Qualified restart: Modi-Xi talks pave the way for new opportunities

The first formal meeting in five years between Chinese President Xi Jinping and Prime Minister Narendra Modi on the sidelines of the Brics meeting in Kazan, Russia, has raised expectations yet again of a reset in Sino-Indian relations. The cordial tone of the meeting portended well for this troubled relationship. Both leaders welcomed the agreement on resolving a military standoff along the Line of Actual Control (LAC) in Ladakh and announced a restart of dialogue mechanisms at an early date between special representatives of both countries to address the broader issues in the boundary dispute. The rapprochement between Asia’s two largest economies must be welcomed. However, India will need to be careful and vigilant in moving forward with the process.

 

Details on the terms of disengagement and patrolling arrangements along the LAC have not yet been specified. As the Ministry of External Affairs noted in its statement, relevant dialogue mechanisms at different levels will now work to stabilise and rebuild relations. Mr Modi has also stressed that maintaining peace on the border is India’s priority. There is much riding on normalising relations between the two Asian giants. Nonetheless, India will need to work on different aspects of this relationship to strengthen its position. The first, of course, is to achieve normalcy on the border and get back to the pre-2020 position. Even as it works towards this goal, which has largely been agreed upon by both sides, it will need to build capabilities to avoid a repeat of the situation at any point. The second aspect of the relationship is economic. Like most countries in the world, India depends on China for a variety of goods. China emerged as India’s largest trading partner in 2023-24, ahead of the United States. India relies heavily on China for hi-tech goods, including critical telecom and power-utility components, electronics, solar panels as well as pharmaceuticals.

 

Notably, despite tensions on the border, India’s trade with China kept rising with the balance tilted decisively in favour of the Chinese. This is also partly because of the non-tariff barriers used by China. India will need to take up such issues with the Chinese authorities with the aim of also making the trading relations more balanced. However, this would still be of limited use and a broader strategy will need to reduce dependence on China by building domestic capabilities and finding new sourcing options. Given the state of the relationship between the US and China, sustained dependence on India’s northern neighbour for inputs could also affect India’s trading possibilities with the US and the West at large. Union Finance Minister Nirmala Sitharaman has rightly noted that India will not blindly accept foreign direct investment without being mindful of where it is coming from.

 

Overall, while the meeting between the leaders of India and China is a good restart, India will persistently need to work both on the diplomatic and economic fronts. To be sure, while the meeting between Mr Modi and Mr Xi occupied much of the mindspace, it should not be lost sight of that this was the first meeting of the expanded Brics grouping and Mr Modi articulated India’s position on a variety of issues. At a broader level, it is an achievement of India’s diplomacy that the country is engaged with major competing powers on its own terms. This can bring long-term advantages and responsibilities.