Rethinking China: India’s Foreign Strategy

As the world battles the ongoing COVID-19 pandemic, India has another fight to tackle, quite literally. In what was the deadliest clash in four decades, Indian and Chinese troops were involved in a skirmish in the Galwan valley of Ladakh, on June 15th 2020. Twenty Indian soldiers were known to lose their lives in this face-off (the numbers on the Chinese side remain undisclosed). If the COVID-19 pandemic had not already spread anti-Chinese sentiment domestically, this face-off offered the coup de grâce. Upon the breaking of this news, a wave of social media posts erupted, urging Indians to “boycott” Chinese products to serve their country. Demands for a total trade ban with China have been since gaining traction. But this begs a question to be asked: is it the only real way out?

The pandemic and this recent conflict with China present India with an opportunity to scrutinize not just its foreign policy, but also reliance on foreign trade. About the former, ever since the Cold War, a constant critique of Indian governance remains that there is no cohesive, calculated stance in India’s foreign policy, leading to India having amicable relations with several countries, but hardly any strong ties. India’s volatile relations with its neighbours further reinforce the importance and urgency of a need to scrutinize the country’s foreign policy. Although there has been a strengthening of diplomatic ties with the United States of America (US), it is unlikely to overpower the US’ dependence on China. Plus, the pandemic has only deepened the wound (first inflicted by the trade war) in US-China ties. Therefore, India can find a potential friend in the US. Another perspective to this is a renewal of the age-old Russia-India-China combination (RIC) to aid in fortifying India’s strategic interests globally. This approach has the potential to solidify India’s position in the Asia-Pacific region.

Last year, post the Pulwama attack, India-Pakistan relations deteriorated further as Pakistan was removed from the Most Favoured Nation (MFN) status along with an imposition of a few other import bans and non-tariff restrictions. Since Indian imports from and exports to Pakistan make up to 0.13% and 0.83% of the total imports and exports, respectively, the move did not affect India substantially.

However, the same strategy may not be possible in China’s case. China, unfortunately, is India’s biggest trading partner. Comparing 2018 statistics, China’s exports to India, accounting to 3.1% of its total exports are more than four times India’s exports to China, at 5.8%. Moreover, India’s GDP still hovers below $3 trillion, making the Chinese economy four times that of India’s. A trade ban would adversely affect the Indian economy -- which is already reeling under the slowdown, far preceding the pandemic itself -- more than the Chinese economy. Furthermore, any escalation in conflict poses a threat to global supply chains in the auto, renewable power, consumer durables, telecommunication, pharmaceuticals, and chemicals sectors. The damage caused by this would be more difficult to measure, especially for ASEAN countries recovering from the pandemic.

In addition, Chinese companies are a major investor in Indian startups (eighteen of the thirty biggest startups). The likes of Ola, Hike, Byju’s, Oyo, Paytm, Snapdeal, Big Basket, and Zomato have received funding of up to ₹4,000 crores. And the number is only expected to increase with rising penetration of Chinese investment in government projects, such as infrastructure schemes, Special Economic Zones (SEZs), and industrial belts. These figures have quintupled to more than ₹60,000 crores since 2014. And, this is without accounting for China’s third-party contribution from other multinationals. These include investment, via subsidiary companies based in other countries, an example being Singapore.

On 29th June, the Indian government banned 59 apps including TikTok, UC Browser, WeChat, CamScanner, Club Factory, Xiaomi’s Mi Community, and more. The most affected of the lot was TikTok, who lost its biggest overseas market of more than 200 million users in India. On the other hand, it left the hundreds of TikTok creators stranded, overnight, urging their audience to switch to other platforms like Instagram and Snapchat. As was the case with the shut down of Vine, it is uncertain how many of these creators will be able to sustain their user base. Another narrative for the ongoings is the coming to light of the donations that the PM Cares Fund for COVID-19 received from several Chinese private companies including TikTok (Rs. 30 crores) and Xiaomi (Rs. 10 crores) -- both of which find their apps now banned in India. This further highlights the deep-rooted dependence of the Indian government and people on Chinese private equity.

One of the most agreed-upon remedies to this might not be a complete trade-ban, but a reduction in reliance on exports and foreign investments. PM Modi’s Atmanirbhar Bharat aims for exactly that. According to the most recent Economic Survey of India (ESI), the “Make in India” campaign can potentially create four crore jobs by 2025. The Survey, in fact, suggests China as the model to be emulated. Although the current economic situation makes it seem like an unattainable goal, there is a bold silver lining. Indian manufacturers were relatively quick in their production of Personal Protective Equipment (PPEs), face masks, and ventilators. In the course of the pandemic, India helped the United States of America through its supply of hydroxychloroquine, thereby earning the title of the “pharmacy of the world”. Although grim, this situation presents India with an opportunity to recreate its image on the global stage, with the support of US-led Western alliances.

All in all, both military and economics are founded in devising the right strategies. India and China seem to be playing a game of chicken where the first one to budge loses. Except, it is a fundamentally unequal playing field. While India is overlooking the gap between itself and China, the latter does not appear to view India as an equal opponent. That being said, China is learning to grow less complacent, as India grapples to find a stronger footing in the world. The US-India ties, in particular, threaten to dwarf China’s position in the Asia-Pacific region.

But, China might just have its fingers in too many pies. The Indo-China military cold war has persisted since India’s defeat in the 1962 war. In light of bettering US-India ties, the US-China trade war is possibly in a 'new phase’ of their cold war. On a regional level against India, China’s popularity is relatively higher - China finds allies in Nepal, Pakistan, and Bangladesh through its economic initiatives, such as the Belt and Road Initiative (BRI), the China-Pakistan Economic Corridor (CPEC), the Trans-Himalayan Corridor, the Bangladesh-China-India-Myanmar Economic Corridor (BCIM). However, with US backing, China faces a threat in both military and economic fronts. Quite like the US-Soviet Cold War, now India could potentially play a role in the stemming Chinese influence across the globe. While it is easier said than done, with US assistance, India might finally gain the international status, envisioned by development economists post its independence.

As of now, that is as far away as the coronavirus-ridden Indian markets are from a $5 trillion economy. But all that can be said is that it is a step in the right direction.

First published on the Monk Prayogshala blog

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Renuka Bhat

Political Econ kid. I love literature, baking, Japanese and cats, in no particular order. Check out my work on: https://renukapbhat.contently.com/