India will lose geopolitical battles against China with a weak economy

Mar 29, 2013 4:30 pm 24 comments

Share this Article

Author:

China’s GDP in 2003 was $1.4 trillion. Its about $9 trillion now. China’s new leader Xi Jinping signed fresh deals to import modern jets, submarines and other deals flashing its $3 Trillion of forex reserves. The Chinese have been aggressive in their diplomatic efforts across the globe which is backed by the confidence they have in their economy. Compare this with that of Indian foreign policy which has faltered with tiny states in its neighborhood, be it Maldives, Nepal, Bangladesh ,Myanmar or Sri Lanka. In all these countries, India faces only one factor, China. The same holds good for the South East Asian Countries and Africa where the scramble to gather resources is well and truly on. India so far has only its “soft power” to show for but no concrete policy or the money spent to carry any influence with these countries.

Let us first consider the sub continent which is our backyard. China has made heavy inroads in all these countries developing roads, ports, railways and also providing weapons. China has made a new road named friendship road from Tibet to Nepal which undermines India’s security. China has made roads, ports and railways in Bangladesh, Sri Lanka, Myanmar. It has invested in the Maldives. China has a head start in the oil and gas resources in Myanmar and set up a surveillance system on the Coco islands that can track India missile tests. No surprises then when China claimed that the Agni V missile had a much longer range than the 5500 kms claimed by India.

Let us consider trade relations with each of the SAARC countries with China and compare it with India.

1) Sri Lanka

The total bi-lateral trade value between Sri Lanka and China topped US $ 3.2 billion, which is the highest in the history. Sri Lanka’s exports to china have increased by 5.9% to $ 162 million in 2012 in comparison to 2011. China’s exports to Sri Lanka reached over US$ 3 billion in 2012.

Investments from China to Sri Lanka were likely to increase this year as against US $ 243 million recorded in 2012. The cooperation in the infrastructure sector also made great strides. Major projects, like Mattala Rajapaksa International Airport in Hambantota, Putlam Power Plant, Colombo-Katunayake Expressway, Colombo Lotus Tower, South Container Terminal of Colombo Port, Extension Lines of South Highway from Pinnaduwa to Godagama and the railway from Matara to Beliatta and some road construction projects like, A9 to Jaffna were all working well.

Compare this with India which has $4 Billion trade and does have other projects, but many of them have been half cocked and plagued with trouble due to the Tamil issue which has not allowed India to fully realize the potential with Sri Lanka. Sri Lanka has come up with many incentives for investment in their county so much so that an official in China said that Sri Lanka was the best investment destination in South Asia and even better than ASEAN!

2) Bangladesh

Bangladesh represents one country which has dramatically fallen out from India’s grasp as far as trade goes. China’s trade though heavily lopsided in its favor now stands at $7 billion a year while India stands at just $2.5 billion again with trade completely in Indias favor. Almost all of Chinas exports to Bangladesh have come at India’s expense which traditionally exported all such items like textiles, machinery etc to Bangladesh. China has been aggressively wooing Bangladesh providing it space for exhibitions in trade fairs. Bangladesh has offered to China a duty free zone to relocate some of its industries that face competition issues due to rising labor prices in China.

3) Nepal

Chinas trade with Nepal stands at $2 billion which is again heavily in its favor. This represents a huge jump in trade between the two countries although India still remains the largest trading partner of Nepal at $4 billion. China has been wooing Nepal aggressively, It has made land ports to facilitate trade between the two countries and China is investing in infrastructure development in Nepal.

4) Maldives

Maldives has been firmly on the Chinese horizon in recent times. Although India has always been the largest trading partner, China has now the same trade figures as India at about $70 million. More importantly, Chinese tourists now constitute the largest group in Maldives. China has also extended big loans to Maldives. India has done the same but the recent change in the government and the coming in of the Islamist government there has seen India’s influence wane in the country.

