March 2017). Ministry of Shipping. 2016. ‘Sagarmala: Building Gateways of Growth’, National Perspective Plan, Government of India. National Development and Reform Commission. 2015. ‘Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road’, National

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Development and Reform Commission, People’s Republic of China, http://en.ndrc. gov.cn/newsrelease/201503/t20150330_669367.html (accessed on 16 February 2017). New Development Bank. n.d. http://ndb.int/our-purpose.php (accessed on 2 March 2017). Nuechterlein, D.E. 1976. ‘National Interests and Foreign Policy: A Conceptual Framework for Analysis and Decision-Making’, British Journal of International Studies, 2(3): 247–248. Nye, J. 1988. ‘Neorealism and Neoliberalism’, World Politics, 40(2): 246. Powell, Robert. 1991. ‘Absolute and Relative Gains in International Relations Theory’, The American Political Science Review, 85(4): 1304. Prasad, J. 2016. ‘New Geopolitics of China, India, and Pakistan’, Council on Foreign Relations. Press Information Bureau. 2015. ‘Sagarmala: Concept and Implementation towards Blue Revolution’, http://pib.nic.in/newsite/PrintRelease.aspx?relid=117691 (accessed on 17 February 2017). Press Information Bureau, Government of India. 2015. http://pib.nic.in/newsite/PrintRelease.aspx?relid=128699 (accessed on 3 March 2017). Press Trust of India. 2016. www.livemint.com/Politics/TVI7TdhCwPCCzfchKiYALJ/ Projects-under-Sagarmala-to-mobilise-Rs4-trillion-create-1.html (accessed on 4 March 2017). Ranjan, A. 2015. ‘The China-Pakistan Economic Corridor: India’s Options’, ICS Occasional Paper, 10: 14–17. Ritzinger, L. 2015. ‘The China-Pakistan Economic Corridor Regional Dynamics and China’s Geopolitical Ambitions’, NBR Commentary, 2–3. Sajjanhar, A. 2016. ‘Understanding the BCIM Economic Corridor and India’s Response’, ORF Issue Brief, 147: 2. Singh, A. 2014. ‘China’s Maritime Silk Route: Implications for India’, Institute for Defence Studies and Analyses, www.idsa.in/idsacomments/ChinasMaritimeSilkRoute_AbhijitSingh_160714 (accessed on 7 March 2017). Singh, S. 2017. ‘The Great Corridor Game’, The Indian Express, www.newindianexpress. com/opinions/2017/jan/13/the-great-corridor-game-1559010-2.html (accessed on 21 February 2017). Singh, Z.D. 2017. ‘A Great Wall of Paranoia’, The Hindu, www.thehindu.com/opinion/ lead/a-great-wall-of-paranoia/article18475163.ece (accessed on 21 May 2017). Spykman, Nicholas. 1944. The Geography of the Peace. New York: Harcourt Brace & Co. 45. Suryanarayana, P.S. 2016. ‘Indian Ocean and the Bay of Bengal: A Strategic Factor in China-South Asia Relations’, ISAS Working Paper, 248: 2. Xinbo, W. 2016. ‘China’s Geo-economic Power. Geo-economics with Chinese Characteristics: How China’s Economic Might Is Reshaping World Politics’, Regional Agenda, World Economic Forum, 7–8. Yang, X. 2016. ‘Modi’s Reform and Future China-India Cooperation’, China-India Dialogue, Carnegie Endowment for International Peace, 3. Yu, H. 2016. ‘Motivation behind China’s “One Belt, One Road” Initiatives and Establishment of Asian Infrastructure Investment Bank’, Journal of Contemporary China, 14.

8 INDIA CHINA BILATERAL TRADE THROUGH NATHU-LA PASS Past and present Anil Kumar Biswas

Introduction China and India are among the world’s oldest civilisations. Since ancient times, both countries have their own rich culture, tradition, ideas and beliefs. Since the early ages, these two Himalayan giants have been sharing their ideas, cultures, beliefs and having trade and business. The practice of trade and business between the two ancient civilisations dates back further than the beginning of Christian era. Not just trade – historically speaking, these two great countries have been exchanging their cultural values since ancient times. The two Asian civilisations were culturally rich and value-added countries. Buddhism from India went to China and many of the Chinese scholars came to India for learning Buddhist philosophy. Many Indian Buddhist scholars also went to China to teach Buddhism and Indian values. Since the very early period, Nathu-La Pass started playing an important role between these two countries. Historically, trade was bustling via various routes by the first century all over world with various essential items before sea routes were discovered. By then the silk route had expanded in trade involving many countries across Europe and Asia. Nathu-La as a part of the silk route became a link between the two countries for trade and exchange of ideas, culture and values. Since then to date this route has been playing a very important role between these two countries. But in the medieval period this route lost its importance for a short span of time and later again revived its lost glory. After the Sino-India War in 1962 till early 2006, this route was totally closed. Except for this period, Nathu-La Pass has been playing a very important role for trade and exchange of knowledge between two gigantic Himalayan countries. At present India and China are two major emerging economies in the world. Present GDP growth of both countries is nearly similar. But some bilateral issues between the two countries threaten the rise of each other, which

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is very dangerous for the overall development of this region and also the world economy. But there are golden opportunities before both countries to dominate the global economy. The governments of the two countries have been trying to minimise and solve such issues through diplomatic channels. The re-opening of Nathu-La Pass is one of the biggest diplomatic achievements for both the countries in sustaining peace and tranquillity in the region. From this background the main aim of this study is to recall the historical glorious relationship between the two countries and analyse the present scenario of trade through Nathu-La Pass, its constraints and also some recommendations for future plans.

Methodology The main emphasis of this study is reminding the readers of the past golden scenario of trade and business via Nathu-La Pass and discussing the present scenario of bilateral trade via this route and its future prospects. This study also emphasises the humanitarian values of trade and business, which will be able to sustain peace and tranquillity between the both countries. For this study, the researcher has followed an analytical method based on secondary data and literature. For this purpose, books, journals, newspapers, published works, government reports and websites are considered as secondary data and sources of literature were used for completion of the study.

The past scenario of Indo-China bilateral trade through Nathu-La Pass (up to 1962) The silk route was one of the most important trade routes between India and China in ancient times. At that time this route was playing an important role as a trade route among Asian and European countries. The Roman, Chinese, Parthian and Kushana empires were taking part in trade and business through this route involving luxury items, various raw materials and spices. At that time, the rich beliefs, faiths and values of various developed empires spread across Asia and Europe through this route. Nathu-La, as a part of the ancient Silk Road, played an important role for trade and business between India and China along with other Asian and European countries. The trade between the two civilisations was carried out through this road along with some other roads. But in the medieval period during the Mongolian Empire, the route disintegrated temporarily. European countries advanced towards modernisation with their own scientific inventions, which helped them to take over the sea trade. For this reason, the silk route became unimportant for Europe. At the time of British rule in India, the relation between India and China had taken new shape. British India was trying to control the trade with Tibet through this route. So this route gained new importance in the favour of British India. Warren Hastings sent a mission to Tibet in 1774 to make formal trade linkages for the first time. In 1783 the British

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government also sent another mission to explore trade linkages between these two countries. But these two missions were failures. In this situation the British government took strong measures for improving the existing communication network through Sikkim and also extending roads up to the Tibetan frontier in 1873. This was the first historical initiative by the British government for the improvement and extension of road communication through Nathu-La to Tibet. The then deputy commissioner of Darjeeling, J. W. Edgar, visited Sikkim and the Tibet frontier and advised for the prospects of trade with Tibet through Sikkim. As a result, the ‘Report of Administration of Bengal’ in 1874–75 strongly recommended establishing Anglo-Tibetan trade through Kalimpong (presently in West Bengal state) and Nathu-La in Sikkim. As a result, a convention was signed in 1894 for the initiation of business between India and China. But this initiative failed due to the resistance of the Tibetan people. In 1904 the British sent a military mission to Tibet which captured Gyastse and reached Lhasa by defeating the Tibetan army and signing a formal agreement. The agreement, signed in 1908, was a follow-up of previous agreement between British India and Tibet on ‘Tibet Trade Regulations’. This follow-up agreement formalised and initiated trade between Tibet and Sikkim. In 1914, China urged execution of new ‘Anglo-Tibet Regulations’ between Great Britain and Tibet, which was refusing to abide by the existing tripartite treaty between Great Britain, Tibet and China. Two trade roads, Jelep-La in Kalimpong and Nathu-La of Sikkim, opened for trade and business between India and Tibet (Hasija, 2013:2). Besides Jelep-La and Nathu-La, before partition, India had two another openings into Xinjiang, the north west province of China. The first was the 600 mile long Ladakh route extending from Kashgarh to Yarkand and then over Karokoram pass to Leh. The second was the 460 mile long caravan route from Kashgar to Gilgit. Besides commerce, these routes were used by Hajj pilgrims from Xinjiang. (Bhardwaj, 2017:11) After independence these two trade roads closed. The reason for the closedown of one route was protection of Indian sovereignty and the other route is now situated in Pakistan Occupied Kashmir (POK). But one report of trade between India and Central Asia (1920–21) indicates that the business year 1920–21 was considered the best for India-Central Asia trade. During that period, the total trade stood at Rs. 93 Lakh with exports valued at Rs. 47 Lakh and imports at Rs. 46 Lakh (Bhardwaj, 2017:11). Due to the trade route between India-Central Asia being closed down, after independence business between India and China via the Nathu-La route gained a new dimension because Sikkim was not a formal state of the Indian Union till 1975. The state of Sikkim before 1975 was a protected state of the Indian Union. So at that time, trade and business between India and China via the Nathu-La route was regulated by the ‘India Trade Agent’. At that

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time, petrol oil, diesel oil, various auto parts, sugar made in India, varieties of rice and construction materials were traded by Indian traders through this route. China also exported wool, silk, yak skin and Chinese silver dollars through this route. The route was totally sealed to cross-border traffic after the 1962 IndoChina War. All types of communication between both countries totally closed after the war.

Initiatives for re-opening India-China border trade after 1962 Indo-China border trade was closed immediately after the India-China War in 1962. But both countries had been demanding the re-opening of the border trade route since the late 1970s. Both countries agreed that Nathu-La and other border trade routes had immense potential for bilateral trade between the two nations. The seed for recommencing border trade with China raised hope between the people of the two countries in 1988 after the visit of former Prime Minister Rajiv Gandhi. The main aim of this visit was to normalise the disdain among the two countries by having bilateral engagements in all sectors. In this regard, the two Asian giants set up a Working Group consisting of members from both countries, who were responsible for searching for a bright, modest, reciprocal solution for the boundary issues. An Economic Group consisting of members from both countries was also set up to search for ways to expand bilateral economic cooperation. These two groups recommended putting in place various dependability acts which would help prevent any conf licts between both the countries, thereby ensuring peace and tranquillity. As a result, the movements of goods and people along the border started between India and China. With regard to these initiatives, both the countries signed a Memorandum of Understanding (MoU) on the recommencement of border trade on 13th December 1991. They also signed a protocol on the procedure of entry and exit of border trade between both countries on 1st July 1992. Under the two agreements border trade re-opened from Gunji in Uttarakhand to Tibet through the Lipulekh Pass. This initiative formally re-opened trade between India and China through Lipulekh on 14th July 1992. After successful trade through Lipulekh Pass, China and India agreed to open another trade road through Shipki-La Pass on 7th September 1993. A new trade route opened from Namgaya in India to Juiba in Zada Country through Shipki-La Pass (Vishal and Muthupandian, 2015:33). As a result, movements of people from both sides and goods were allowed through Shipki-La Pass in Himachal Pradesh. After successful bilateral trade between both through these two routes, India revealed its desire for expansion of business via Nathu-La Pass of Sikkim state. But China did not agree to reintroduce trade via of Nathu-La Pass because they proclaimed Sikkim was their territory. Former Prime Minister Atal Bihari Vajpayee took initiative for the re-opening of this trade route. He visited China in 2003 and with the appointment of special political representatives on both sides, an agreed mechanism to explore the problem

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from a political standpoint was put in place and broke the ice on the issue of expanding trade through Nathu-La Pass of Sikkim, and an MoU was signed (Acharya, 2006:4934). After several dialogues between the leaders of both sides, bilateral trade and business between both started via this route only on 6th July 2006. As a result, Nathu-La Pass finally re-opened in 2006 for trade and business between the two emerging nations after 44 years of close-down.

