Opinion Columnists 23 Mar 2021 Mohan Guruswamy | Th ...
The writer, a policy analyst studying economic and security issues, held senior positions in government and industry. He also specialises in the Chinese economy

Mohan Guruswamy | The challenges of living next to Chinese dragon

Published Mar 23, 2021, 7:21 am IST
Updated Mar 23, 2021, 7:51 am IST
It would thus seem India and China are destined to live out the foreseeable future as rivals, if not adversaries
Geography and recent history have made the India-China relationship a difficult one, and one in which the United States will find ample space and opportunity to inveigle itself to its advantage. (Representational image: AFP)
 Geography and recent history have made the India-China relationship a difficult one, and one in which the United States will find ample space and opportunity to inveigle itself to its advantage. (Representational image: AFP)

The Indian and Chinese economies are now in two entirely different stages of development. For a start, China’s GDP is nearly five times bigger than India’s. Its GDP is now over $15.4 trillion, while India is inching towards $3.2 trillion. How China moves and acts in the future will affect the developed economies enormously as it has become the major provider of world growth for the past two decades, while India’s indifferent growth in the past decade has had little bearing or derived little benefit from it. The shutdown in Chinese production centres due to the Covid-19 pandemic and the consequent slowdowns in manufacturing from Japan to the US and from India to Europe only serves to establish how much world manufacturing has come to depend on China.

For India to be a $5 trillion economy by 2024, as Prime Minister Narendra Modi dreamed of, is now not even a faint hope. For India to make that rendezvous and matter to the world, it needs to be posting a frenetic 12-15 per cent growth over the next four years, and to overtake China would mean maintaining a pace of 8-10 per cent for the next four decades at least. There is not even a glimmer of that now. Hope is a good thing, but wishful thinking is a serious mental malady.

 

Despite the immediate gloom, the demographics seem to favour India, but it is still for India to show that it can take advantage of it. But if it doesn’t by investing in education, vocational training, public health and job creation, the youth bulge could very well become a millstone? While China’s population will stabilise at 1.46 billion by around 2030, India’s might stabilise at 1.70 billion around 2060.

Because its population will stabilise much before India’s will, China will age rapidly, which means its economic growth will inevitably slow down. India’s youthful demographics favour its continued growth for a much longer period. Thus, even if India keeps growing at about 7-8 per cent, its GDP could only close in on that of a China with a declining growth rate by around 2070.

 

But what does the rise of India and China imply for the world’s power structure? True, the world’s economic fulcrum will shift to Asia. Already Asia’s GDP exceeds that of the United States and the European Union. By 2030 it will account for about over 60 per cent of world GDP, with China having the biggest GDP. But this is in future and often the future has a habit of not happening as predicted. Therefore, we must look at the present.

The real problems in China will get accentuated, as exports to the US and EU slow down, as the US in particular is determined to reduce its trade gap. With low-cost production shifting to other low-cost economies like Vietnam and Indonesia. China will naturally try to overcome this by stimulating domestic and overseas consumption and can even finance it by slowly reducing its foreign reserves, as Saudi Arabia and others are doing now.

 

The high growth period in China is petering off and it’s the transition we must be wary of. Where will the world get its next growth engine? Demography favours India, but our political discourse gives no inkling of any awareness of this or inclination to put immediate politics aside to set our long-term course.

Geography and recent history have made the India-China relationship a difficult one, and one in which the United States will find ample space and opportunity to inveigle itself to its advantage. This is a made-to-order situation for strategists and leaders in the three countries to ply their trade with plenty of worst-case scenarios. It would thus seem India and China are destined to live out the foreseeable future as rivals, if not adversaries.

 

China’s aggressive soft power diplomacy has widely been seen as arguably the most important element in shaping the Indian Ocean strategic environment, transforming the entire region’s dynamics. By giving large loans on generous repayment terms, investing in major infrastructure projects like the building of roads, dams, ports, power plants and railways as a part of its Belt and Road Initiative, and offering military assistance and political support in the UN Security Council through its veto power, China is actively buying goodwill and influence among countries in the Indian Ocean region. India cannot compete with China in pocketbook diplomacy either.

 

China’s defence budget has almost certainly experienced double-digit growth for two decades. The annual defence spending of China rose from over $30 billion in 2000 to $209 billion in 2021, over three times higher than that of India. Foreign estimates of Chinese military spending suggest that actual spending may be much higher. In 2019, the Chinese government reported an official defence budget of just under $178 billion, while the Stockholm International Peace Research Institute (SIPRI) estimates actual (nominal) spending to have been $261 billion. SIPRI usually adds about 50 per cent to the official figure that China gives for its defence spending, because even basic military items such as research and development are kept off budget. This is not a sum India can match and the last thing we need to get caught in is a numbers game.

 

Now if one were an Indian planner, he/she would look at the China/Pakistan axis with askance. India has had conflicts and still perceives threats from both, jointly and severally. The Tibet plateau, once intended as India’s buffer against the north, has now become China’s buffer against India.

Now if one were a Chinese planner, he or she would be looking with concern at India’s growth and increasing ability to project power in the IOR. The planner will also note what experts are saying about India’s growth trajectory. That it will be growing long after China gets walking sticks. That it is the ultimate pivot state in the grand struggle for primacy between the West led by the US and Japan, and China.

 

In recent times there has been much talk about the “Quad” — the United States, Japan, Australia and India — to confront the spread of China’s dominance. There have been several rounds of talks and virtual meetings of these countries starting 2019. But we must not forget that unlike the US, Japan and Australia, who are physically distant from China, India lives cheek by jowl with it, sharing a long and contested border. It is Indian and Chinese troops which face each other eyeball to eyeball there.

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