The biggest foreign policy crisis of the year is India’s chance to comprehensively revamp its China policy.
The stand-off at the India-Bhutan-China tri-junction reflects the dissonance in the Sino-Indian relationship, driven by a hardening of the Chinese stand on territorial claims. Some Indian analysts suggest a comprehensive relook at India’s approach to such assertiveness, while others believe such a “reset” is already under way.
The last such “reset” of relations was in 1988, when Rajiv Gandhi visited China. Though a trip had been in the making since 1984, a formal invitation arrived with the Chinese vice-foreign minister in 1987. The trip next year, the first premier-level exchange since 1960, eased strains accumulated from the days of Jawaharlal Nehru-Zhou Enlai. This indicates that a relationship “reset” has a shelf-life of about three decades. So, if it is time to reassess, what should it entail?
The benefits of the 1988 modus vivendi accrued to both sides. Bilateral trade flourished, the boundary issue was managed, and both countries could grow as economic powerhouses without being tied down in their backyards.
Thirty years later, there is a growing view that the 1988 rapprochement has run its course.
For some years now, the Chinese elite have believed that their time as the pre-eminent power has arrived. Initiatives like “China Dream” for a “fully developed Chinese nation”, or the Belt and Road Initiative (BRI) are critical to hoist China to the centre of the international system. Publicizing the BRI summit in May was a way of claiming legitimacy for this role.
These alone perhaps would not have required an immediate reorientation. However, US President’s apparent transactional approach to Asia makes it a pressing necessity. There is little clarity on how a distracted American administration would react to developments in South Asia.
China believes this is its opportunity to claim geopolitical space in Asia. The selective approach to terrorism, or opposing India’s entry to the Nuclear Suppliers’ Group, indicate where it wants to see India in a China-led order. The China-Pakistan Economic Corridor through Gilgit-Baltistan helps tie down India in South Asia. Similarly, the current stand-off is China’s attempt to legitimize its claim and change the status quo.
The Doklam incident follows a template that China has been using for a while. This involves identifying an area with unsettled claims, and moving in. When challenged, an indignant China claims rights “since ancient times”. As evident elsewhere, China has carefully separated the project of reclaiming national pride from economic relationships—which means better trade relations or Chinese direct investment alone is unlikely to change anything.
The closeness following 1988 was as much a necessity for China as it was for India. Still not an economic behemoth, China needed newer markets to expand. The post-Tiananmen crackdown soon after also made it necessary to nurture new relationships. The China of 2017, however, is far removed from the China of 1988, and India must account for this asymmetry.
First, recalibrating the relationship will require clear signalling of expectations and nuanced communication. Not all developments will merit a reaction but the ones that do will need to be identified and responded to, purposefully. These may include China inciting anti-India sentiment in the neighbourhood, or impeding infrastructure development in Indian territory. To consider these red lines will demand communicating the message clearly; if tested, India will also need to demonstrate that it has a multi-step strategy, and the willingness to follow it.
Second, the government will have to decide on responses—will it challenge China’s own red lines, its “core interests?” India’s approach has changed since the 2015 Chumar incursion. Tibet policy, too, shifted when the “prime minister” of the Central Tibetan Administration attended Narendra Modi’s swearing-in. Turning these separate incidents into cohesive strategy will leave little room to dither. Closer relations with Taiwan will also demonstrate resolve. Following up on these will require determination and finesse, and no space for muddling through.
Third, India will have to consider context while responding. For instance, is it sufficient to only protest China’s stand on Masood Azhar, or will questioning China’s equivocation on terrorism help more? How do the economic and strategic benefits of BRI stack up against the objections?
Admittedly, answering these questions is far easier in theory than in practice. An ad-hoc approach will not work for a reorientation of foreign policy of this magnitude. Serious institutional energy will have to be spent in considering all options and planning a coherent strategy.
As in 1988, it will require deliberate signalling that the entire relationship will not hinge only on these issues. As the veterans of South Block explained, the earlier “reset” worked because it was consistently nurtured for years. Another one, if considered, will also need to play the long game.
Recent Posts
Petrol in India is cheaper than in countries like Hong Kong, Germany and the UK but costlier than in China, Brazil, Japan, the US, Russia, Pakistan and Sri Lanka, a Bank of Baroda Economics Research report showed.
Rising fuel prices in India have led to considerable debate on which government, state or central, should be lowering their taxes to keep prices under control.
The rise in fuel prices is mainly due to the global price of crude oil (raw material for making petrol and diesel) going up. Further, a stronger dollar has added to the cost of crude oil.
Amongst comparable countries (per capita wise), prices in India are higher than those in Vietnam, Kenya, Ukraine, Bangladesh, Nepal, Pakistan, Sri Lanka, and Venezuela. Countries that are major oil producers have much lower prices.
In the report, the Philippines has a comparable petrol price but has a per capita income higher than India by over 50 per cent.
Countries which have a lower per capita income like Kenya, Bangladesh, Nepal, Pakistan, and Venezuela have much lower prices of petrol and hence are impacted less than India.
“Therefore there is still a strong case for the government to consider lowering the taxes on fuel to protect the interest of the people,” the report argued.
India is the world’s third-biggest oil consuming and importing nation. It imports 85 per cent of its oil needs and so prices retail fuel at import parity rates.
With the global surge in energy prices, the cost of producing petrol, diesel and other petroleum products also went up for oil companies in India.
They raised petrol and diesel prices by Rs 10 a litre in just over a fortnight beginning March 22 but hit a pause button soon after as the move faced criticism and the opposition parties asked the government to cut taxes instead.
India imports most of its oil from a group of countries called the ‘OPEC +’ (i.e, Iran, Iraq, Saudi Arabia, Venezuela, Kuwait, United Arab Emirates, Russia, etc), which produces 40% of the world’s crude oil.
As they have the power to dictate fuel supply and prices, their decision of limiting the global supply reduces supply in India, thus raising prices
The government charges about 167% tax (excise) on petrol and 129% on diesel as compared to US (20%), UK (62%), Italy and Germany (65%).
The abominable excise duty is 2/3rd of the cost, and the base price, dealer commission and freight form the rest.
Here is an approximate break-up (in Rs):
a)Base Price | 39 |
b)Freight | 0.34 |
c) Price Charged to Dealers = (a+b) | 39.34 |
d) Excise Duty | 40.17 |
e) Dealer Commission | 4.68 |
f) VAT | 25.35 |
g) Retail Selling Price | 109.54 |
Looked closely, much of the cost of petrol and diesel is due to higher tax rate by govt, specifically excise duty.
So the question is why government is not reducing the prices ?
India, being a developing country, it does require gigantic amount of funding for its infrastructure projects as well as welfare schemes.
However, we as a society is yet to be tax-compliant. Many people evade the direct tax and that’s the reason why govt’s hands are tied. Govt. needs the money to fund various programs and at the same time it is not generating enough revenue from direct taxes.
That’s the reason why, govt is bumping up its revenue through higher indirect taxes such as GST or excise duty as in the case of petrol and diesel.
Direct taxes are progressive as it taxes according to an individuals’ income however indirect tax such as excise duty or GST are regressive in the sense that the poorest of the poor and richest of the rich have to pay the same amount.
Does not matter, if you are an auto-driver or owner of a Mercedes, end of the day both pay the same price for petrol/diesel-that’s why it is regressive in nature.
But unlike direct tax where tax evasion is rampant, indirect tax can not be evaded due to their very nature and as long as huge no of Indians keep evading direct taxes, indirect tax such as excise duty will be difficult for the govt to reduce, because it may reduce the revenue and hamper may programs of the govt.