Bilateral trade and business via Nathu-La Pass since 2006 Re-opening of Nathu-La Pass for bilateral trade through the Himalayas is of historic significance; at the same time it is strategically more important for the Indian side and economically beneficial for both countries. Once upon a time this pass was the only link between these two culturally developed countries. The road re-opened after a 44-year gap with the signing of an MoU between the governments of the two countries. The state government of Sikkim had taken major initiatives for this historical agreement. Initially, the official trading list containing 44 items was declared mutually by the governments of both countries for export and import between India and China. Out of total 44 clauses, 29 clauses were selected for exportation and 15 were selected for importation. The list of items selected for export to the Tibet Autonomous Region included agricultural equipment, agricultural products, copper products, clothes, bicycles, vegetable oil, tobacco and tobacco products, various spices, shoes made in India, kerosene oil, stationery and utensils, liquor made in India, milk products, packaged food, herbal items and hardware. India’s list included imported items like animal skin, fur, raw silk, the back part of yak, butter, China clay, seabelyipe, common salt, horses, goats and sheep from China (Hasija, 2012:2). As per the MoU, both India and China unanimously agreed to set up markets at Changgu on the Indian side and Reqinggang on the Tibetan side for making trade and business through the Nathu-La Pass easy. Re-opening of the pass gave momentum to both the countries for increasing border trade. Presently 80% of border trade with China is conducted through Nathu-La Pass. Trade through Nathu-La Pass between India and China is now conducted under a barter system. Under this business system there are no customs duties levied on the selected commodities. As per the trade agreement, traders are allowed to trade up to Rs. 1 Lakh from the year 2007–08 without acquiring the Import Export Code number (IEC). Vehicles entering Sikkim from China are levied Rs. 50 as an entry permit fee and 5 yuan; a fee of Rs. 25 is levied on Indian vehicles entering the Chinese side. This trading route is situated over 14,000 to 17,000-foot high terrain in the Himalayas. So trading on this route through Nathu-La Pass is totally closed in winter because of heavy snowfall. This route is open only in summer for trading. Trading is only open four days a week through this route from May to November. Trade markets on both sides are opened for eight hours from 7:30 AM–3:30 PM from Monday to Thursday. We have already completed fourteen years of the trade route being

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open. The aspirations of people from both sides are rising tremendously. Traders from both sides demand more and more trade through this pass and they want appropriate facilities in the international trading zones. The state government of Sikkim constituted a Study Group on trade through Nathu-La in 2003 headed by Mahendra P. Lama to study business prospects through the pass between India and China (Hasija, 2012:3). This study committee submitted the report in 2005 with a lot of trade aspirations. The report of the Mahendra P. Lama committee estimated that Rs. 2,266 crore of business would be conducted via this route by the end of 2010 and he predicted that it would reach Rs. 12,203 crore by the end of the year 2015. But the trade report of 2013 showed obscure promises and prospects due to various infrastructural challenges and overall relationships between the countries. The report showed that the trade f low only reached Rs. 8.92 crore instead of its projected promise, a huge gap between the projection and real trade value. Another report showed that Indo-China trade growing by more than 40% every year and the two-way trade stood at Rs. 79 crore in 2005–06. The Asian Development Bank-sponsored study in 2006 concluded that after the re-opening of the trade route through Nathu-La, trade with countries of South and South East Asia was expected to improve the economy of the entire territory with the trade turn over increasing at least five fold. After the re-opening of Nathu-La Pass, people of both sides demanded inclusion of more and more items on the import and export lists. Honouring people’s demands, both governments agreed to the inclusion of five more items for import and seven items for export to China in May 2012. After 2012, traders from Sikkim received permission to import these additional items and also to export additional items. As a result, trade and business between both countries increased. Cooperation between the two sides also increased much more than before. Namrata Hasija noted that India-China bilateral trade through Nathu-La for 2012 ended the year on a high note with merchants from Sikkim importing items worth more than Rs. 1 crore after two consecutive years of zero purchase by the Indian traders. The Sikkimese traders exported items worth nearly Rs. 6 crore (the exact amount is Rs. 59,881,780) compared to the previous year’s figures of Rs. 334.4 Lakh. At the same time Sikkimese traders had purchased items worth Rs. 10,146,622 in the same year (Hasija, 2013:3). In 2016, India exported goods worth Rs. 63.38 crore and imported goods valued at Rs. 19.30 crore through the Nathu-La route. According to the agreement, India imported 20 items such as herbal medicine, garments, shoes, quilts, blankets, carpets, goat and sheep skins, yak tails and yak hair and exported 36 items such as spices, tea, coffee, cycles, rice, f lour, handicrafts and agricultural implements in 2016. In 2017, due to the Doklam stand-off, trade between India and China through Nathu-La was only possible for two weeks. So that year only goods worth Rs. 3.54 crore were traded via this route. Trade between India and China through NathuLa Pass resumed on 1st May 2018, as declared by S. K. Pradhan, Secretary of Commerce and Industries, government of Sikkim in the presence of Joint Secretary Shri N. Jaswant and officials and traders from both sides after the Doklam

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tragedy. The Information and Public Relation Department of the Sikkim government announced that the Indian traders exported goods worth Rs. 3.75 crore and imported goods worth Rs. 27.69 crore through the route in the business year 2018. Nathu-La Pass started playing another important role from 2016, when arrangements for the travelling of pilgrims through this route from India to Kailas Manas Sarovar, the holy place of the Hindus situated in Tibet, was signed. Previously pilgrims from India visited this holy site through Lipulech Pass of Uttarakhand. The road is more risky for pilgrims to Kailas Manas Sarovar Yatra than Nathu-La. Pilgrimage to Kailas Manas Sarovar through Nathu-La is more comfortable because this route is motorable on both sides. In the year 2017, the government of India also announced a trip to this holy place situated in Tibet through Nathu-La. But due to the stand-off at Doklam, China did not allow Indian pilgrims to Manas Sarovar through this route, and trade between both countries was also hampered due to this reason. But leaders from both sides took actions towards ending the Doklam stand-off. The standoff resolved after mutual withdrawal of the troops after diplomatic initiatives taken by the leaders of both sides. After Doklam, trade and business via NathuLa restarted. The bilateral trade for the year 2018 between India and China started on 1 May 2018 through this route after the Doklam Crisis subsided. A most significant aspect of the business agreement through this route is that China acceded that Sikkim is an inseparable part of India. The re-opening of this route has decreased illegal trade between the people living along the border. Trade between India and China through this route also established human relationships between the people of both sides. Trade and business always have a social responsibility; under such responsibility peace and tranquillity build in the region for the wellbeing of the people of both sides. So the re-opening of Nathu-La Pass added another golden feather to the cap of the Indian nation. Yet, there are some challenges in border trade through Nathu-La Pass that have created many obstacles for expanding trade and business between the two countries.

Challenges of bilateral trade through Nathu-La Pass Nathu-La Pass has been playing an important role for bilateral trade and business and strategic relations between two Himalayan civilisations since ancient times. After the re-opening of Nathu-La Pass in 2006 after a long gap of 44 years, it now plays a very crucial role in bilateral trade and strategic relations between India and China. But, trade through this route still faces some challenges which are creating obstacles to the overall trade relationship between the two countries. Following are the challenges faced by the two countries: 1 Geographically, Nathu-La is situated between 14,000-foot to 17,000-foot terrain in the Himalayas. Due to the high altitude, Nathu-La receives heavy snowfall in winters. So Nathu-La Pass is totally closed in winter due to heavy snowfall. As a result business on this route is carried out only in

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3

4 5 6

7

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summer from 7:30 in the morning to 3:30 in the afternoon IST. So the trading period is not open for the whole year. Nathu-La is connected to the mainland by NH10. But past Gangtok, the capital city of Sikkim, the road to Nathu-La is too narrow. The NathuLa route has several sinking zones and most parts of the road are prone to landslides. Due to natural constraints, expansion and smooth functioning of trade on this route is very difficult. Due to such connectivity issues, movement of vehicles is too costly and time consuming. Physical infrastructure of trading marts at Changgu on the Indian side is not well established. Trading marts are not modernised with all modern facilities for traders on the Indian side. Warehouses in trading marts do not have sufficient capacity to accommodate trading items safely. Hotels/rest houses for traders, drivers and helpers and other workers related to business are not available there. Due to these various reasons, traders and drivers and helpers and other workers face serious problems. The same types of constraints are faced by Indian traders, drivers and helpers at the Reqinggang trading marts on the Tibetan side. Proper medical facilities are not available at trading places due to the high terrain, which is one of the serious challenges to the traders, drivers and helpers. Trading activities are limited only to the permanent residents of Sikkim, meaning those who were residing in Sikkim before 1975. Due to this reason Nathu-La lost its importance as an all-India trade route to China. Sikkim is landlocked by West Bengal, and Siliguri of West Bengal is the only gateway that connects Sikkim with mainland India. But traders from West Bengal and other parts of the country are not allowed to be involved in the NathuLa trade. Due to this reason, trade and business between India and China through Nathu-La has been tagged as regional rather than national. Due to not including traders from other parts of the country, illegal trading activities occur. Traders outside the state of Sikkim try to involve themselves in business illegally. The number of traders allowed to enter the Tibetan Autonomous Region (TAR) in China on each trading day is very limited; only 40 traders are allowed to enter TAR in China on a daily basis. The number of vehicles from the India side going into TAR in China every trading day is also very limited; only 60 vehicles are allowed to enter TAR in China on a daily basis as per original protocol. The import and export items list is backdated in nature and also very limited. There are so many items in the import-export list that are less important to the people of both sides and the numbers of items are also very restricted. Due to these constraints bilateral trade via this route is not viable in the true sense.

Future prospects of bilateral trade through Nathu-La Pass After the India-China War of 1962, Nathu-La re-opened in 2006 after a gap of 44 years. Now it has opened for trade and the movement of people from both

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sides. The overall business between both the countries via Nathu-La was Rs. 0.20 crore in 2006 which reached Rs. 8.92 crore in 2013 and Rs. 31.44 crore in 2018. Business through Nathu-La expanded manyfold during 2006 to 2018. Trading of India with China through this route has increased 15,720% during this period. So it is right to say that the prospects of this route are very hopeful although there are so many challenges of bilateral trade between India and China through Nathu-La Pass. But various trade reports show that business is increasing through this route since its re-opening. India and China are two fast growing economies in Asia. In India-China relations, China’s policies towards India have always been guided by various objectives. In fact, China never likes a strong competitor such as India in its world affairs. Strategically China would never like a rival power in Asia. So, China always likes to see a soft regime in India; which is one of her long-term policies. Recently, India-China relations are facing a huge crisis due to several misunderstandings between them on certain issues. India’s application for entering into the Nuclear Suppliers’ Group (NSG) was declined by China because China does not want rival power in world politics, which became the most important cause of misunderstanding between them. The initiation of the China-Pakistan Economic Corridor (CPEC) via Pakistan Occupied Kashmir that violates Indian sovereignty is a major cause for crisis in the relationship between the two countries. A recent initiative by the Chinese army to build a road in the Doklam sector, which is a tri-junction between India, Bhutan and China, culminated into the Doklam stand-off. But there are still prospects to enhance strategic communication between both countries and reduce misunderstanding and help both nations play a decision-making role in Asia and also on the global platform. Cooperation and unity between the two countries will help the region to gain a leading position in world. Grounding this situation in mind, re-opening more border trade has helped to revive trust between the people of both countries, which will help in discarding all types of misunderstanding. After re-establishing business via Nathu-La, economic cooperation has increased, and at the same time people-to-people relation between the two countries has also grown. This road is now also allowed for pilgrims from India to Tibet. So the future of this route is very promising. Hopefully discarding all types of constraints, this route through Nathu-La will be able to promote more trade between the traders, and to increase the movement of people, which will help to build trust among the people from both sides. This oldest border pass will be able to make business easy between China and the eastern and northeastern part of India. Hopefully, it also will be able to boost up the policy of ‘Look East’. So, NathuLa Pass promises a good future.