Looking at the African stage, China has aggressively expanded its influence in the dark continent. Today China has displaced the US and Europe in Africa to become the continents largest trading partner at near $200 billion. The balance of trade is equal as China has heavily invested in the natural resources in Africa and imports oil, copper and other raw materials to feed its huge manufacturing base. There is a Chinese diaspora in Africa which takes care of Chinese investments which includes roads, ports, dams, railways and more recently, manufacturing units which have Chinese managers with African labor. Compare this with Indo-African trade at about $75 billion though India has had historic and traditional ties with the continent and the presence of large Indian origin population in the continent.

South East Asia too shows that China leads India by a long way. China is ASEANs largest trading partner. Trade between the two stands at over $400 billion. Compare this with India’ trade of $80 billion. Both India and China now have a free trade agreement with ASEAN but while China’s trade has been growing dramatically, India has been quite slow.

From all this, the most common factor is that China runs large trade surplus with each of these countries being largely an export driven economy. The other fact is that the rate of increase of trade is also very high at over 20% generally to over 35% with countries like those of ASEAN. This has allowed it to run up large forex reserves which it is using all over the world in key strategic areas to expand its influence for both trade as well as military and strategic objectives. China has used its large surplus to develop infrastructure in Africa, South Asia and the poorer countries of ASEAN. Contrast this with India which is a net importer and India’s $300 billion reserve is not good enough for it to buy influence all over. Add to this India has some issue or the other with its neighbors. These neighbors have now realized that they can play the China card in its relations with India and China has obliged these countries readily and expanded its influence in the region which is of great importance to it for both its energy security as well as trade it ships its goods to Middle East, Europe and Africa.

India has been trying to increase its influence in the South East Asia where many of the countries in the region have territorial disputes with China. But even then, China’s trade and investment in these countries far out strips India. With Vietnam, China has a trade of $7 billion while India has $4 billion. China is heavily investing in Cambodia and Laos.

Even after India started economic reforms, it has progressed slowly. Lots of hurdles to trade and investments and regulations has meant that its not easy to do business in India. This has held back faster economic growth in India. China has relentlessly marched on it its economic progress to become the second largest economy in the world and on course to be the largest by the end of the decade. Chinese leaders have shown single minded focus of fast economic growth while Indian leaders lack any foresight or vision to develop the country and are often seen come out with populist, unsound and unwise policies to meet those populist schemes. India herself lacks world class infrastructure and the expertise for it to build infrastructure abroad. Even if India does undertake projects abroad, they are slow to complete. China on the other hand has built world class infrastructure in its own country and has the expertise to execute major projects world over and dwarfs the rest of the wold in infrastructure development. China’s willingness to do business with rouge regimes, gives it a major advantage. Just like how the west found it easier to work with dictators while preaching democracy everywhere. Hard cash,weapons for rouge regimes or massive loans and infrastructure development for poor countries is too much for any of such nations to refuse practically.

For India to succeed diplomatically and in geopolitics  it is imperative that it grows economically and very rapidly at that. Right now China outspends India in every sphere to “buy” influence which in many cases is detrimental to Indian national security but there is nothing that India can do about it unless it can match China dollar for dollar. India’s “good image” will then be an advantage to compete with China.

About Yusuf Unjhawala

Businessman by profession but always fascinated with defence and strategic affairs. Editor, India Defence Analysis. Admin, www.defenceforumindia.com/forum

24 Comments

  • For India democracy and high economic growth are mutually exclusive.

  • Congress is cancer that has held India back as has the twisted secularism

  • What we need is a Dictator who is strong in mind, and will relinguish power when the time is right

  • I’m sure that given China’s ways, an alternative to China will be taken by both hands.
    But this cannot be felt in advance, such a response will be seen only when the alternative (India or whoever) materializes and stands as an equal to China.

    • Exactly the point. India will be able to forge good alliances and friendships and dependencies if it can come close to spending the amount China does.

