T N Ninan: Moving into South Asia

In 1991, when India launched its economic reforms, China's economy was about 50 per cent bigger than India's. By 2000, the Chinese economy had grown to two-and-a-half times India's size. Now it is five times as big. That is about the size relationship that India has today with the United Arab Emirates, or Colombia, when it comes to relative gross domestic product. No one in India thinks those countries are India's equal; and no one in China thinks India is its equal. After the talk of Chindia (Jairam Ramesh), of India and China rising together (Confederation of Indian Industry), of there being room for both countries in Asia (Manmohan Singh), and other blather, it is time to get real. Far from the Indian hope that it be treated as the pre-eminent power in South Asia and the Indian Ocean region, the emerging reality is that China is steadily pushing into South Asia.

Xi Jinping's proposals for this region are aimed primarily at developing the transport links that can help it neutralise India's geographical advantage in the region. Both the Maritime Silk Road and the proposed road link between Kunming in south-west China and Bangladesh, through Myanmar and India's north-east (a back-door entry into South Asia, so to speak), are designed to link the region more closely to the Chinese economy - as has already been done with Southeast Asia and is proposed to be done in Central Asia with a revival of the Silk Road. Such proposals also have obvious strategic implications. India has been wary in its responses, but Sri Lanka is enthusiastic about a scale of Chinese investment proposals that India cannot match, proposals strategically targeting a larger role in Sri Lanka's ports. Meanwhile, if Indians thought that the Maldives were a dependant country (remember, we foiled a coup bid in the 1980s), think again. Tourism accounts for about 30 per cent or more of the country's economy, and Chinese tourists have overtaken the once predominant Westerners in number. They account for 24 per cent of all tourist arrivals; India's share is barely three per cent. What dependence, and on whom? After Sri Lanka and the Maldives, Mauritius?

For years, India's attitude to Chinese investment was the same as that of the United States: view with suspicion, block if possible. Chinese telecom equipment was subjected to a special security audit. Then Chinese power equipment companies pretty much took over the business in India, offering a combination of low prices and cheap finance that won over Reliance Power and Lanco, while Indian equipment suppliers remained hungry for orders. India has fretted about the neo-colonial nature of bilateral trade (exporting raw materials while importing manufactured goods), and the massive trade imbalance. The Chinese meanwhile complained that India was being unfriendly when it came to its treatment of Chinese goods, companies and investment. That seems to have changed; many Indians are disappointed that China is offering only $20 billion in investment over five years, not $100 billion! Do we really want to be like some African countries, welcoming Chinese investment to build railways, set up special zones, and the like?

Writing on this page earlier this week, Nitin Pai referred to a recent Heritage paper by Michael D Swaine that analyses Xi Jinping's double-pronged diplomatic push: build positive economic relations while maintaining hard-line stances on territorial and resource issues. That approach is very much in evidence when it comes to India: incidents along the Line of Actual Control (LAC) continue alongside the economic initiative of offering investment and transport proposals. The point is simple: if India wants to avoid being cast as a subsidiary power in South Asia, and being put under pressure on strategic issues, it has to stop coming up second-best against the Chinese economy.