Concluding recommendations Nathu-La is the oldest pass in the world connecting India and China. It was also a part of the ancient silk route. Since ancient times, trade, culture, faith,

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beliefs and human resources have been exchanged through this route. History says that this pass was closed only for the period of 1962–2006 for the people of both sides after the 1962 Indo-China War. This route re-opened in 2006 after a long gap of 44 years to honour the demands of the people of both sides. After the re-opening of this route, the people of both sides got ample scope not only for trade, but also for sharing their faith, beliefs and knowledge for human unity as well as for discarding all misunderstanding. There is a huge scope for cooperating with trust, which will help in bringing peace and tranquillity to this region by discarding all types of existing misunderstanding between both the countries. Trade and business has not only given shape to economic values, it has also created human values. It creates a human chain through human relations building, which strengthens unity among people and helps maintain peace and tranquillity. This humanity side of business is more valuable than its monetary value. So trade and business are not only generating money, but also building trust among various stakeholders. From this view point, Nathu-La as a pillar of business between India and China plays a very crucial role in creating peace and tranquillity between the two countries. In the sense of monetary value of business, both sides of border are making positive profits, which boost up their socio-economic condition and geographical infrastructure. The state of Sikkim from the Indian side has especially taken ample benefit from the re-opening of the Nathu-La route for bilateral trade and business between India and China. As per the trade agreement between both sides, only traders from Sikkim are allowed to trade with China via the Nathu-La Pass. As a result, the socio-economic status of the people of Sikkim should be promoted by the impact of the bilateral international trade through this route. So it is right to say that there are so many prospects of the Nathu-La Pass for the people of both sides although present bilateral business between both the countries via this pass faces some serious challenges which need to be tackled immediately. Researchers view that such initiatives need to be taken urgently for making Nathu-La trade challenge free. Nathu-La is situated in high terrain in the Himalayas. So, heavy snowfall in winter and landslides in the rainy session hinder the trade through this pass. Narrow road connectivity from Gangtok to Nathu-La also is a serious challenge to the trade through this pass. It is not only the narrowness of the connectivity that is a hindrance, the road condition is also another threat to the smooth movement of vehicles on this route engaged in bilateral trade. Application of modern technology for building roads in high Himalayan terrain will help minimise landslide and other risks, and also widening the roads will make trade easier and cheaper. Use of modern technology to build motorable roads during winters by removing snow from the roads will also assist in increasing the overall business period through Nathu-La Pass. New widened roads from Gangtok to Nathu-La need to be completed fast. The ongoing road work after completion will make business easy and cheap. There is also a need to reduce traffic congestion for the smooth running of trade vehicles on this road. In the tourist season, roads get jammed due to large numbers of

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tourist taxis on this route. Maintenance of the road to Nathu-La on the India side is entrusted to Border Roads Organization (BRO), a wing of the Indian Army. The present government also emphasises progress and development with the use of technology and emphasises more the improvement of relations with all neighbouring countries by improving connectivity through land, water and air. It is very important to build up one alternative road connecting Nathu-La and Siliguri in West Bengal for trade and strategic reasons. Expansion of railway connectivity and building up of air connectivity into Sikkim is necessary for its strategic importance. In 2018 one airport in Sikkim started to operationalise by connecting mainland India through air connectivity. Sikkim is now connected to the rest of world by air connectivity; hopefully this initiative will boost up the bilateral trade through Nathu-La. An initiative for rail connectivity towards Sikkim is also another positive step for the promotion of bilateral trade through this route. There is a need to develop infrastructure of the trading marts on the Indian side for smooth functioning of bilateral trade between the two countries and build up more warehouses with enough storage capacity so as to make business hassle-free. It is essential to increase business quantity assigned to each trader and also revise the list of items for boosting trade between the two countries. Building up of sufficient numbers of hotels/rest houses for traders, drivers and helpers and other workers related to trade in this area will also boost up the bilateral trade between both countries. There is an urgency of setting up necessary health facilities near the trade marts for the benefit of traders, drivers, helpers and other involved personnel. Time to time revision of the charges collected by the government from each vehicle and parity between the amounts collected by the governments of both countries will make business hassle-free. Expansion of business hours and allowed more vehicles from both sides in every business day is necessary for strengthen the bilateral business knot between both the countries. Presently only 40 traders from the India side are allowed to enter the China side per business day; but traders demand it increase to 60 per business day. It is very necessary to allow traders from all over India who are interested in trading take part in the business. Presently it is only limited to the residents of Sikkim. There is strong logic for the inclusion of traders from West Bengal, particularly from North Bengal to trade through Nathu-La Pass; Siliguri in West Bengal is the only gateway to Nathu-La and the business infrastructure of Siliguri is developed and connected with all parts of the country by road, rail and air. There is strong demand from the people of West Bengal for the re-opening of the Kalimpong-Lhasa route via Jelep-La. This route had importance to the people of both sides from the time of British rule till the Indo-China War in 1962. Before 1962, Kalimpong formed the centre of India-Tibet trade. Thus, should the Jelep-La Pass re-open, southwest China will have access to Kolkata’s port facilities and it would also minimise cost of transportation from Beijing to Tibet through the Bay of Bengal. The re-opening of this route along with Nathu-La Pass will be beneficial for business of northeast India and also for making business networks within this region. Strategically, the old silk route

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is also very important to both countries. This route is also very important for the reestablishment of the connectivity within South and South East Asia. For this reason there is a need to give more thrust by both the governments to this endeavour. The Indian side needs to have dialogue with the Chinese side from time to time. The route has potential for socio-economic development and cultural unity in the region by connecting South and South East Asia. Hopefully the previously stated policy suggestions will make Nathu-La a well-established international trade centre in the region. Promotion of international business on this route will help the development of the region. A good business relationship along with friendly people-to-people contact will minimise existing misunderstanding between India and China and help maintain peace and tranquillity in the border region and also will be able to maintain peace and tranquillity within the vast region.

References Acharya, Alka. 2006. ‘A Partnership of “Global Significance”’, Economic and Political Weekly, December 2: 4934–4936. Bhardwaj, Atul. 2017. ‘India’s Opposition to China-Pakistan Economic Corridor is Flawed’, Economic and Political Weekly, LII(4): 10–12. Hasija, Narmata. 2012. ‘Nathu-La & the Sino-Indian Trade: Why the Lull?’, IPCS, Institute of Peace and Conf lict Studies, No. 183, March, 1–4, www.ipcs.org. Hasija, Namrata. 2013. ‘India, China and the Nathu La Yesterday, Today & Tomorrow’, IPCS, Institute of Peace and Conf lict Studies, No. 203, January, 1–4, www.ipcs.org. Vishal, Ravi Shekhar and Muthupandian, B. 2015. ‘India’s Border Trade with China: Current Status and Potential of Trade Route through Nathu La’, SMS, XI(2).

9 INDO-SINO TRADE IN THE POST-GLOBALISATION ERA Sundeep Kumar S

Introduction China and India began economic liberalisation much later than some of the other East Asian and South-East Asian countries such as Japan, Singapore, South Korea and Taiwan. 1978 and 1991 are landmark years when the People’s Republic of China (PRC) and India began opening up their respective markets to the outside world (Zhong, 2014). This 13-year gap between the two means a significant difference in their overall growth in terms of GDP. Both countries adopted different growth models and also faced unique sets of challenges domestically and externally. Yet, the bilateral trade between the two countries has grown significantly with China currently being the largest goods trade partner of India with a total value of over US$70 billion (Department of Commerce Government of India, 2017). From a negligible bilateral trade of US$265 million in 1991, China has gone on to be the largest trading partner of India with a staggering total value of over US$70 billion as of 2015–16 (Kalha, 2016). Going by this trend in the last 25 years, this figure can be expected to grow further in the future. Despite the increasing trade figures with China, India has been the lesser beneficiary with a trade deficit of US$56 billion (Kalha, 2016). This is largely due to the trade basket of India. India’s demand for imports from China is greater than China’s demand for Indian imports. India imports manufactured capital goods which include high-tech, high-value telecom and electronics from China. India’s exports, on the other hand, comprise of raw materials such as iron ore, minerals, cotton, etc. (PTI, 2016a). This has caused a comparative cost disadvantage for India. This is the biggest challenge that India and China’s bilateral trade relations are facing. There remains a vast ground to cover for India to develop its secondary sector in order to compete or rather complement its Chinese counterpart.

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Prior to the 2008 financial crisis, globalisation was mainly driven by demand from the Western market. This model has become unsustainable for emerging markets such as India and China as the demand from the West has steadily fallen since the recession. This led policymakers to rethink economic design for their respective countries. Post-2008, trade between India and China, two of the largest Asian markets, struggles to adapt to the fragile global market factors. This is primarily due to the fall in demand and shift in nature of such demand from the West for goods produced in the East. The trade deficit figure may encourage protectionist measures by India given that the global environment leans towards protectionist trade policies such as imposing tariffs on imports from China (Morici, 2017). This poses challenges to international trade which has benefitted India and China’s employment and economic indicators over the last three decades. Such protectionism could be countered through promotion of regional free trade agreements (FTAs) such as the RCEP. RCEP is a regional free trade agreement between ten member states and six trade partners of the Association of Southeast Asian Nations (ASEAN) states, including three of Asia’s largest economies – China, Japan and India (Hans India, 2016). RCEP has the potential to serve India’s economic objectives by providing a platform to reduce its unsustainable trade deficit with China. This is possible by gaining market access for some of its industries such as pharmaceuticals, IT and services and food in China, details of which will be discussed later in this chapter. The other important phenomenon is China’s Belt and Road Initiative (BRI). Though at present, India has chosen not to be part of the transcontinental multi-billion-dollar development initiative, the BRI will impact China’s trade relations with India in years to come. The reason being, a project of such magnitude is bound to have a regional and global impact on trade; and China has repeatedly projected its interest to engage India in BRI (Zhaohui, 2019). The challenges faced by bilateral trade between India and China in the postglobalisation era are categorised into three factors: 1 2 3

Trade basket. Changing growth trajectories. Global environment for trade.

While these aspects continue to shape the trade ties between India and China, the BRI cannot be ignored as it presents itself as the single most significant feature that can define its future course.

Trade basket One of the most important factors that inf luence the high trade deficit numbers for India with China is the composition of the trade basket that the two countries possess. India’s major exports to China are cotton, iron ore, aluminium, steel and

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copper which are all primary goods. These raw materials contribute to over 50% of India’s total export to China. Primary goods do not have the value addition to exports that manufactured or secondary goods provide as they lack application of technology and other manufacturing techniques which enhance the utility of products. The major imports from China to India are mechanical, electrical machinery and components, and organic chemicals. All these capital goods provide the value addition to Chinese exports (Singh, 2015). The constituents of bilateral trade between India and China need to be analysed by identifying the impact Indian imports has on domestic production. China’s exports of value-added capital goods to India have affected Indian manufacturing in terms of competitiveness. This competitive edge of Chinese products in the merchandise goods sector has enabled it to achieve a large trade surplus against Indian exports. Small-scale manufacturers in India have taken to trading due to the import of cheap alternative Chinese products. The Indian market has shown a preference for these alternatives, disrupting domestic manufacturing. In recent years, due to the rapid expansion of China’s small and medium-scale industries, exports from this sector have significantly increased as its trade basket has widened. The product categories in China’s small and medium-scale sector include gift sets, glasses, bathroom fittings, builder hardware, furniture and ceramics (Khan, 2014). A similar situation has developed in the machinery, electronics and components sectors. Products such as textile machinery, diesel engine pumps, ceramic tiles, LED displays, bicycles, sports goods, fitness and gym equipment, and electronics and components are available at a cheaper price in China compared to domestic costs involved in their production within India (Khan, 2014). Anti-dumping duties can be levied against import on such products. However, such measures require a system which can gather sufficient evidence to build a case against unfair trade practices by China affecting domestic industries in the importing country. Though Micro, Small and Medium Enterprises (MSME) has a separate ministry within the Government of India, it simply does not have a unified body that could collect such data and lobby to represent their cause. The MSMEs in India are extremely unorganised, hence losing opportunities for collective negotiations or bargaining (Khan, 2014). This is, however, not the case in heavy industries sectors such as steel and aluminium. China produced around 800 million tonnes of steel in 2016 which is almost 50% of the total steel produced globally. When compared, India produced about 95 million tonnes in 2016 (Association, 2017). The excess capacity that China produces has resulted in the fall in global steel prices. China has been accused by many countries of dumping steel at very low prices, which in turn has thrown the domestic steel industry into crisis. As a response to dumping of cheap steel, the US imposed a 266% duty on some of China’s steel imports (Miller and Mauldin, 2016). India also imposed anti-dumping duties on some of the Chinese steel products in 2016. This, however, was not a percentage value, but a difference between the landing value and the Minimum