  • Soumik Pyne

    Chankya once said” O king look after your treasurer better than your commanders, for he who controls the treasury truly controls the balance of power in war”. All said and done however China is far ahead of India by compromising on Labor laws, Environmental concerns and a blatant disregard for human rights especially the rights of landowners to the plot where they have settled in some cases for hundreds of years.This is something a multi-party democracy simply cannot do, however all of the above also have far- reaching social and political implications that have always in history thrown a spanner in the works of rising authoritarian states. Also china to some extent grows using a Created growth rate much like the Soviets early in the 50’s and 60’s.But again the Chinese being a particularly effective entrepreneurial people could maintian the growth.Only time can tell how this drama will finally play out.

  • What goes up must come down.

    India should develop its economy at its own pace and make sure it is sustainable. Remember that China is now reaping the awards of the one-child policy, which will come back to haunt them in 20 years time when they will have a staggering senior population. China also manipulates its currency so it stays undervalued and has built entire empty cities just so it could raise its GDP. The most important factor, however, is that China is in a death-dance with the US. If anything happens in the US the Chinese economy will go down the crapper.

  • The Chinese have been aggressive in their diplomatic efforts across the globe & SE Asia,which is backed by the confidence they have in their economy Compare this with that of Indian foreign policy which has faltered with tiny countries in its neighborhood, be it Maldives, Nepal, Bangladesh ,Myanmar,Pakistan or Sri Lanka.
    1)india with its large coastal areas oil exploration shud be developed with JV inorder to reduce the import bill & generate f/x reserves.
    2)Reduce trade balance in favour of india against china.
    3)Change in foreign policies which has failed with economy package & infra projects to gain confidence.

  • I am from mainland China, and I say – GO, INDIA. I hope the Indians free China from the evil and corruption of the PRC.

  • Can someone please tell me why India’s neighbors are coddling up to China?
    Simple fact is that India’s stance on Sri Lanka at UN, Arming Tigers and unable to do what is write as the central government. (at least in terms of Sri Lankan situation)
    Especially treat your neighbors as friends not to influence or create havoc to appease a hidden agendas. Have respect to it’s neighbors aspirations and wishes. Have to stop this mentality of tit for tat arms race for goodness sake Pak , Ban and SL are your brothers and sisters
    Saying goes as Who needs enemies when we have friends like India

  • The ideas in this weak article are losers. Nobody fights conventiona WW2 syle wars today

  • NANDAKUMAR M S

    There is no point in getting worked up on India’s poorer growth and influence compared to China. India is democratic, Secular (however skewed they are though) country which has huge limitations in everything & everywhere (endless loop of opposition at every stage plus the political inadequacy). Whereas China can deal with anything with iron hand (at least so far) and break all the barriers for growth. My hunch is India will leapfrog in not too distant future after attaining correct critical mass (combination of literacy, maturity and infrastructure etc.)

  • India will need a strong millitary: army, navy, air force. indian army lacks weapon, air force has a faulty aircraft system, navy: sorry i don’t know.

    india needs to upgrade these millitary equipments.

  • elegant_india

    The growing Chinese influence in indian Ocean & access of GWADAR port in Pakistan is really a matter of concern for India.
    But India too have lots of capabilities to play TIT for TAT by increasing its ties with ASEAN countries, especially TAIWAN & VIETNAM. Currently CHINA moves strongly signals to restrict trade routes in Indian Ocean region & to create naval bases in SriLanka & Maldives. China’s support to Pakistan over disputed territories in Kashmir & supplies of nukes, armaments & running other infrastructure projects is clearly a indication for INDIA to take some bold step to reply Chinese aggressive moves.
    It’s now time for India to change its view on TAIWAN, even TAIWANESE too eager to develop relations with INDIANS, there military also rising. But instead of providing arms & military support to Taiwan, India need to enhance a corporate & business ties with Taiwan. India’s presence in TAIWAN really make CHINA cautioned.

    In every Chinese diplomatic relations whether it’s with country like Nepal, srilanka or Argentina, one thing is very much common, that’s Chinese Export where they invest 1$ & in return get 3$.

