Can India’s Act East Policy challenge China’s Belt and Road?

China’s diplomatic moves have seen it improve relations with its Central Asian neighbours through its flagship One Belt, One Road economic partnership – which should see the region’s landlocked countries enjoy an infrastructure windfall. Relations with Russia have warmed, partly due to Putin’s need for new friends since his falling out with the West, although this situation could change again very soon.

To the East Japan and South Korea remain distant politically but remain tight trade partners. A big sub-continent sized question lies to the South, can China improve its relations with India? The two nations could find common cause but seem determined to fall out. China’s support for Pakistan is a big red flag for India, who see its neighbour as a state sponsor of terrorism, while India’s continued hosting of the Dalai Lama and his government in exile rouses similar emotions in Beijing.

The Askai Chin region is a high, vast and uninhabited desert which has been controlled by China since its brief war with India in 1962, this and other border disputes remain unresolved and will remain a thorn in the side of warmer Sino-Indian ties. India is also wary of new “Pakistans” – more neighbouring countries allying with China leaving isolated and surrounded by hostile states.

China has forged strong economic links with Bangladesh, Sri Lanka and Myanmar which has Delhi worried and so Prime Minister Modi has hit back. India’s Act East policy has seen the country pursue a more active foreign policy and Indian companies are making more waves overseas as they invest in and trade more with other emerging markets. Indian companies are no where near their Chinese rivals in terms of volume, but there are echoes of China’s going out policy as firms from Delhi, Mumbai and Bengaluru are buying overseas natural resource assets to help feed demand at home, not to mention investing in tech industries and more traditional manufacturing.

India has been pushing its diplomatic and economic case with close neighbours, building bridges with Myanmar, Afghanistan, Iran and Sri Lanka. All these countries have good reasons (such avoiding Chinese dominance) to spread their international bets by maintaining good relations with India.

Perhaps the most promising region for the Act East Policy is ASEAN. The South East Asian trading bloc signed a free trade agreement with Delhi in 2015. Growing trade and investment between the sub-continent and region having been underscored with new security and diplomatic links. This region fears Chinese economic and military power so its makes sense to hedge by staying close to another rising power.

But India faces an uphill struggle, its economy is a fraction of China’s giant workshop and although its growth is currently marginally higher it is from a smaller base and its overall economy is between 5 or 10 times smaller depending which measure of GDP is used.

India’s big trump card is its democratic multi-cultural society which stands in sharp contrast to China’s autocracy, although far behind in terms of wealth, elections, a vibrant civil society and free press make India a more attractive diplomatic partner (particularly for other democracies such as Japan and Indonesia). If Delhi can start to match China’s economic prowess then it could soon compete with China on a more equal footing.



Categories: Geo-Economics

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1 reply

  1. Nice article it will be very interesting to see how it workouts, stakes are really high for india

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