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Import Price (MIP) that was determined to keep the domestic market competitive (PTI, 2016b). The predatory trade strategy of China is also ref lected in the non-tariff barriers that are in place in China for some of the Indian exports. Devaluation of the Chinese currency is one such barrier. When China devalued its currency in 2015, it affected the export competitiveness of some of the Asian economies. India experienced a 10% loss in equities which was directly related to the devaluation (Kundu, 2016). China’s foreign exchange reserve is above US$3 trillion (Wei, 2017). With deep pockets, China has been investing heavily outside its borders to gain better returns on its huge stockpiled capital. These investments are made in commercial and economic projects, but there is a notion that these investments have a strategic motive. An example is China’s investment in Pakistan – India’s political and military rival. China has proposed to invest US$46 billion in Pakistan as part of the China-Pakistan Economic Corridor (CPEC) (Staff, 2016). China’s ties with Pakistan could possibly be a factor that inf luences its import policy for India. For instance, China is the world’s top importer and consumer of non-basmati rice, a product Pakistan has been exporting to China for many years. China had placed non-tariff trade barriers on imports from India for several years. One such case is the barrier for import of Indian non-basmati rice, citing sanitary issues. Given the all-weather friendship that Pakistan enjoys with China, it is not outside the limits of logical thinking to perceive that such a stance had been taken by China to prevent Indian rice exporters from competing against their Pakistani counterparts. This, however, has gradually begun to change with China providing clearances to 14 Indian rice exporters after inspecting their rice mills ( Pattanayak, 2016). Driven by increasing demand for non-basmati rice, such policy shifts by China will further encourage bilateral trade between the two countries. India’s food, pharmaceutical and service industries also face market access problems due to the non-tariff barriers that China has in place. These are some of the Indian industries that are better placed globally and have the potential to narrow the balance of trade issue with China. China continues to have a slow regulatory process for import of such high-value industries (Sahdev and Nataraj, 2014). Market access issues for Indian manufacturers in China is also due to the non-existence of fair and substantial FTAs between the two countries (Mewati, 2015). Persisting with such non-tariff barriers ref lects the protectionist mindset of the state. India also expressed some protectionist sentiments in bilateral trade with China. For instance, there were calls within India for banning Chinese firecrackers (Rajitha, 2016). Such calls were made as China was viewed as a state that supports Pakistan and practices mercantilist trade policies thereby harming India’s domestic industries (Singh and Sharma, 2016). Apart from these issues, India is faced with poor infrastructure and logistics to facilitate a competitive environment for bilateral trade. Indian manufacturers

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often fall short due to the poor quality of electricity or in many instances the non-availability of electricity. It has a huge power shortage, which is not conducive to growth in the manufacturing sector. Transport and related infrastructure are not sufficient enough to accommodate a manufacturing supply chain that can be globally competitive (PTI, 2016c). Adding to these issues are some of the policies relating to the three factors of production – land, labour and capital. Certain laws for these three factors are archaic and do not encourage investments and businesses to maximise production. India also has in place regulatory regimes which impose duties on imports of some raw materials and components. This is coupled with tax regimes that are not favourable for trade and investments. These laws also ref lect the protectionist attitude of the state (Singh and Sharma, 2016).

Changing growth models China adopted a globally unique growth model since Deng Xiaoping’s reforms in 1978 which is famously known as ‘socialist market economy’ (社会主义市场 经济, Shehuizhuyi shichang jingji). This economic policy is state-controlled capitalism where the market is open to foreign investments, but the public sector plays a predominant role (Fabbri, 2006). Since then, China went on to lift more than 700 million people out of poverty (Schmitz, 2017). China also became the fastest growing developing country with GDP growth rates reaching the magical double-digit at its peak (McGregor, 2008). Industrial corridors or special economic zones were created to drive investments (Ross, 2013). This made the Chinese economy investment driven and export-oriented (Schmitz, 2017). This conducive environment for manufacturing made China the factory of the world. China became the last stop of a global supply chain where components made in other countries were imported and assembled to make a complete product with a ‘Made in China’ tag (Economist, 2015). This aided China to build up its foreign exchange reserves due to huge trade surpluses it enjoyed with its trading partners (Yueh, 2013). Things have, however, begun to change since the 2008 financial crisis. China’s export growth has been on the decline due to the fall in demand in the consumer-driven Western industrialised countries (Zhang, 2016). This has forced China to rebalance its economy from being an investment-driven and export-oriented one to a consumption-based economy (Research, 2017). The rebalance is having an impact felt on Chinese trade as markets evolve due to demand and supply factors (Coppola, 2017). China has also been making efforts to increase its service sector’s contribution to its GDP. Since the 2008 crisis, the secondary sector’s contribution to China’s GDP has been declining when compared to its tertiary sector which has been on the rise (Blackrock and Ishares, 2016). The rebalance strategy has had an impact on the trade composition of China too. As the contribution of the secondary sector to growth is reducing, China has

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begun to move towards production of high-technology, knowledge-intensive and complex goods (Thirwell, 2016). The changing trade basket has enabled China’s exports to move up in the global value chain. This has increased labour cost, making labour-intensive manufacturing more difficult as there is more emphasis laid on high-tech manufacturing such as robotics and artificial intelligence (Thirwell, 2016). Another reason the rebalance has impacted trade is the fact that the domestic consumption is less dependent on imports than on domestic production ( Thirwell, 2016). Before the rebalancing process began, China’s domestic consumption was met through imports. With most countries having China as their leading trade partner, such a change is bound to have a spillover effect in other countries. This is because countries that trade with China too have to adjust their trade composition to ensure overall market stability (Thirwell, 2016). The Indian economy, on the other hand, has been driven by internal consumption and the tertiary sector. India focused on developing the tertiary sector since it liberalised its economy in 1991. Reforms that were needed for strengthening its manufacturing sector were not undertaken. The service sector in India is primarily driven by IT services ( Badhuri, 2012). A knowledge-intensive service sector meant that the India failed to capitalise its demographic advantage as it lacked digitisation. The labour-intensive manufacturing sector remained neglected for many years. This has resulted in more than 90% of India’s working population being either self-employed or part of the unorganised sector (Virmani, 2015). India failed to exploit the economic opportunities that a strong manufacturing sector can offer (Chakravarty, 2016). As a result, Indian exports were not part of the global value chain. Many East and South-East Asian countries such as the Philippines, Vietnam and South Korea became part of a global supply chain where they began manufacturing components that were exported to China. India missed the manufacturing-led growth bus by not being part of this global supply chain (Kalha, 2016). This was largely due to the poor infrastructure, tax regimes that were not investment friendly and regulatory land and labour laws (PTI, 2016b). Since the 2008 crisis and the slowing down of China’s GDP growth rate, India has taken the lead as the fastest growing economy with a growth rate of 7.1% for the 2016–17 financial year (TNN, 2017). This has been the growth story of India thus far. The impact of India’s growth model on its trade is apparent. India enjoys a surplus in its services trade but its merchandise trade suffers from a huge trade deficit (Chakraborty, 2016). India aims to reduce this deficit by creating a friendly environment for investments and manufacturing, with its prime minister launching the ‘Make in India’ campaign in 2014. The campaign envisions a boost in India’s manufacturing sector, thereby increasing its share in global merchandise trade (Kala, 2015). Tax reforms such as removal of retrospective taxation, the introduction of a unified tax regime – GST, allocation of land for

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industrial corridors, development of infrastructure and the easing of regulatory and bureaucratic bottlenecks that hamper manufacturing are some of the wider objectives of this campaign (CSIS, 2017). It is an initiative with an ambitious goal of making the ‘Made in India’ tag a global brand. India and China’s growth trajectory looks identical. This may not necessarily be in terms of trade composition but rather in terms of statistical indicators. India’s growth indicators in 2014 look similar to the China’s in 2001. This ref lects the 13-year divide the two countries have in commencing reforms (Zhong, 2014). With the Chinese rebalance and India’s drive to increase production of merchandise goods, the trade compositions of the two countries will also change or evolve. Hence, there is a possibility of India becoming the factory of the world going by the growth patterns. The changing growth models also present an opportunity for India to narrow its trade deficit with China by means of bringing in Chinese investment. China’s total investment in India during the period 2000–16 was a negligible amount of US$1.35 billion (Sunkara, 2016). This has begun to change as the total investment has risen to a sum of US$2.3 billion within a span of one year (Sunkara, 2016). This was following the Chinese president’s visit to India in 2014 when he pledged to increase investments to a total of US$20 billion (Chaudhury, 2017). The growth models have proven to inf luence bilateral trade between India and China and it will continue to do so.

Global environment for trade The 2008 financial crisis and the sluggish performances of the developed economies since then have completely altered the world trade outlook (Wladawsky, 2016). Some of the European countries and the US attribute such outcomes to the multilateral trade system or globalisation that f lourished before the 2008 crisis. A sentiment of protectionism has emerged in the West as a result. This is also ref lected by the strict immigration policies adopted by some of the Western countries (Brown, 2016). With Donald Trump’s ascendency to the White House in the US, the preference for protectionism has become more pronounced. The US president has been very vocal about his non-preference for FTAs. The Trans-Pacific Partnership (TPP), an initiative of the Obama administration, was an FTA between 12 countries across the eastern and western Pacific shores. One of Trump’s main policy proposals during his presidential campaign was to stop the TPP from becoming a reality. Since his swearing in, the US has withdrawn itself from TPP, ending any possibility of continued Western-led multilateralism similar to the pre-2008 era (Aleem, 2017). China had initiated its own regional trade agreement – RCEP. With China, Japan and India being part of RCEP, it has become a very important regional trade agreement for continued multilateralism (Morici, 2017). With the Western protectionism making international trade tougher, agreements like RCEP should aim

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at providing alternate markets for global exports for developing countries. With India not having an effective trade agreement with China, RCEP could provide a mechanism for India to gain market access in China for some of its competitive industries. India should, therefore, exercise a greater role and responsibility in the negotiating process of RCEP as the stakes are very high. RCEP is also important for India’s trade relations with ASEAN nations and its ‘Act East’ Policy (Chatterjee and Singh, 2015). The agreement could diversify India’s export profile and help narrow down its trade deficit with China and other countries in the region. Another aspect of US protectionism is Trump’s accusations against China of stealing American jobs. American investments in China and the US-China trade relations are figures often cited by Trump to justify the protectionist attitude ( Economist, 2017). The US has a huge trade deficit with China and there have been several occasions when American industries have accused China of dumping (Listerud, 2017). The falling demands from the West and the unreliability of future trade are some of the external factors driving China’s rebalancing. The decreasing demands from the developed economies have also made global exports more dependent on the middle-income economies for market access which themselves are relying on exports to sustain growth (Zhong, 2014). Though developing countries such as India have a good consumer market, multilateralism is critical for the overall growth of industries. It is also necessary to address the problem of trade balance. The prevailing global trade environment has had its impact on production lines in China and in India. With both countries having to diversify their markets, their trade baskets have to adapt to the global realities. This is because of the changing demands of developed and developing societies. Manufacturing and exports have to cater to global demands, not the other way around. This basic principle is essential to remain competitive in the global market. It also further enhances the need for developing countries to improve their consumer markets in order to accommodate imports. It is a highly challenging prospect for developing nations like India.

The BRI factor BRI is about Chinese investments in various infrastructure development projects in many countries across continents. It has two wings – the land-based Silk Road Economic Belt (SREB) and the Maritime Silk Route (MSR). This entails project execution at the ground level in these countries in telecom, ports, airports, railways, roads, etc. The resources employed are capital, capital equipment from China, and Chinese labour and management (Wildau and Ma, 2017). Some of the local labour in the recipient country is also trained and employed. Like any project anywhere, the capital investments consist of debt and some grants as a softener. The debt is structured as long-term loans running into several years with interest payments during the outstanding period of the debt (DevonshireEllis, 2019).