    Recent move by Indian government is really appreciable to get clearance of CHABAHAR port in IRAN which is just 75 km away from GWADAR in Pakistan, now again the question comes how much time INDIA take to build IRAN-AFGHAN rail links, because AFGHANISTAN is rich in minerals & china already completes its rail link from Pakistan to Afghanistan to getting access of minerals & try there best to access afghan resources via afghan-pak-china Rail route.

  • If for no other reason, India must make a strategic policy turnaround to embrace Western alliances for the sake of economic uplift for the impoverished billion. Sixty years muddling in the non-aligned non-sense, rubbing shoulders with despot kings and communist dictators who have very little to show in real progress today has left India damaged economically. The economic weakness in the light of gigantic advancements of China has left India defensively weak. China will continue to pressure India into compromising posture so that they achieve their larger goal. The enlightened generation of India need to take a more proactive role in the policy formation. The first policy change should start with jettisoning the phony posture of neutrality. The Western Europe, NATO and the USA represent the clubs that India should fight for membership rights. Just look at the nations that became part of this alliance, namely, Western Europe under the Marshall Plan, Japan, and the Asian Tigers. Through direct or indirect affiliations they enriched their citizens with better standard of living, economic prosperity and stronger military. The foggy head Indian leadership has failed repeatedly and it is time to open the doors of power to let fresh breeze blow in.

  • India is so disgustingly poor, still wants to become ‘world power’, HAHAHA. First feed your starving people not daydream.

    • china have not opened up it’s economy for International evaluation,all data like 9% growth or 7% growth and HDI is reported by Chinese government,no proof supporting Chinese economic data exist.How can u say that china is more developed than India? So saying china is richer than India might be nothing more than false claims.Basically in Layan’s language you Chinese have not even given the exam and you are saying that you are the topper.That is really very funny

  • Go to beijing compare it to delhi. Compare shanghai to mumbai. Even if chinese figures are not accurate. They cant be far off. Sure there are poor chinese in china but hundreds of millions have been lifted out of poverty over the years. The chinese government does not follow the western model wholesale. And the chinese people isnt bothered who runs the country. Emperor or President. As long as life gets better by the day. India best times was when only 1 capable leader was up there instead of a group of clowns.

    • “And the chinese people isnt bothered who runs the country. Emperor or President. As long as life gets better by the day.’

      I don’t think so-I feel after Tiananmen Square protests chinese people do not have the guts to overthrow monarchy from their nation.If I am wrong can you tell me why chinese goverment have imposed restrictions on media.Ofcourse to prevent any kind of pro democracy uprising.Chinese people should realize that it is just a matter of luck that the current chinese leaders are working for welfare of their country.Who knows in future if chinese leaders became like Pak army generals who always want to overthrow elected goverment and impose their will on the nation.So chinese politcal system is the biggest risk to china.
      As far as Delhi and Mumbai are concerned ,I don’t think problem of these cities is poor infrastructure.The real problem is Old infrastructure+increase in poppulation.You can say that goverment should have developed infrasture by now but the fact is things go slow in democracy( for example-In a democracy their can be regime change after every 5 years,Things like this slows down the process of development) but ensures human rights and long lasting democracy which is very important.
      I do not know whether you are chinese or not but let me tell you that China will never play a big role in world not only because China is facing competion from other BRICS countires but because western countries like USA will never allow you to do so and they will use the issue of democracy and human rights to curb chinese development(Involvement of USA.France UK etc in Arab Spring in the name of human rights and democracy can be a good example).You can say western countries have double standards,I will agree with you on that but the fact still remains the same-Western countries will use this card of human rights and democracy to limit your involment in global issues.

      So basically this attitude of chinese people to support monarchy as long as their life gets better day by day is their biggest enemy and their is no need for me to provide any proofs for what I am saying because we have seen countries getting destroyed due to non democratic goverments in past and we are seeing such countires getting destroyed even right now(Arab spring).Issues like border tensions and conflicts with neighbours bring external threat,issues like corruption brings internal threat to a nation but issues like human rights and monarchy have potential to invite both internal as well as external threat.

Leave a Reply

You must be logged in to post a comment.

Follow

Get every new post delivered to your Inbox

Join other followers: