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Published Twice a Month
November 28, 2018 – December 11, 2018

Centre on Asia and Globalisation
Lee Kuan Yew School of Public Policy


Guest Column

India Must Avoid Belt and Road Envy

By James Crabtree    


CIB_128_1200x800Photo by Ilirjan Rrumbullaku on flickr.com

As India heads into an election year in 2019, its leaders have yet to formulate a convincing plan to deal with China’s growing presence around South Asia. In particular, the giant Chinese Belt and Road Initiative (BRI) has left New Delhi with a dilemma over how it should respond to Beijing’s regional attempts to win friends and influence. But whatever else it does, India would be wise to avoid the temptation of trying to match China by launching some kind of cut-price BRI rival of its own. 

Precise financial details about BRI’s supposed $1 trillion of infrastructure projects are often oddly hard to pin down. Nonetheless it is clear that China is pumping many tens, if not hundreds of billions into India’s backyard. Projects launched as part the China-Pakistan Economic Corridor (CPEC) alone (part of the BRI), which includes investments in disputed areas of Jammu and Kashmir, are estimated to have a combined budget of around $60bn, according to the Center for Strategic and International Studies (CSIS), a Washington-based think tank. 

The BRI is one of many factors that have contributed to frosty relations between the world’s two largest emerging economies over the last few years. The year 2018 saw something of a thaw, following April’s special meeting between Prime Minister Narendra Modi and President Xi Jinping in Wuhan, the capital of China’s eastern Hubei province. But after 2017’s military standoff on the Himalayas Doklam plateau, even this meeting remained largely a cosmetic exercise.

The BRI is a particular problem for India because it has changed New Delhi’s relations with many neighbours at once. Pakistan is now effectively a Chinese ally. Sri Lanka moves back and forth between Beijing and New Delhi. Smaller nations like Bhutan and the Maldives once had little option but to grumble about India’s excesses. Now, in their own way, they too can play one Asian giant off against the other. 

Nor is the BRI likely to prove a passing phenomenon. The initiative has been recently assailed for the debt its projects often leave behind, as poorer nations struggle to repay commercial loans, leaving them indebted to Beijing in one way or another. Suspicions have grown, probably unfairly, that this was the plan all along. 

Even so, China seems set to press ahead with an initiative that has become inextricably linked with Xi’s foreign policy. Plans unveiled in September at the time of BRI’s 5 year anniversary to pump a further $60bn into projects across Africa hardly suggest China is planning to pull away from its signature foreign policy endeavour. This expansion only deepens New Delhi’s dilemmas. It also explains why some, envious of China's infrastructure ambitions, argue India should consider launching some kind of nascent BRI rival, significantly expanding its existing programme of infrastructure investments in neighbouring nations. 

Yet such an approach seems unlikely to succeed, not least because India self-evidently lacks anything close to China’s fiscal resources. New Delhi also lacks the basic building blocks that have made the BRI possible. China has huge policy banks able to bankroll grand foreign projects, like the China Development Bank. India’s state-backed banking sector, by contrast, is dominated by small, ailing lenders, almost all of whom are bogged down by bad loans, and in any case, have a deeply cautious lending culture. 

There are also no real Indian equivalents of the hulking state-directed enterprises that develop and build most BRI projects. India’s private sector does have a fair number of buccaneering tycoons, as I have detailed in my recent book, The Billionaire Raj. But most of them are also struggling with bad debts, and show few signs of wanting to support new projects of any kind. Finally, it is far from clear if India’s risk-averse democracy has the capability, or indeed the will, to develop expensive infrastructure projects abroad, when it often seems unable to do so at home. 

Whoever win’s next year’s poll to become the country’s Prime Minister, a more sensible, focused strategy is needed. To the extent India does fund infrastructure abroad, it should pick smaller projects that can actually be delivered, avoiding the delays that too often characterise Indian infrastructure diplomacy. International plans should follow roughly the same path, as with like the Asia-Africa Growth Corridor, a deal launched between India, Japan and various African countries in 2017, which has so-far delivered little in terms of outcomes. 

If South Asia ever was a place where India’s writ ruled unchallenged, that is no longer the case. No country in the region wants to choose between China and India. But at its worst China’s BRI builds poor quality “white elephant” style infrastructure projects, leading to a backlash in its partner nations. It is not an approach India should to want to copy. 


James Crabtree is an Associate Professor in Practice at the Lee Kuan Yew School of Public Policy in the National University of Singapore. He is author of "The Billionaire Raj".


The views expressed in the article are solely those of the author and do not necessarily reflect the position or policy of the Lee Kuan Yew School of Public Policy or the National University of Singapore.