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China has invested around US$200 billion across Africa in the last 15 years. These investments started much before BRI was formally announced as China’s global plan ( Jayaram et al., 2017). China has also heavily invested in the Central Asian Republics (CARs) and in several South Asian countries which include Pakistan and Sri Lanka with very independent economic models (Chatzky et al., 2019). The Chinese have been investing in the EU for some years now with a financial and economic model unique to China-EU cooperation. The big infrastructure projects are executed in collaboration with domestic corporations within the EU countries. So that is the model specific to the EU (Stanzel, 2019). As discussed earlier, domestic infrastructure remains a major roadblock for the growth of India’s manufacturing sector. This has proven to be one of the biggest factors for India’s negative trade balance with China and many other countries. The lack of quality infrastructure to accommodate a robust manufacturing sector has resulted in a poor show of India’s trade basket, hence losing export competitiveness. India’s Niti Aayog chairman had stated that India would need US$4.5 trillion of investments in infrastructure by the year 2040 to support the economic needs of the people (Online, FE, 2018). Despite the acute shortage of capital to meet this demand over the next two decades, India has, until now, chosen not to join China’s BRI bandwagon, citing conf lict over core national security interests and differences over the nature of BRI. The main irritant for India not joining the BRI is the China-Pakistan Economic Corridor (CPEC) – a major land component of the BRI, which runs across Pakistan Occupied Kashmir (POK). India’s official position has been not to be a party in any international projects that undermine its sovereignty (MEA, 2017). The nature of Chinese investments under the banner of BRI has also been viewed as strategic and against India’s security interests. Apart from this, there have been several voices across India which have questioned the financial terms of Chinese investments in other countries such as Sri Lanka where the investments have proven to be a debt trap for the recipient nation (Pant, 2019). Should these concerns be negotiated, and India welcomes BRI in the future, Chinese investments in India have the potential to complement infrastructure development needed for the growth of the manufacturing sector. This, in turn, will help India to diversify its trade basket and improve its exports to China and other countries, narrowing its trade deficit. This, coupled with China’s own economic rebalance which will cause an increase in its imports, will directly impact the trade between India and China.

Conclusion India needs to diversify its trade basket. The world’s fastest-growing economy cannot afford to take a backseat in the global supply chain of merchandise goods trade. The 13-year difference in commencing reforms must be harnessed with

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right observations derived from the Chinese growth story. While China developed rapidly with its export-oriented and investment-driven model, it failed to address certain critical social and environmental issues. Today China is faced with a huge environmental and pollution problem. This has caused a severe health hazard among the Chinese citizenry for which there will be a sizeable social cost paid by the state (Albert and Xu, 2016). Another major issue that China has to face in the near future is its growing debt-to-GDP ratio. Post-2008, China began to drive growth through lending and construction. This raised its debt-to-GDP ratio to a staggering 250% (France, 2016). China is currently in a debt bubble which could burst anytime, creating a global ripple effect. China has left behind enough indications to caution India. The delay in undertaking reforms has presented an opportunity for India to follow a growth model that could avoid the social and environmental costs paid by China. A well-planned growth model will provide long-term prosperity. Climate change has become the most challenging issue that humans are facing in the Anthropocene. India has to take the lead from this by developing a manufacturing sector that produces competitive goods for sustainable development. It is also an opportunity for innovating new technologies to achieve more environment-friendly growth. Such innovations of high-tech solutions can lead to exports that would enable India’s trade basket to move up in the global value chain. Observing China’s alarming debt levels, India must be cautious in its lending. Growth cannot be sustained by such a lending spree as has occurred in China. With more focus being given to manufacturing, India must not let its global position it enjoys in its service sector slip. It must continue to sustain the strong service sector and adopt policies to accelerate growth. India and China must possess diverse trade baskets that do not compete for market access in other countries. As leading economies of the developing world, both countries must accommodate each other in international trade. The most important factor for India to propel its manufacturing sector is to develop its trade infrastructure and logistics. Abolishing regulatory process in investment will encourage industries to maximise production. The GST, removal of retrospective taxation, creating industrial corridors and special economic zones will aid the ‘Make in India’ campaign ahead. But the focus needs to be on resource allocation, management and implementation. With the demand for capital for infrastructure development and China’s rebalance, there exists a realistic possibility of India joining BRI in the long term, contingent on its core interests being protected. A mutually agreeable arrangement on outstanding concerns over CPEC and an investment model specific and unique to India could open the doors for China’s BRI in India, boosting its exports to China. China must also remove the regulatory process for India’s food, pharmaceutical and services industries. Providing market access to these industries will

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only increase the competitiveness of domestic industries. Given that there are no effective bilateral trade agreements, India must capitalise on the opportunity RCEP will provide. With effective policies under RCEP, India will finally have a mechanism by which trade with China can be more accountable. RCEP will benefit Indian industry’s penetration into the Chinese market and the responsibility thereof rests with the Indian government in the negotiation process. India must continue to sustain and build its domestic consumption. This has helped India to divert supply to domestic demands during the global recession and switch to exports in times of global buoyancy. The Chinese rebalance is trying to do the same but has come at a cost of a debt bubble which India can avoid. With the West becoming protective, India must take a leadership role in continuing multilateralism. With the 21st century pegged to be an Asian century, Indo-Sino trade must ensure sustained growth in the region as well as globally.

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ivity-is-the-key-to-addressing-the-india-china-trade-deficit/story-B0oUzoeQOp LRlya56n3ZXP.html (accessed on 20 May 2019). Zhong, Raymond. 2014. ‘The 13-Year Divide: India’s Economy Looks Much Like China’s in 2001’, The Wall Street Journal, www.wsj.com/articles/indias-economy-todaymuch-like-chinas-in-2001-1410730681 (accessed on 20 March 2017).

10 CHINA’S SILK ROAD ECONOMIC PROJECT, CENTRAL ASIA AND INDIA’S INTERESTS Kamala Kumari

When viewed against the backdrop of a rising China and its present assertive foreign policy, the idea of SREB appears monumental and the goals of tremendous significance, not only for Asia, but Europe as well, and it also ref lects China’s ambition to play a pivotal role in world affairs. In other words, it is China’s way of defining its place in the world and relations with its neighbours. China’s Silk Road project as an economic concept has helped China resurge as an economic power. In recent times there have been major investments in transport links, particularly transcontinental railway lines. This economic project actually is not totally new; rather, it’s rooted in the historical trade route, the Ancient Silk Road that traversed through the Central Asian region. This project actually is an expanding network of transportation infrastructure linking West and East, and is considerably shorter and faster than the long sea route. China’s role in trying to revive the Silk Road so far has been significant as it is taking quite bold steps, and this has been pointed out by many scholars. Peter Frankopan, a Senior Research Fellow at Worcester College, Oxford, and Director of the Centre for Byzantine Research at Oxford University, says, the Chinese government is building networks carefully and deliberately to connect to minerals, energy sources and access to cities, harbours and oceans. It does so in partnership with countries whose status is raised from ‘iron friends’ to relationships that can survive in ‘all-weather’ conditions. (Frankopan, 2015:516) The OBOR is actually “offering a replication of the Chinese economic miracle to every country” which wishes to cooperate in this project (Helga ZeppLaRouche, 2016:31). Wu Jianmin, a former president of China’s Foreign Affairs

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University (attached to the Ministry of Foreign Affairs) and a member of the Foreign Policy Advisory Committee of the Chinese Foreign Ministry, describes OBOR as “the most significant and far-reaching initiative that China has ever put forward” (Wu, 2015). As of now, the Belt and Road Initiative is an east-west transport corridor which is part of President Xi Jingping’s dream for his country. With this initiative, China plans to establish a link to the historical ‘Ancient Silk Road’ (丝绸之路, Sichou zhi lu). And in this initiative, Kazakhstan is the key pillar. It is from Kazakhstan that three branches spread out; the northern branch goes via Russia to Europe. The central branch goes through the Kazakh port of Atyrau, the Caspian Sea, Azerbaijan, Georgia and Turkey. This branch bypasses Russia to reach Europe. The southern branch is via Turkmenistan, Iran and Oman. There are other connecting rail and road links as well. Now China needs to ensure that the economic benefits trickle down to the general populations of the countries involved in this project, in particular the populations of Central Asia, as it is central to three of its routes. Here it would be important to note the motivating factor and driving force behind this project.

Driving force China actually is being driven by both domestic and foreign considerations. Through this Chinese expression of expansion, China aims at promoting a whole range of Chinese interests. Besides economic compulsions, there have been other motivating factors as well behind this project. China wants to build its leverage in Central Asia. This coincides with its idea of a multipolar world, a world with China as its pivot and its area of inf luence, Central Asia being one such area which encompasses both economic and security issues. And this will have geopolitical and social fallout as well. Another point to be kept in mind is that China’s economic strategy for Central Asia is linked to its own domestic agenda for Xinjiang, which is based on the assumption that building up economic prosperity would result in political stability. Xinjiang, the northwest frontier region which is home to a sizeable Muslim ethnic minority population (Lain, 2016), has for long been an issue of concern. Xinjiang would be playing a major role as its cities of Urumqi, Kashgar and Khorgos will be at the centre of many of the proposed routes. Also, the other major factor is that there seems to be an urge to develop all of China’s 31 provinces, with affirmation from all provinces for their active participation. The western province of Qinghai has indicated that it will build a rail, highway and aviation network to link the provinces and countries along the OBOR; Guangdong province which is along the coast will also execute some major infrastructure projects (Ahmad, 2016). Through the SREB initiative, China has embarked on a huge project with extensive development of infrastructure, expansion or maybe a set of new trade routes, which will result in new markets. Besides, the concepts of SREB grew out of China’s need to export surplus steel, cement, etc. and the project would

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provide an outlet for China’s surplus financial reserves. Another key motive is the protection of resources such as oil, gas, uranium, copper and gold. According to the Reuters news agency report, “President Xi told a delegation of Chinese entrepreneurs that he hopes to achieve a trade volume of over 2.5 trillion dollars with the OBOR countries in around ten years’ time” (Bessler, 2015). And since Central Asia is central to these initiatives, the interests seem to be precisely highly complex as it is where they face multiple challenges. This project is also perceived to be basically China’s response to the so-called US pivot to Asia strategy or a rebalance to Asia, which was announced in 2011. The Belt and Road Initiative thereby is an attempt to expand inf luence in Asia and it is expected to enhance not only ‘five connections’ namely; trade, infrastructure, investment, capital and people but at the same time expected to create a community with ‘shared interests, destiny and responsibilities’. (Cheng, 2015) In the process China hopes to diversify its exports, contribute to development in Eurasia, increase access to food and energy, lessen dependence on the US dollar and improve representation of developing nations in global affairs. Another dimension explained is that while the OBOR is prompted by China’s interests in energy, security and promotion of economic ties, it is actually driven by the vision of a ‘greater Eurasian idea’ that calls for ‘strengthening economic and cultural integration’ and building ‘a new type of international relations underpinned by win-win cooperation’, is actually ‘to guarantee its interests in this region’ and at the same time cooperate with the other powers. (Ahmad, 2016) Georgia is also part of the plans of China to create the SREB and is attractive for several reasons, including the fact that it avoids passing through Russia; as believed, it would be easier for China to deal with a small country which is more dependent on China than China is dependent on it (Van Dijk, 2016). Importantly Georgia has excellent ports opening on the Black Sea. Also the fact that, beyond hydrocarbon and key commodities like, cotton, aluminium, etc., the production structure in most countries are quite similar which limits intra-regional trade, at the same time this creates opportunities for countries within central Asia to benefit more under friendly environment and through trade-enabled regional value chains. ( Jha, 2015) The Silk Road has occupied a central place in Chinese strategy primarily in quest of its economic as well as security interests. A brief background of the

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Ancient Silk Route would provide a historical perspective in understanding the present initiative, as even the earlier Silk Route was at the core of Chinese strategy.

