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.
Receive Daily Updates
Recent Posts
Steve Ovett, the famous British middle-distance athlete, won the 800-metres gold medal at the Moscow Olympics of 1980. Just a few days later, he was about to win a 5,000-metres race at London’s Crystal Palace. Known for his burst of acceleration on the home stretch, he had supreme confidence in his ability to out-sprint rivals. With the final 100 metres remaining,
[wptelegram-join-channel link=”https://t.me/s/upsctree” text=”Join @upsctree on Telegram”]Ovett waved to the crowd and raised a hand in triumph. But he had celebrated a bit too early. At the finishing line, Ireland’s John Treacy edged past Ovett. For those few moments, Ovett had lost his sense of reality and ignored the possibility of a negative event.
This analogy works well for the India story and our policy failures , including during the ongoing covid pandemic. While we have never been as well prepared or had significant successes in terms of growth stability as Ovett did in his illustrious running career, we tend to celebrate too early. Indeed, we have done so many times before.
It is as if we’re convinced that India is destined for greater heights, come what may, and so we never run through the finish line. Do we and our policymakers suffer from a collective optimism bias, which, as the Nobel Prize winner Daniel Kahneman once wrote, “may well be the most significant of the cognitive biases”? The optimism bias arises from mistaken beliefs which form expectations that are better than the reality. It makes us underestimate chances of a negative outcome and ignore warnings repeatedly.
The Indian economy had a dream run for five years from 2003-04 to 2007-08, with an average annual growth rate of around 9%. Many believed that India was on its way to clocking consistent double-digit growth and comparisons with China were rife. It was conveniently overlooked that this output expansion had come mainly came from a few sectors: automobiles, telecom and business services.
Indians were made to believe that we could sprint without high-quality education, healthcare, infrastructure or banking sectors, which form the backbone of any stable economy. The plan was to build them as we went along, but then in the euphoria of short-term success, it got lost.
India’s exports of goods grew from $20 billion in 1990-91 to over $310 billion in 2019-20. Looking at these absolute figures it would seem as if India has arrived on the world stage. However, India’s share of global trade has moved up only marginally. Even now, the country accounts for less than 2% of the world’s goods exports.
More importantly, hidden behind this performance was the role played by one sector that should have never made it to India’s list of exports—refined petroleum. The share of refined petroleum exports in India’s goods exports increased from 1.4% in 1996-97 to over 18% in 2011-12.
An import-intensive sector with low labour intensity, exports of refined petroleum zoomed because of the then policy regime of a retail price ceiling on petroleum products in the domestic market. While we have done well in the export of services, our share is still less than 4% of world exports.
India seemed to emerge from the 2008 global financial crisis relatively unscathed. But, a temporary demand push had played a role in the revival—the incomes of many households, both rural and urban, had shot up. Fiscal stimulus to the rural economy and implementation of the Sixth Pay Commission scales had led to the salaries of around 20% of organized-sector employees jumping up. We celebrated, but once again, neither did we resolve the crisis brewing elsewhere in India’s banking sector, nor did we improve our capacity for healthcare or quality education.
Employment saw little economy-wide growth in our boom years. Manufacturing jobs, if anything, shrank. But we continued to celebrate. Youth flocked to low-productivity service-sector jobs, such as those in hotels and restaurants, security and other services. The dependence on such jobs on one hand and high-skilled services on the other was bound to make Indian society more unequal.
And then, there is agriculture, an elephant in the room. If and when farm-sector reforms get implemented, celebrations would once again be premature. The vast majority of India’s farmers have small plots of land, and though these farms are at least as productive as larger ones, net absolute incomes from small plots can only be meagre.
A further rise in farm productivity and consequent increase in supply, if not matched by a demand rise, especially with access to export markets, would result in downward pressure on market prices for farm produce and a further decline in the net incomes of small farmers.
We should learn from what John Treacy did right. He didn’t give up, and pushed for the finish line like it was his only chance at winning. Treacy had years of long-distance practice. The same goes for our economy. A long grind is required to build up its base before we can win and celebrate. And Ovett did not blame anyone for his loss. We play the blame game. Everyone else, right from China and the US to ‘greedy corporates’, seems to be responsible for our failures.
We have lowered absolute poverty levels and had technology-based successes like Aadhaar and digital access to public services. But there are no short cuts to good quality and adequate healthcare and education services. We must remain optimistic but stay firmly away from the optimism bias.
In the end, it is not about how we start, but how we finish. The disastrous second wave of covid and our inability to manage it is a ghastly reminder of this fact.