News Reports

Bilateral relations

India & China to launch platform for diplomacy
The Times of India, December 10

India and China for the first time will launch a forum for high-level people-to-people and cultural exchange on December 21. The mechanism, which will cap a year of thaw in Sino-Indian ties, will be inaugurated by foreign minister Sushma Swaraj and her counterpart and state councillor Wang Yi.

Rivals and neighbours: China and India count down to joint military drill
South China Morning Post, December 10

China and India will launch a two-week joint military drill on Tuesday, the first exercise of its kind since the two Asian giants were locked in a tense border stand-off in the Himalayas 18 months ago.

China-wary India Oks 56 new warships, 6 new subs in 10 years
The Times of India, December 4

With Chinese warships making regular forays into the region, the Indian government has given initial approvals for construction of 56 new warships and six submarines for the Indian Navy over the next decade.

Modi, Xi say perceptible improvement in India-China relations post-Wuhan Summit
The Indian Express, December 1

Prime Minister Narendra Modi and Chinese President Xi Jinping have admitted that there had been a “perceptible improvement” in bilateral ties since the Wuhan informal summit and both sides are optimistic that 2019 would be an even better year for India-China relations.

News Reports

China and India in the Region

In ‘Asia’s gateway to Africa’ Mauritius, rivals China and India compete for the upper hand
South China Morning Post, December 8

With a population of just 1.3 million, Mauritius relies on India for security, but needs China’s help for its ambition to become the Singapore of Africa, a financial and business gateway for overseas investors in the continent.

China welcomes India, Pakistan's efforts to open Kartarpur Corridor
The Economic Times, December 3

China on Monday welcomed India and Pakistan's efforts to open the Kartarpur Corridor, saying strengthening dialogue between them and properly addressing their differences means a lot to the world peace and development.

G20 summit: India, Russia, China hold trilateral after 12 years
Livemint, December 1

The Russia-India-China (RIC) meeting came hours after Prime Minister Narendra Modi, his Japanese counterpart Shinzo Abe and US President Donald Trump held their first trilateral meeting on the margins of the summit

Countering China: US, Japan and India push for open Asia
Channel News Asia, December 1

The leaders of the United States, Japan and India met jointly on Friday (November 30) for the first time and called for open navigation in Asia, a show of unity with China clearly in mind.

Sri Lanka signs port deals with China amid political upheaval
Reuters, November 29

Sri Lanka penned two multi-million dollar contracts with Chinese firms for a port upgrade project on Thursday (November 29) in the middle of a political hiatus that has raised doubts over the legitimacy of the government and the legality of the deals.

India offers Maldives $1bn in loans to help repay China debt
Nikkei Asian Review, November 28

India is considering providing up to $1 billion in loans to the Maldives to help it pay down its debt to China, but only if the island nation agrees to distance itself from Beijing, Indian government sources said.

News Reports

Trade and Economy

China backs India’s bid for improved domestic regulations
Livemint, December 10

Many developing countries, including China, on Thursday (December 6) supported India’s initiative to “rejuvenate” and “re-energize” negotiations to improve the disciplines on domestic regulation, which are being used by the US, the European Union (EU), Canada and Australia, among others, to deny market access to short-term service providers such as computer professionals, according to people familiar with the development.

U.S. finalizes duties on certain steel pipe from China, India
Reuters, December 7

The U.S. International Trade Commission on Thursday said it had determined that American producers were being harmed by imports of certain large-diameter welded steel pipe from China and India, a finding that locks in duties on those products for five years.

After long years of skewed trade, China agrees to import more from India
The Economic Times, December 5

China is now keen to import pomegranate, grapes, soyameal, fish oil and fish meal from India apart from non-basmati rice and sugar it had decided to buy earlier.

China rejects India’s proposal to trade in rupee-renminbi
Livemint, December 2

China has not accepted India’s proposal to carry out bilateral trade in local currencies which was aimed at bridging the ballooning trade deficit with the neighbouring country, an official said.

India’s Q2 GDP growth rate falls to 7.1%, but retains fastest growing economy tag
The Indian Express, November 30

The Indian economy grew at 7.1 per cent in the July-September quarter of the current fiscal, down from 8.2 percent in the previous quarter (April-June), according to government data released Friday (November 30). However, it still remained ahead of China to retain the tag of the world’s fastest-growing major economy.

EU, India, China try to break WTO impasse on disputes
The Times of India, November 29

Key members of the World Trade Organisation (WTO) including European Union, India and China have come together in an attempt to break an impasse over resolving trade disputes as the US has blocked the appointment of new members to hear cases in the Dispute Settlement Body (DSB).


News Reports

Energy and Environment

WHO report: Climate action could save China, India more than $10 trillion
CGTN, December 7

‍Keeping the temperature rise within 1.5 degrees Celsius would result in massive financial gains for China and India. Both countries would save a maximum of nearly 10 trillion U.S. dollars, a World Health Organization (WHO) report claimed.

China’s unbridled export of coal power seen as imperilling climate goals
The Japan Times, December 6

Even as China struggles to curb domestic coal-fired power and the deadly pollution it produces, the world’s top carbon emitter is aggressively exporting the same troubled technology to Asia, Africa and the Middle East, an investigation has shown.

India Seen Emulating China Growth in LNG Use to Fight Pollution
Bloomberg, December 6

China’s dramatic increase in liquefied natural gas imports over the past two years may have hogged the headlines, but India may well emulate its neighbor in switching to the cleanest and fastest-growing fossil fuel.

Making the world hotter: India's expected air-conditioning explosion
Channel News Asia, December 4

With India's air-conditioning market expected to explode from 30 million to a billion units by 2050, the world's second-most populous country could become the planet's top user of electricity for cooling.

India likely to attain one of its climate targets a decade in advance: new research
The Indian Express, December 3

India is likely to attain the goal of having 40 per cent of its electricity generation coming from renewable sources by the year 2020 itself, instead of the original target of 2030.


Analyses

The Complex Geopolitics of India’s Growing Energy Needs
Future Directions International, December 6

By James Bowen, Research Fellow at the Perth USAsia Centre

India’s growing energy co-operation with Russia, including proposed Arctic developments, illustrates the considerable geopolitical implications of its vast demand and growing import dependence and include Delhi’s likely role at the centre of climate-focused international diplomacy.

Security cooperation can boost China, India ties
Global Times, December 4

By Sun Yong, Professor at Sichuan Normal University

Asian powers should shoulder their responsibilities and the fate of Asia should be in the hands of Asian countries and their people. It will contribute considerably to global peace and stability if China and India work together to set an example of cooperation to resolve these security problems.

Why India must not take Jack Ma's Communist Party of China ties lightly
Money Control, December 4

By Jacob T. Jabin, China analyst at the National Maritime Foundation, New Delhi

The data Chinese companies collect about Indian consumers allows them and the Chinese State to achieve big data applications on a scale unavailable to Western or Indian companies or to their governments.

China deserves its economic success
Livemint, December 3

By Zhang Jun, Dean of the School of Economics at Fudan University and Director of the China Centre for Economic Studies, a Shanghai-based think tank.

The economic rise over the last 40 years was achieved by its successful policy of committed structural reform.

This little talked about trade relationship could flourish, China and India just need to ditch the mutual distrust
South China Morning Post, December 2

By Alan Rosling, entrepreneur, adviser and commentator based in Hong Kong. Previously an Executive Director of Tata Sons and co-founder of Kiran Energy

Hong Kong has the cultural ambidextrousness, the science base and the financing skills to act as interpreter between new businesses in India and China.

China, India and Russia jointly counter unilateralism at G20
CGTN, December 2

By Ning Shengnan, Assistant Research Fellow at the Department for Developing Countries Studies, China Institute of International Studies.

On the one hand, Beijing, New Delhi, and Moscow need to play a more important role in maintaining regional and international peace. On the other hand, the current situation requires the three economies to stand up against unilateralism and trade protectionism and to promote a fair, just, equitable, democratic and representative international order.

India Struggles to Compete With China’s Digital Silk Road
The Diplomat, November 29

By Chan Jia Hao, Research Assistant at the Institute of South Asian Studies (ISAS); and Deepakshi Rawat, Junior Research Consultant at Pulse Lab Jakarta

China is making technological inroads into South Asia that will have long-lasting repercussions for India.

Modi Should Not Bail Out China In Maldives
Forbes, November 28

By Panos Mourdoukoutas,Professor and Chair of the Department of Economics at LIU Post in New York 

India’s Prime Minister Narendra Modi shouldn’t help the Maldives pay its debts to China. It isn’t in India’s own economic and geopolitical interests, at this point.


Books and Journals

Is China’s loss, India’s gain? An examination of the US tariff war
Observer Research Foundation, November 20, 2018

By Abhijit Mukhopadhyay

The author is Senior Fellow with ORF’s Economy and Growth Programme. His main areas of research include macroeconomics and public policy, with core research areas in monetary economics and the political economy of finance.

The unilateral tariff imposition by the United States on various countries has started a trade war that threatens to adversely affect the world’s major economies. This paper finds that no country, including the US itself, is likely to benefit from a tariff war. In India, some analysts had expected that the country’s export penetration in the US and elsewhere will increase, as China loses out. An analysis of trade data, however, shows that while China’s export basket is more advanced and consists of more finished manufacturing goods, India’s consists more of raw materials and semi-finished goods. As the tariff war continues, therefore, it is unlikely that India will gain significantly in the international market at the expense of China.


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Compiled and sent to you by Centre on Asia and Globalisation and the Lee Kuan Yew School of Public Policy, National University of Singapore.

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