Historical background The original Silk Road, which is also known as the ‘Ancient Silk Route’, refers to a network of trade routes that came into being during the westward expansion of China’s two great dynasties: Tang and Han (206 BC–220 AD). It extended over a thousand miles from Kian in Central China to Europe. It connected East Asia, Central Asia and the Mediterranean region. People, goods and ideas had been travelling across this landmass for millennia, but were at its height from about the second century BC until the fourteenth century, when the Mongols safeguarded a northern land route that crossed the Eurasian steppes. However, after the fifteenth century, sea routes became more important than the overland trade routes. Merchants then traded in many commodities along Silk Road land routes – horses, jade, gems, glass, lacquer ware, spices, incense, tea, ivory, cotton, woollens, linens, musical instruments, Chinese paper and, of course, silk. The richly evocative term ‘Silk Road’ (Die Seidenstrassen, coined by the nineteenthcentury German explorer Baron Ferdinand von Richthofen) refers to the material ‘silk from China’ (Grotenhuis, 2006:10). The extensive network of trade routes not only resulted in the exchange of goods, but as the saying goes, “culture follows trade”! There was exchange of cultural contacts and interaction of historical experience as well. Central Asia was thus the epicentre of the trade routes, connecting Eastern and Western markets, spurring immense wealth. Valuable Chinese silk, porcelain, jade, Indian ivory, spices, Kashmiri shawls and other goods came from other centres such as Samarkand, Bukhara, Merv, etc. China received gold and other precious metals, ivory and glass products. For millennia trade and movement of goods was a regular feature of human activity. The emergence of the Silk Route gave a boost to political unification and led to development of cities and regions. These cities were not only centres of trade but centres of learning as well ( Joshi, 2014). Besides silk from China, and spices, jewellery and clothes among other goods from India, Buddhism travelled up to Tibet and China through this road (Reyaz, 2019). However, advances by the Mongols in Central Asia and various crusades in the fifteenth century seriously disrupted the Silk Route (McBride, 2015). The route is believed to have peaked during the first millennium, during the first Roman leadership and then Byzantine Empires and in China during the Tang Dynasty. The historical Silk Road also was a core of China’s strategy. It was an age characterised by the first Chinese expansion to the west and south and the establishment of trade routes which later came to be known as the Silk Road. Describing the legendary surpluses of the Han Dynasty, Sima Qian, a Chinese historian living in the first century BC, wrote, “The granaries in all the towns are brimming with reserves, and the coffers are full with treasures and

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gold, worth trillions”, and that “there is so much money that the ropes used to string coins together rot and break, an innumerable amount. The granaries in the capital, overf low, and the grain goes bad, and cannot be eaten” (Charles Clover and Lucy Hornby, 2015). The new Silk Route or Belt and Road initiative provides the opportunity to connect with people, markets and nations, and so many countries including Central Asia are keen to integrate with this project.

The Silk Road Economic Belt The current status The SREB is 8,400 km long originating in Kian and includes 3,400 km in China, 2,800 km in Kazakhstan and 2,200 km in Russia. The ‘Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road’, a document published by the Ministry of Foreign Affairs of China, states that “We should strengthen bilateral cooperation, and promote comprehensive development of bilateral relations through multi-level and multi-channel communication and consultation” (NDRC, 2015). And as cooperation priorities, it calls for the development of ‘a number of bilateral cooperation pilot projects’ and the establishment and improvement of ‘bilateral joint working mechanisms’. This project also aims to enhance the role of multilateral cooperation mechanisms, notably the Shanghai Cooperation Organisation (SCO); Association of Southeast Asian Nations (ASEAN) Plus China (10+1); the Asia-Pacific Economic Cooperation (APEC); the Asia-Europe Meeting (ASEM); and even those aligned with the ( Japan-dominated) Asian Development Bank, such as the Greater Mekong Sub-region (GMS) Economic Cooperation and the Central Asia Regional Economic Cooperation (CAREC). (Spanger, 2016) In this context the National Development and Reform Commission of China (NDRC), which is its Central Planning body, has identified six routes that are an integral part of its land and maritime corridors. They are the (1) ChinaMongolia-Russia economic corridor; (2) New Eurasia land bridge economic corridor; (3) China-Central Asia West Asia economic corridor; (4) China-Pakistan economic corridor; (5) Bangladesh-China India-Myanmar economic corridor; and (6) China-Indochina economic corridor (NDRC, 2015). According to the NDRC there are five major goals: (1) policy coordination; (2) facilities connectivity; (3) unimpeded trade; (4) financial integration; and (5) people-to-people bonds (NDRC, 2015). Kim Chong Min rightly terms this project China’s “new international economic diplomacy initiative” (Min, 2016). This project is new and huge and

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provides opportunities to a number of countries that often do not get the attention of the world. At the same time, this project would also accelerate outward investment, and develop the western part of the country which China so much desires (Van Dijk, 2012). Of all these routes, the northern route is split between the Trans-Siberian Railway and a route running south of Mongolia via Kazakhstan to Russia and on to the ports of Rotterdam and Duisburg. These connections have been used extensively, for instance by Deutsche Bahn, which, for instance between 2011 and 2012, employed nearly 200 container trains for BMW on both routes, to Chongqing and Shenyang. Apart from this, rail freight service on the route via Kazakhstan has been operative since 1992 (Xiaotong and Belgibayev, 2016). On the southern route that eschews Russia, various trial connections have recently been tested. These newly emerging connections have several comparative disadvantages, such as numerous custom controls, but they are being energetically expanded and could one day become a true rival to the much longer northern routes. One such trial took place between China and Tehran on 16 February 2016 and is expected to become a regular freight service running once a month. In 2015, DHL (Deutsche Post DHL) also commissioned shipping from Lianyungang in China via Kazakhstan, Azerbaijan and Georgia, including two sea transit segments, for arrival in Istanbul within 14 days (Spanger, 2016). In spite of the fact that “Afghanistan with its pivotal strategic position, looming security vacuum, and a small border with China, is an ideal platform for Beijing to seek greater westward strategic depth and inf luence” (Hong, 2013:25), Afghanistan actually did not figure in the initial plan of the project. So far, there is no clear logistical structure in place or at least in the public domain as to what the project’s layout plan would look like on the ground; however, several phases of this project have already started. And with the news about the cooperation of Eurasian Economic Union (EEU) and SREB makes the situation even more complex, as EEU is a multilateral whereas the SREB is a unilateral project. However, there seems to be some sort of understanding between Vladimir Putin and Xi regarding this at least at this point of time. Also, the SREB initiative does not articulate how the trickle-down effect of trade and its profit is supposed to take place. And as Catherine Putz feels, Beijing’s belt fits with Kazakhstan’s sunny path, but questions remain on its compatibility with the EEU (Putz, 2016). Also, there is no clarity on the issue of investment share and share of profit, tariffs, etc. There is a need for border management and border security apart from harmonising the custom rules, as this project is intra- as well as interregional. Peter Burian, EU ambassador to Central Asia, said during a roundtable interaction on 10 February 2017, “so far no one knows any details regarding all these issues, not even in China. At the same time, he hoped that thing might be clear after the Belt and Road summit”, which was then due to take place in Beijing in May 2017 (Burian, 2017).

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And, as Raffaello Pantucci puts it, the three elements that are essential to bear in mind when outside powers are seeking to connect with the vision, is that it is important to understand each corridor in detail, to focus on the commercial opportunities that the corridors will create and to think with a longer horizon that most governments usually consider. (Pantucci, 2017) In fact, joint communique of the BRI Forum Summit of 2017 outlining the outcomes from the summit ref lected that China could not push its entire agenda in a unilateral fashion as it would have originally envisaged. The Economic Times read, “leaders, ministers, and officials from Germany, France, England, Greece, Portugal and Estonia did raise objections regarding the original text of the communiqué, over issues of transparency and environmental protection”. It further said that, on day one of the summit, the Russian President Vladimir Putin called for more negotiations on the project; Kenyan President Uhuru Kenyatta also felt that there should be more transparency in the entire process to implement OBOR. The final Communique from the summit referred to key international principles including the issue of sovereignty that India advocated.  .  . . Consultation on an equal footing: Honouring the purposes and principles of the UN Charter and international law including respecting the sovereignty and territorial integrity of countries; formulating cooperation plans and advancing cooperation projects through consultation.  .  . . Endeavour to expand people-to-people exchanges, promote peace, justice, inclusiveness, democracy, good governance, the rule of law, human rights, gender equality and women empowerment; work together to fight against corruption and bribery in all their forms. (Chaudhury, 2017) As Christopher Balding puts it, “it is grand in ambition but short on details, Xi’s sweeping initiative may be better thought of as a ‘philosophy’ or ‘party line’, rather than a fixed commitment” (Balding, 2017). And it seems almost certain that the amount of money that would be put into the Belt and Road projects is bound to be significantly lower than advertised and it’s going to be a lot harder than China had thought it to be initially. It was evident when European countries refused to sign the final statement at the summit, after it omitted language on corruption and governance. Even the US seemed sceptical. Enticing Western countries as well as banks to finance projects prior to having it fully analysed and vetted would be an uphill task for sure for China (Balding, 2017). Beijing seems to have moved too soon and too quickly. The recently concluded (26 and 27 April 2019) Second BRI Forum presents a paradox “at the

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heart of its ambitious initiative” that has become apparent. China seemed to be in a salvage mode from all the backlash and considerable scrutiny of the economic viability of these projects ( Jaishankar, 2019).

Some responses from Central Asia China occupies a critical place in Central Asia’s overland connectivity projects, as it has been a key driver of infrastructure investment and actively involved in agri-business and telecommunications investments. The roads, railways, tunnels, power lines and refurbished oil refineries as well as special economic zones have been built by Chinese companies. China has also invested heavily in the region’s natural resource extraction. The Central Asian States (CAS) have so far extended cautious support to President Xi’s SREB project, as this coincides with their own focus on connectivity projects. The CAS would like to overcome their landlocked status and connect with the world. The cautious response is primarily because the contours of the project are not yet clear. As noted by the Chinese scholar Zhong Sheng, “The Belt and Road initiatives look at ideas and suggestions for cooperation and development” (Zhong, 2014). Besides, the SREB is not a multilateral effort, which should have been the case since the SREB is expected to traverse through several countries. A consultative mechanism would have had greater acceptance. However, the CAS in all likelihood would support the SREB, as long as Chinese investments and infrastructure development projects are in tandem with their own plans, that is to promote their objective of infrastructure developments, as it would help them to overcome their landlocked status. So far it is believed that this initiative is an independent project and not consultative, so it basically would help them in their infrastructure and it is hoped that it does not undermine their sovereignty. Any hint of infringement of their sovereignty or territorial integrity would be unacceptable. Since the Central Asian States, especially Kazakhstan, are central to the SREB, it is important to assess their response to this core foreign policy initiative, even though at this juncture the contours of the SREB are not clear. Turkmenistan on its part has launched a major effort to emerge as the transport hub. Its central location is favourable to its ambition: (1) the Kazakhstan-Turkmenistan-Iran rail link was inaugurated in December 2014; (2) the Tajikistan-AfghanistanTurkmenistan pipeline is awaiting investments; (3) Turkmenistan has constructed a short 2-km rail link from its border with Afghanistan; (4) the Persian Gulf Corridor passes through Turkmenistan and ends at Oman. In September 2015 Turkmenistan organised an international conference in Ashgabat focusing on harmonisation of rules and regulations. The Ashgabat Declaration states this, and India has become a member of this Corridor; (5) Afghanistan is probably operational, or upgrading of the existing infrastructure is taking place. Uzbekistan has initiated the Persian Gulf Corridor. Its focus, however, is on improving existing domestic infrastructure or planning new projects for internal

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connectivity. It has built an international free economic zone at Navoi for air connectivity to the West. Kyrgyzstan and Tajikistan have played a crucial role in the Northern Distribution Network. A China-Kyrgyzstan-Uzbekistan road link has got held up because of Uzbek-Kyrgyz differences about its entry point into Uzbekistan ( Joshi, 2016). In terms of visibility, the Chinese workforce is visible more in Kyrgyzstan and Tajikistan. The construction of Osh-Sarytash-Irkeshtam and Bishkek-NarynTorugart roads in Kyrgyzstan, for example, was partly funded by China, and therefore 60 per cent of raw materials were imported by 70 per cent Chinese workers and 30 per cent local workers. All these highlight the typical Chinacentric relationship, which is the core in all such China-infrastructure projects. And even though China’s SREB vision could be transformative for Central Asia, as China’s vision does support in theory an economic agenda that enhances prosperity for local populations, the importance of good governance through SREB initiatives such as the Asia Infrastructure Investment Bank (AIIB) and its intended partnering (more) with development banks such as the Asian Development Bank, which China has emphasised, would require adherence to an open tendering process so as to address some of the issues of transparency (Lain, 2016). Also the fact that even though the expansion in trade has been the driver of growth, contributing to the significant and impressive gains in poverty reduction and shared prosperity, the region feels that the easier gains of trade have been mostly realised and the region has maybe reached a tipping point with prospects for further expansion of trade being limited by economic fundamentals, investment climate issues and shortcomings in trade policy. Add to this the risks of historical practices continuing in bilateral engagement in Central Asia, the SREB initiative may be less than transformative for the local populations of Central Asia. Apart from all this, Central Asia has initiated several connectivity projects of its own, like the Lapis Lazuli Corridor and the Persian Gulf Corridor. In addition, several other options like INSTC (International North–South Transport Corridor) and the Chabahar, which are already operational, are also available for use (Kumari, 2019).

Challenges at hand The SREB is not a multilateral effort, which should have been the case since the SREB is expected to traverse through several countries. However, any hint of infringement of sovereignty or territorial integrity would be unacceptable to CAS and keeping in mind China’s earlier practice in Africa and elsewhere, it would be a great challenge. Apart from this, there are other issues which need attention. For example, the leaders in all these countries are old and the Central Asian population, especially the youth, which is quite large and very ambitious, has a mind of its own. How

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would the youth look at this project as a matter of concern? And since the project has been f loated and has not really taken f light yet, will the new elites and youth who are coming up in these countries, who may have their own ‘Dreams’, also support their countries’ smooth functioning even if they do not benefit from the economic dividends? Besides the risk of increasing economic vulnerabilities in the region, there is no clarity regarding official lending to Central Asia. Also, there are other suspicious, less transparent agreements, such as Tajikistan’s 2011 agreement to settle a land demarcation issue with China, in which China gained 1,000 sq. km. This was described as an ‘unofficial debt writing-off agreement’, although there is no documentary evidence of such deals. The mounting debt exposure within, with already structurally vulnerable economies, could exacerbate domestic inequalities and potentially encourage unfair practices and encourage these countries, particularly Kyrgyzstan and Tajikistan, to become more heavily dependent on Chinese aid. Then, there is a practice of citing very low interest rates for encouraging countries to accept loans, whereas the fact is that in reality the loans are offered with scepticism whether they will ever be paid back, and China would get the chance to seek loan repayments in other ways, as has been the Chinese practice. Sometimes deals are structured so that the access to resources or mineral rights become part of the repayment plan. In addition, Chinese companies, engaging in non-transparent operations in the region, have been criticised, for example, a case involving Chinese State-owned oil and gas company CNPC (China National Petroleum Corporation). Apart from this, China’s historical track record of investment engagement in the region raises concerns about economic inequalities and poor governance that the SREB could exacerbate ( Lain, 2016). There has been some resentment amongst Central Asian populations against Chinese investment as well. Can the Chinese investment lead to a compromise in their respective sovereignty rights? Alternatively, would it cause Chinese economic domination, which will have geopolitical fallout? Countries have also raised the issues of workforce; however, it needs to be seen whether the project would adhere to such stipulations.

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The Eurasian Economic Union (EEU). Even though the EEU is a multilateral effort, it has supported the SREB initiative, which is China’s project and not consultative in nature, so the sticky question of the Free Trade Area (FTA) remains unresolved. Labour. Central Asia has quite a large youth population. Labour would be an issue. As has been the trend, China uses its own labour. But Central Asia would now want its youth population to be part of the labour force. Uzbekistan has already announced that it would want 30 per cent of the labour to be local. Turkmenistan wants 70 per cent of the labour to be local.

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Investment share and share of profit, tariffs, etc. There is no clarity on any of these issues so far, not even in China. Heart of Asia. Afghanistan has been projected as a key component of China’s New Silk Route initiative via which Beijing plans to revive the historical Silk Route. However, Afghanistan did not feature in the initial New Silk Route plan. Security. Though Chinese trade and investment is certainly appealing, there is no clarity about the security of the containers and goods and issues of border management, etc. Corruption and environmental protection issues. How could one ignore the issue of corruption and environmental protection? However, there is no mention of any of these issues. Lack of clarity and logistical structure in place. The much-hyped First BRI Forum Summit of 14–15 May and likewise the Second (26–27 April 2019) Summit did not have actually anything new to offer to the countries that made their presence felt even at the highest level. There was a lot of discussion, but it seems no respite from the anxiety. Rather as each day passed voices of concerns were heard from different quarters in spite of China harping about further developments on the project. Confusion and scepticism. Very few countries of the many identified by China were represented by their top leaders; they mostly made their presence felt through representation of lower level dignitaries. This speaks volumes about the response of the interested countries. And even those who were present mostly talked about the need for more accountability and transparency. As of now, even the communique sounds hollow. The communique reads, “Consultation on an equal footing: Honouring the purposes and principles of the UN Charter and international law including respecting the sovereignty and territorial integrity of countries; Formulating cooperation plans and advancing cooperation projects through consultation”. This sounds hollow, as China in practice is doing just the opposite.

The biggest challenge is to address all these issues as soon as possible if China really wants to fulfil President Xi Jinping’s ‘China Dream’.

India’s interests India has interests in the SREB as one of the routes, namely CPEC, passes through India’s territory that is currently occupied by Pakistan. CPEC violates India’s territorial integrity and this project will have political and security implications. However, China very conveniently has been using the territory in spite of India’s raising the issue with China. If China really wants India to be part of it, China must first have a discussion with India and so far, that has not happened. This project is not only economic in nature as China claims it to be, but rather, it will have geopolitical and social fallout as well. It involves India’s sovereignty and security.

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India not being on board could be validated on several grounds. Otherwise, India has been very supportive of connectivity projects and the number of connectivity projects it is part of or has initiated speaks volumes of its willingness and support to connectivity projects for integrating regions, people and cultures. It is a misnomer that India opposes connectivity projects; rather, India has been part of several connectivity projects, right from ancient times – be it the Spice Route, Uttar Path or the Northern Route, or the fabled Ancient Silk Route – to the present. India’s stand vis-a-vis connectivity projects has been very well reiterated by Sushma Swaraj at the First India Central Asia Dialogue, 12–13 January 2019, in Tashkent, Uzbekistan, that “connectivity initiatives must be based on universally recognised international norms, good governance, rule of law, openness, transparency, and equality. They must follow principles of financial responsibility and must be pursued in a manner that respects sovereignty and territorial integrity” (Kaura, 2019). Also, as Shyam Saran puts it, India does have its own Silk Route strategy; it has been building its own strategy without making much noise about it, slowly but steadily putting it in place. Even Ajay Patnaik has talked about India’s Silk Route strategy. And anyways, the south-south (South Central Asia) and East-West (China-Europe) corridor would be of little help to IndiaCentral Asia economic relations. However, the other alternative to India’s access to Central Asia would be through the north-south axis, which has assumed greater significance due to the ongoing Eurasian integration process ( Patnaik, 2016:141). Also, it may be noted that since Chabahar is already operational, it may be a game changer for the entire region, particularly for Central Asia and Afghanistan. The Indian Ocean Region emerges as a hub of trade and economic engagement with Afghanistan and the CAR connects with other regions of the world. Hence, Chabahar is poised to emerge as a major transit centre for transshipment to the shipping industry, as well as link to the hinterlands ( Joshi and Kumari, 2019). Prime Minister Modi’s statement on the importance of respecting sovereignty at the inaugural session at the 2017 Raisina Dialogue holds a lot of significance: “only by respecting the sovereignty of countries involved, can regional connectivity corridors fulfil their promise and avoid differences and discord” (MEA, 2017). China should keep in mind that the sovereignty of the countries which fall on its Belt and Road Initiative, particularly of India, which has voiced its concern several times, should not be compromised or overlooked at all; only then is there any possibility of this project taking off, forget about it being a success. However, in spite of all these issues, there is immense scope of coordination and cooperation depending on the interests of the countries involved; but first of all, China needs to address the interests and concerns of all the concerned countries and on all accounts.

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Conclusion The SREB is a huge project and is part of Chinese President Xi Jinping’s ‘China Dream’. It involves many countries and huge infrastructure, thereby cooperation from all countries is required for the progress of this project. Since the Central Asian States, especially Kazakhstan, are central to the SREB, it is important to assess their response to this core foreign policy initiative. And it would not be wrong to state that the CASs would welcome any initiative that promotes their own objective of infrastructure developments, as it would help them to overcome their landlocked status. But only as long SREB helps them in their own infrastructure and not undermine their sovereignty. Another reason that could impact the progress would depend on changes at the global level, as well as regional dynamics. Though Chinese trade and investment is certainly appealing, there is no clarity, transparency or accountability with respect to investment, security of the containers and goods, issues of border management, etc. This project is not only economic in nature as China claims it to be; rather, it will have geopolitical and social fallout and security implications as well. The project was announced in 2013 and now it is 2020, and not much progress is visible, other than new announcements every now and then. India’s not being on board could be validated on several grounds, as this project is not in synergy with India’s long held position on connectivity projects, and also CPEC, which is one of the major corridors of this project, passes through the Indian territory without even consulting India, thus violating India’s sovereignty and territorial integrity. Otherwise, India has been very supportive of connectivity projects both in the past be it the Spice Route, Uttar Path, as well as the present INSTC, Chabahar, etc. China needs to be proactive and President Xi Jinping needs to address all these issues with utmost care, if he is serious about fulfilling his ‘China Dream’.

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Pantucci, R. 2017. ‘China: Understanding Beijing’s Belt and Road Initiative’, RUSI, 12 May 2017. Patnaik, A. 2016. Central Asia: Geopolitics, Security and Stability. London and New York: Routledge, p. 141. Putz, C. 2016. ‘China Pushes One Belt, One Road in Central Asia’, Diplomat, 24 May 2016. Reyaz, M. 2019. ‘India Finally Appears Serious About Central Asia, Making Uzbekistan Its Gateway To The Region’, https://www.indiatimes.com/amp/news/india/indiafinally-appears-serious-about-central-asia-making-uzbekistan-its-gateway-to-theregion-360556.html (accessed on 2 March 2019). Spanger, H.-J. 2016. ‘Russia’s Turn Eastward, China’s Turn Westward: Cooperation and Conf lict on the New Silk Road’, 14 June 2016, http://eng.globalaffairs.ru/print/val day/Russias-Turn-Eastward-Chinas-Turn-Westward-Cooperation-and-Conf lict-onthe-New-Silk-Road-18209 (accessed on 29 March 2017). Van Dijk, M.P. 2012. ‘An Increasing Role for Smaller Chinese Cities in Western Provinces because of the Crisis’, Journal of Town & City Management, 2(4): 321–322. Van Dijk, M.P. and Martens, P. 2016. ‘The Silk Road and Chinese Interests in Central Asia and the Caucasus: The Case of Georgia’, Maastricht School of Management, Working Paper No. 2016/12, August 2016, www.msm.nl/resources/uploads/2016/09/MSMWP2016-12-1.pdf (accessed on 22 March 2017). Wu, J. 2015. ‘One Belt and One Road, Far-Reaching Initiative’, China US Focus, http:// tinyurl.com/chinaUSbeltroad (accessed on 22 March 2017). Xiaotong, Z. and Belgibayev, M. 2016. ‘China’s Eurasian Pivot’, The Asian Forum, 4(1), www.theasanforum.org/chinas-eurasian-pivot (accessed on 21 October 2016). Zepp-LaRouche, H. 2016. ‘The Crisis, the New Silk Road and India’s Role’, Raisina Dialogue, EIR, 11 March 2016, p. 31. Zhong, S. 2014. ‘The Silk Road: From Past to the Future’, Foreign Affairs Journal (Beijing), Spring 2014.

INDEX

Note: Page numbers in italics indicate a figure and page numbers in bold indicate a table on the corresponding page. accommodation: in international relations 21; via attraction 21–23 ‘Act East’ policy 22, 86, 91, 94–95, 107 Agreement on Cooperation on Addressing Climate Change 36 Allison, Graham 113 Al-Qaeda 60 amalar 44 American cynicism 5 Anand, Sakshi 79 Anglo-Tibetan trade 118 Armed Forces (Special Powers) Act (AFSPA) 13 Asian Century 33 Asian Infrastructure Investment Bank (AIIB) 64– 65, 104, 113, 151 Asia-Pacific Trade Agreement countries 42 Association of Southeast Asian Nations (ASEAN) 11, 88, 129 Balding, Christopher 149 Bangladesh 27–28 Bangladesh-China-India-Myanmar Economic Corridor (BCIM-EC) 106, 112 Belt and Road Initiative (BRI) 22, 88 bilateral trade 38, 116–127 Blue Revolution 93 Border Roads Organization (BRO) 126 Bound to Lead (Nye) 1

Brazil, Russia, India, China and South Africa (BRICS) forum 63– 64; China’s foreign policy basis to be in 77–80; economic strength of 72–74; IndiaChina and 76; India’s choice to be in 76–77; rise of 68–83; stand on global issues 74–76; theoretical underpinning 71 BRICS Bank 63 BRICS countries 36; foreign exchange reserves 73 BRICS Summit 37 BRI Forum Summit of 2017 149 Bush, G. W. 59 Carnegie Endowment for International Peace 112 Cheng Zhijie 79 China: arms of soft power 20; counterfeiting and 43– 45; cultural trajectories 19; government-related soft power angle 20; new normal and implications for India 41– 43 China National Knowledge Infrastructure (CNKI) database 7 China-Pakistan Economic Corridor (CPEC) 105, 106, 110, 112, 124, 131, 137 China Railway Construction Corporation 35 China’s Silk Road Economic Project 143–155

Index

China’s South Asia trade 40; relations 39 Chinese Communist Party (CCP) 8 Chinese Diaspora 8 Chinese imitation commodities 48 Chinese soft power: dynamics 20; impact of 27; limitations of 8 –9; rise of 7– 8; strategies 19–30 Chopra, Anil 111 civil liberties 9, 9 climate change 36, 58 Cold War 77 common national interests 105–108 Communist Party of China (CPC) 19 Comprehensive Nuclear-Test-Ban Treaty (CTBT) 4 Confederation of Indian Industry (CII) 25 cooperation 65, 102–104 counter-terrorism efforts 56 Dai Bingguo 105 Deepak, B. R. 102 Deng Xiaoping 105, 132 Dhaka, Bangladesh 27 Durban Summit 76 Duterte, Rodrigo 22 Edgar, J. W. 118 educational scholarships 28 Emerging Markets and Developing Economies (EMDE) 70 ethnic minorities 8 Eurasian Economic Union (EEU) 148 Exclusive Economic Zone (EEZ) 86 Federation of Indian Chambers of Commerce and Industry (FICCI) 43 financial crisis 78, 129, 134 Foreign Direct Investment (FDI) 35, 46, 46, 47, 48 Framework Agreement 89 Frankopan, Peter 143 Freedom House report in 2018 14 Freedom House report of 2020 8 free trade agreements (FTAs) 129 G-8 forum 68 G-20 forum 60– 61, 68 General Agreement on Tariffs and Trade (GATT) 61 geo-economic factors 108–112 geopolitic factors 108–112 Gharekhan, Chinmaya 11 globalisation 68, 77 global leadership 8

159

Goswami, Namrata 109 great powers 1; transitions 2 –3 gross domestic product (GDP) 70, 70, 72, 74, 132 Group of 20 (G-20) summit 37, 89 Guizhou International Investment Cooperation (GIIC) investment 107 Haibin Niu 79 Hasija, Namrata 121 Hastings, Warren 117 Hecksher-Ohlin trade theory 48 Hu Jintao 78 Human Development Index (HDI) 13 India: arms of soft power 20; domestic diversity 19; in Indian Ocean, geostrategic significance 86–88; later years 11; Nehruvian era 10; as power 9–16; soft power 11–16; soft power elements 19 India-China border trade, initiatives for re-opening 119–120 India-China engagement: anti-piracy efforts 57; China’s veto on Masood Azhar 57; climate change 58; counterterrorism efforts 56; at United Nations 53–58; United Nations peacekeeping operations 57–58; UNSC and P-5 54–56; UNSC reform 53–54 India-China national interests 100–113 Indian-American business organizations 25 Indian Council for Cultural Relations (ICCR) 13, 20, 27 Indian Diaspora 12, 16 Indian Drug Regulatory Authority 49 Indian Foreign Service 29 Indian maritime security strategy (IMSS) 86, 91–94 Indian Maritime Security Strategy-2015 (IMSS-2015) 91, 92 Indian Ocean Region (IOR) 86, 87, 91, 95–97 Indian soft power: dynamics 20; education sector 15; impact 25–26; medical tourism 14; new sources of 14–16; shortcomings and challenges to 13–14; sources of 11–13; strategies 19–30; tourism and expatriates in 15–16 India Trade Agent 118 Indo-China bilateral trade 116–127; and business via Nathu-La Pass since 2006 120–122; challenges of 122–123;

160

Index

past scenario, Nathu-La Pass 117–119; prospects of 123–124 Indo-China War 125, 126 Indo-Sino trade: Belt and Road Initiative (BRI) factor 135–136; global environment for 134–135; growth models, changing 132–134; post-globalisation era 128–138; trade basket 129–132 Influence of Sea Power upon History, The (Mahan) 109 information technology 2 , 9 international community 4 International Day of Yoga 12 international memberships, China 4 International Monetary Fund (IMF) 68, 69, 72 international politics, changing nature of 68–71 International Property Rights (IPR) 45; crimes 44 international relations 53 Internet 9 Islamic State of Iraq and Syria (ISIS) 60

Mahajan, Sumitra 37 Mahan, Alfred Thayer 109 maloxine 44 Mandarin language 26 Maritime Silk Road (MSR) 22, 88, 90, 97, 108, 109; architecture and China’s rationale 88–91; pivotal response 91–94 Mausam project 95–96 Micro, Small and Medium Enterprises (MSME) 130 middle powers 1–2 Missile Technology Control Regime (MTCR) 59 Modi, Narendra 23, 24, 34, 36, 77, 81, 82, 93, 154 Most Favoured Nation (MFN) status 37 Mukherjee, Pranab 94 multiculturalism 12 multilateralism 69, 77 Muslims 16 Muslim Uyghur community 57 Myanmar 23

Jaishankar, Dhruva 16 Jaishankar, S. 96 Jaish-e-Muahammad 81 Jaswant, N. 121 Jin Liqun 65 Johnston, Alastair Iain 3 – 4

Narasimha Rao, P. V. 105 Nathu-La Pass 116–127 nationalism 1, 23–25 naval collaboration, bilateral and multilateral 94–95 Naypyidaw 23 Nehru, Jawaharlal 10 neoliberalism 103 New Development Bank (NDB) 63, 77, 79– 80, 104, 113 Non-Alignment Movement (NAM) 10 North Atlantic Treaty Organisation (NATO) 60 Nuclear Supplier Group (NSG) 59; China and India 59– 60 nuclear weapons 3 Nye, J. S. Jr. 1–3, 12, 16, 22, 23

Kaladan Multimodal Transit Transport Project (KMTTP) 107 Kamath, K. V. 63 Kantha, Sharmila 42 Kataria, Anuradha 72 Keohane, R. O. 1, 2 Khan, A. Q. 59 knock-off commodities 42, 44 Kondapalli, Srikanth 79 Kurlantzick, Joshua 7 Lama, Mahendra P. 121 Lashkar-e-Taiba 81 Lemke, D. 2 , 4 liberalism 102 liberal trade argument 5 Li Keqiang 45 Li Mingjiang 7 Li Xing 79 Look East Policy 25 Mackinder, Halford 109 ‘Made in India’ tag 134

One Belt One Road (OBOR) project 100–113, 144, 145 O’Neill, Jim 71 Organisation of Islamic Cooperation (OIC) 57 Organization for Economic Cooperation and Development (OECD) 42, 74 Organski 3, 5, 71 Pakistan Occupied Kashmir (POK) 110, 118 Panda, Jagannath P. 76, 80

Index

Patnaik, Ajay 154 Paul, T. V. 21 Pax Indica 19–30 Pax Sinica 19–30 peaceful rise of China: deterrence theory 5 –7; liberal theory 5; reasons 3 –9 People’s Republic of China (PRC) 128 people-to-people soft power 25, 27, 30 people-to-state soft power 25, 27 Permanent Court of Arbitration (PCA) 22 political liberties 9, 9 Potter, Philip 21 power transitions 1–17; theory 4 Power Transitions: Trends and Strategies (Tammen et al.) 71 Pradhan, S. K. 121 Prasad, Jayant 110 Pravasi Bhartiya Diwas 12 press freedom status 8 Press Trust of India 37 private investment 29 Putin, Vladimir 149 Raja Mohan, C. 12, 14 realist assumptions 2 Regional Comprehensive Economic Partnership (RCEP) 64, 129, 135, 138 Sagarmala project 100–113 Sahni, Varun 11, 15 Sanya Summit 75 Saran, Samir 80 Saran, Shyam 154 Shambaugh, David 20 Shanghai Cooperation Organisation (SCO) 11, 60 Shenzhen Economic Zone 39 Silk Road Economic Belt (SREB) 88, 144, 150, 151; challenges 151–152; current status 147–150; driving force 144–146; historical background 146–147; India’s interests 153–154; major issues 152–153; responses from Central Asia 150–151 Silk Road Fund (SRF) 104 Silk Route 21 Singh, Manmohan 34, 35, 80 Singh, Tridivesh 81 Sino-Indian economic relations 33–50; areas of cooperation 34–35; economic ties history 37– 41; persistent trade deficit 41 Sino-Indian trade 39 Sino-Pakistani trade 39

161

Sitharaman, Nirmala 43 social media 24 societal interaction 21 soft power 1–2, 25–29; deployment 1–17; dynamics 20; nationalism and 23–25; see also Chinese soft power; Indian soft power Soft Power 30 Index 16 Soft Power: China’s Emerging Strategy in International Politics (Li) 7 South Asian Association for Regional Cooperation (SAARC) 11 Spice Route 21 Sri Lanka 89 state-to-people soft power 25, 27, 30 state-to-state soft power 27, 29, 30 Swaraj, Sushma 24, 93, 154 Taliban 60 Tammen, R. L. 2 , 4, 71 Tharoor, Shashi 11, 12, 15, 16 Thucydides trap 113 Tibetan Autonomous Region (TAR) 123 ‘Tibet Trade Regulations’ 118 trade: basket 129–132; facilitation 48; imbalance 33, 48; process 21 trade deficit 41, 41, 48, 49, 129; addressing 45– 48 Transit Transport Agreement 90 Trans Pacific Partnership (TPP) trade agreement 64 Trump, Donald 81, 82, 134, 135 Turkmenistan 150 Uighur Muslims 8 unique product code (UPC) 44 United Arab Emirates 25 United Nations Democracy Fund 12 United Nations Peacekeeping Operations (UNPKOs) 58 United Nations World Trade Organization report of 2018 15 Vajpayee, Atal Bihari 39, 100, 119 virtual communication 21 Wagner, Christian 10 Waltz, Kenneth 3, 5 Wang Yi 36, 37, 79 Wang Yusheng 78 Weibo account 21 Wittkopf, Eugene R. 71 Wohlforth, William C. 69

162

Index

World Bank 68–70 World Bank report of 2010 71 World Economic Forum report of 2016 81 World Happiness Report of 2019 13 World Politics (Organeski) 71 World Politics: Trends and Transformation (Wittkopf ) 71 World Trade Organization, India and China 61– 62

Xiaoping Yang 112 Xi Jinping 23, 24, 34, 36, 64, 79, 88–90, 100, 155 Xinhua editorial 24 Xinjiang 8 Yong Deng 8 Zakaria, Fareed 7