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Foreign Policy

Could India Rise amid China’s Dependence and Hegemony?

Aug 14, 2023

India's Journey: Embracing Multi-Alignment and Shaping the Global Stage 

As the Western powers grapple with the herculean task of ‘de-risking’ from China’s overwhelming dominance in certain strategic sectors, other countries are striving to rise up and occupy a portion of the global stage. India, having emerged from the ashes of non-alignment, is now actively embracing multi-alignment. This shift acknowledges the evolving dynamics and an attempt to chart a new path, engaging particularly as the self-identified Global South leader. 

Despite the looming obstacles that lay ahead, India’s spirit of fortitude is deeply embedded in its rich history of overcoming adversity. To continue achieving progress, Delhi balances between strategic autonomy and deeper engagement with the international community. This requires political wisdom and patience, to avoid over-dependence on any one power and prevent subservience, besides accepting that investments take time to yield results. Ultimately, India’s commitment to democracy and its pursuit of domestic transformation and poverty elimination are key factors enabling its growth as a worldwide power. 

Global Actors between Decoupling and De-risking 

As noted by Nobel laureate Michael Spence, the current period is marked by a phenomenon of “destructive decoupling,” alternatively called “re-globalization” (Taneja & Zakaria), or “gated globalization” in a lighter description (Khar). The world economy becomes more hostile and less open. Yet, within the uncertainty lies an opportunity for whoever adapts and innovates. The future will be shaped by those who embrace change, overcome adversity, and pioneer new paths. The ultimate victors will be those who rise and thrive in the face of great obstacles. 

With India now emerging as the world’s fifth-largest economy (nominal GDP), Delhi is in a prime position to observe other established global powers. The ongoing U.S.-China rivalry takes center stage in this context. While the U.S. has long pursued a ‘decoupling’ strategy to counter China’s expansion - reinforcing technology controls to undermine Beijing’s high-tech capabilities, such efforts have led to unforeseen consequences. Firstly, China is rapidly accelerating towards self-reliance in science and technology, as well as on export demand. Secondly, China is ramping up technological know-how, positioning itself as an industrial advanced power, emancipated from Western influence. 

Countries are struggling to match China’s sharp geopolitical tactics, where “Security and Development” take precedence nowadays. Furthermore, China is strengthening the strategic partnership with Russia, potentially challenging the ‘liberal order,’ while extending influence along the ‘String of Pearls’ from the South China Sea to Sri Lanka, Pakistan, and Djibouti. Meanwhile, India, perceiving China as a significant Indo-Pacific rival, responds with protectionist measures, screening investments, restricting strategic firms and technology, and prioritizing defense affairs, especially in the Line of Actual Control. And paying close attention to Pakistan, which is increasingly aligning with China economically and militarily, overshadowing Islamabad’s long-standing bond with the U.S. 

India’s foreign policy and global position are significantly impacted by these movements, which could weaken its desire for a distinct path and incline further towards closer ties with the West. By applying the ancient wisdom of Arthashastra (“the enemies of my enemies are my friends”), India’s interests are aligning with those of the U.S., undergoing a gradual foreign policy shift, marked by the India-U.S. Nuclear Agreement in 2007. Still, India navigates between different powers as a simultaneous member of QUAD, IPEF, the SCO, as well as BRICS and RIC. 

Pondering India’s Future: Could China’s Economic Miracle Offer Insights? 

China’s remarkable economic growth was fueled by the ‘engagement’ policy, which was meant to establish some democratic elements, though this effort was not successful. Nonetheless, this policy led to Beijing’s accession to the WTO and the adoption of market principles. As a result, numerous countries moved production to China because of lower labor costs. Those same Western countries may relocate production today to other efficient nations, diversifying supply chains and reducing reliance on China. Within the “China plus one” strategy, India emerges as the first alternate hub with a large workforce, potential for industrial scaling-up, a robust technology sector and decisive location in the Indo-Pacific, attracting Western companies. 

Herein, India holds strategic partnerships with both the U.S. and the EU, while maintaining a significant trading dependence on China. In 2022, the U.S. surpassed China as India’s primary trading partner (from 2008 to 2021 China held that position), yet that same year Sino-Indian trade reached an unprecedented peak of 136 billion USD, rising 8.4%. India faced a substantial trade deficit amounting to 101 billion USD. Currently, China’s economy is five times larger than India’s. 

China’s economic dominance extends beyond India, presenting formidable trade challenges for other global powers reliant on its strategic products and technology. In 2022 the U.S.’ trade deficit with China reached an all-time high. Furthermore, China’s sway in Europe resulted in a substantial €27.4bn trade deficit in December 2022. Despite the EU’s openness to Chinese trade (China was the largest partner for EU imports of goods in 2022), robust market barriers hinder European access. Besides, the U.S. Inflation Reduction Act further complicates European companies’ global competitiveness. To navigate these realpolitik dynamics and zero-sum games, Europe should minimize tactical vulnerabilities by diversifying trade, expanding suppliers, and adjusting production chains. India emerges as a natural alternative, prompting intensified bilateral efforts with Europe in recent times. 

Subsequently, disengaging from China poses a complex and time-consuming endeavor for many. Surprisingly, reports show how global reliance on China has increased since the ‘trade war’ started, while China’s dependence on the world has decreased. Last March, an Indian Institute of Foreign Trade study questioned the possibility of decoupling from China due to local companies relying on imported goods from China. “Make in India” still has shortcomings, yet its achievements primarily hinge on domestic factors. Efforts are underway to address critical issues like legal stability, investment risks, income disparity, and macroeconomic imbalances, yet their effective execution needs to be expedited for tangible results. 

Moreover, India’s presumed ascendancy cannot be assured merely by a potential decline of China. Already ten years ago Lee Kwan Yew said: “Do not talk about India and China in the same breath.” Today, while India may have the potential to counterbalance China’s economic ambitions in the span of a few decades, its ability to compete as an equal in trade and security remains uncertain. Achieving their objectives would require a multifaceted approach and strategic measures. 

Four Approaches for Improving India’s Economic Sovereignty and Global Influence 

The interaction between China and India has been defined by Brian Wong as the “most strategically” aspect of 21st-century international politics. To capitalize on this potential, Delhi could balance strategic autonomy with global engagement, avoiding overreliance on any single power. India can build on this by embracing one or a combination of the following approaches. 

Firstly, maintaining a domestic balance of economic and political power is essential for thriving, and a fragmented global economy with competing blocs does not foster success. Moreover, mutual distrust among nations lead to dangerous perceptions and inefficient and costly global supply chains. If India were the first to successfully address these threats, demonstrating an unwavering commitment to security and stability, it would establish itself as a beacon of reliability. 

Secondly, India may benefit from exploring alternative strategies to enhance competitiveness, beyond relying on providing low-cost labor and cheap goods, which was a successful approach for China to become a major supplier. Yet, China has since advanced technologically and now competes in more sophisticated goods. Therefore, importers could have different expectations from India than they had from China. India could evolve into a competitive supplier of technological capabilities beyond outsourced labor, producing higher innovation value goods to meet demand. 

Thirdly, reducing risks associated with economic and trade dependencies on China comes with its own set of challenges. If the West shifts economic and trade focus to other Asian countries instead of China, the former may end up relying on China for the raw materials necessary to produce goods. Essentially, they would have merely replaced a dependence on an intermediary with a new form of dependence on China. This situation would worsen if these countries become more vulnerable to Chinese pressure than they currently are. With a visionary approach, India could take the lead in demonstrating aptitude to effectively mitigate this trade. 

In essence, India has potential to emerge as a significant global power, as envisioned by Modi and Jaishankar. By assuming an active role as an effective mediator, India can foster global harmony as a trustworthy leader. And, by growing an influential position on the global stage over internally-focused G20 politics and domestic/electoral considerations, India has the capacity to bring stability to fractured geopolitics and to shape the world’s future from a pragmatic approach, strategic thinking, and profound grasp of power and influence. The future will determine if it emerges as a consequential global player. 

The author dedicated four months in 2023 to conducting extensive on-the-ground research in India, engaging with politicians, experts, policymakers and civic society leaders in the country.

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