At the heart of India’s China problem is an Indian inability to size up the Middle Kingdom and the meaning of its spectacular rise and to devise realistic responses to meet the attendant challenges. To be fair, this is not an affliction of New Delhi alone. Successive American administrations have also remained equally puzzled about China’s long-term strategic intent. There are three views on China that dominate much of Indian public discourse: of China as a (historically) unique power; of China as an economic partner; and of China as fellow ‘norm-entrepreneur’.
China as a sui-generis power
Many in India have implicitly assumed China to be a sui generis power – grounded in a supposedly-Asian ethos – whose behaviour is to be understood outside the matrix that is usually employed to study traditional (Western) powers. When Xi Jinping calls for a new kind of great-power relationship, he has many takers here.
This group of China aficionados believes that Beijing’s mandarins privilege the impetus of a deep-historical identity over raison d’etat – the assumption being that China is a civilizational state that would eschew the use of force and coercion in its rise to great-power status. Such idealists are comforted whenever Chinese dignitaries visiting India invoke the ‘Five Principles of Peaceful Coexistence’ – a set of quasi-philosophical principles that were in vogue up and until Mao saw to it that India was abjectly defeated in a short and sharp confrontation in 1962.
China as an economic partner
The second view of India-China relationship can be termed econo-centric. China, in this view, emerges as a key partner in India’s economic transformation, especially when it comes to becoming a large market for Indian goods and services as well as an important source of foreign direct investment. ‘Chindia’ – a Chimerica-like portmanteau coined by a minister of the previous government – will be predicated, in equal parts, by the logic of economic interdependence and the history of civilizational ties, so goes the argument.
But idealism is not always a necessary condition in the econo-centric view. One prevalent pragmatic opinion in India is that of leveraging China for India’s infrastructure growth and connectivity needs to reduce the gap in material strength between the two countries. Once that gap is sufficiently bridged India will be in a position to deter Chinese designs, proponents of this view hold.
It is not uncommon to see this view being expressed pithily both on- and offline as “an 8 per cent GDP growth rate for the next two decades is India’s China policy.” For India to sustain this growth rate, Chinese surplus capital, directed at infrastructure development, can come handy. India’s connectivity aspirations can also be met by aligning them with Chinese mega-plans like the Belt-and-Road-Initiative.
There is indeed historical precedence to buttress this line of thinking. After all, China’s spectacular growth was supported through free-riding the economic and security architectures that the US put in place, not to mention through leveraging Western investment. Why can’t India out-China China in a similar way?
There are two problems with this argument. First, there is no common enemy that India can invoke to seek concessions, economic or otherwise, from China. The US-China rapprochement was in the shadow of the Soviet Union and is a classic example of how the two countries leveraged a strategic triangle to their own benefits.
With China-Russia animosity now buried (at least publicly) and India-Russia relationship increasingly under strain, triangular geopolitics is unlikely to work in New Delhi’s favour. Second, even assuming that Chinese economic growth slows down in the near future, the gap in material strength between the two countries is unlikely to be closed anytime soon.
Putin, Modi and XI Jingping
China as fellow norm-entrepreneur
The third view of China in India is as a potential partner in promoting global governance norms that will promote the unique needs of emerging economies led by the two countries. The coterie that hold this view have argued that existing multilateral institutions, whether it is the International Monetary Fund or the World Bank, have been insufficiently effective in meeting the needs of emerging economies.
They also hold the view that these economies are under-represented in multilateral institutions (as measured by voting shares, for example). Seen from the prism of multilateral bargaining it makes sense for India and China to deploy their collective heft to seek reforms of these institutions – when possible – and to create new institutions that compliments the existing ones.
BRICS was the product of this line of thinking. Pragmatic Indian scholars and policy-makers, even when suspicious of China’s strategic intent towards India, have argued that BRICS is a valuable platform in that it allows the two countries to cooperate on “low-politics” issues (the über-realist John Mearsheimer’s terminology) – trade, sustainable development, and finance, for example – without hard-security irritants that would normally stalemate bilateral discussions being in the picture. This was also the line of thinking that led India to seek membership as the second-largest shareholder in the China-led multilateral Asian Infrastructure Investment Bank.
An unstated hope was that as both countries find convergence on low-politics issues, the road towards greater understanding on hard-security concerns and sensitivities would be paved. That has not come to a pass. While India has enthusiastically supported the BRICS agenda – last year’s summit in New Delhi had a record number of events around it – China has shown no discernible softening around India’s core security concerns regarding Pakistan or India’s membership in the NSG.
The view that the 21st century will be that of Asia’s has become commonplace to the point of being trite. The fructification of this long bet will be predicated in large measures by whether India and China can simultaneously and peacefully rise to great-power status. This will be invariably determined by whether India reads China – and absorbs the consequences of China’s rise into its strategic calculus – correctly and realistically.
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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.