China extended its invitation to India for its $4 billion event – the New Silk Road Summit currently taking place in Beijing. India has chosen to give the extravagant event a miss owing to several strategic and economic factors.
China’s One Belt One Road (OBOR) has been the single most widely discussed topic in current geopolitics by academics, policy makers and the media since it was proposed by the Chinese President Xi Jinping in 2013. The last time a statement by a nation’s leader was scrutinised in such depth was when George Bush Jr had announced USA’s ‘War on Terror’.
The OBOR has two components, the land-based Silk Road Economic Belt (SREB) and the Maritime Silk Road (MSR). The SREB proposes to connect China to Europe, West Asia and parts of Africa through Central and South Asia. The MSR aims to achieve the same through the waters of the Indian Ocean Region (IOR). As Beijing claims, connectivity is the basic objective of this monumental initiative.
India’s proximity to the OBOR makes it an important player that could potentially influence the outcome of it. It is also the largest economy in South Asia with a GDP of over $2 trillion. It has a long coastline with several ports. With its southern tip overseeing the Indian Ocean and Sri Lanka as an immediate neighbour, it is strategically placed to determine the progress of MSR. It shares lengthy borders with countries such as Nepal, Bangladesh, Myanmar and Pakistan. that have endorsed OBOR. As the fastest growing developing economy and with a young demography, India promises to be a global power in the future. These indicators explain China’s call to India to be ‘part’ of its grand economic initiative.
In order to analyse India’s decision, firstly, it has to be understood that the OBOR is not a multilateral agreement which nations sign on to be ‘part’ of it. Hence, the argument on whether or not India must be part of OBOR can be dismissed. Several infrastructure and economic projects along the proposed land and sea routes put together will form a network of connection which is called OBOR. The China- Pakistan Economic Corridor (CPEC) is one such project that passes through Pakistan-occupied Kashmir (PoK), an India territory.
What China seeks from India is an endorsement of the initiative as a whole. This signifies that China is aware of the importance of India’s role as a regional power to meet the set objectives of OBOR. Hence, the question that has to be raised is whether it is in India’s interest to endorse China’s OBOR.
Investment in infrastructure development is the need of the hour in Asia. The Asian Development Bank (ADB) in its recent report has stated that Asia requires $1.7 trillion annually between 2016 and 2030 to meet its infrastructure needs. This includes mechanisms to mitigate the impact of climate change. According to ADB, currently, an annual investment of $881 billion is made in infrastructure across Asia. Economically larger nations such as China, Japan and India - the top 3 biggest economies in Asia, need to co-operate to develop infrastructure and ensure economic inclusion in the Asian region. China, with an estimated $3 trillion foreign exchange reserve, has the deepest pocket in Asia by far.
Hence, by endorsing OBOR, India could expand its diplomatic space to ensure that the capital outflow from China is used for constructive purposes and to narrow down the capital deficit in Asia. India could bring in this factor of accountability which is much needed in development projects.
Central and South Asia have long been largely excluded from economic opportunities surrounding them. It remains to be one of the most poorly connected regions in the world. Economic integration of this region and infrastructure development could be potential solutions to some of the pressing issues such as security and poverty. A war torn country like Afghanistan stands to benefit through infrastructure initiatives which will provide better connectivity for trade and hence increase its economic activity. India definitely stands to gain if the Central and South Asian countries commence their individual, yet integrated path towards development. A healthy and wealthy neighbourhood will definitely rub off on India too. It will also open up new and alternative markets for India’s trade and hence could be of economic benefit.
Factors that could have influenced India’s policy makers to not participate seem to be fundamental to the OBOR initiative itself.
The only project part of the SREB that runs into Indian territory is the CPEC. With China not being concerned about India’s objections to the CPEC running through PoK, the possibility for India to endorse SREB can be eliminated. It does not hold relevance for India to endorse the project when the proposed route does not go through any other Indian territory other than PoK. This proves to be a failure on the Chinese part to not include India at the planning stages of OBOR.
While the pros mentioned highlights India’s potential role at the international forum, it first needs to find answers to its own interest before playing a good samaritan.
It is not in India’s national and economic interest to endorse OBOR. Apart from strategic reasons such as territorial integrity and sovereignty as impediments, India does not stand to gain any economic dividends by a mere endorsement of the Chinese initiative. China, on the other hand, could benefit from India’s approval of OBOR. This is because India’s posture is a critical factor in influencing countries like Sri Lanka, Bangladesh, Myanmar and Nepal to adopt favourable policies towards China and OBOR. This is the underlying reason China has been pushing India to endorse OBOR. This raises the question on why India should endorse OBOR without gaining any leverage from doing so.
India’s domestic connectivity and infrastructure is challenged more by internal factors. Laws relating to the three factors of production - land, labour and capital - require reforms, which are more of a challenge than non-availability of resources. Hence, what India requires to do is to set its house in order to address its problems that are holding it back in terms of development.
Another challenge faced by India is the efficient management of ports. The MSR proposes to develop port infrastructure along the IOR to boost trade and connectivity. Ports in Indian southern coastal region already have the capacity to handle large volumes of trade. What it needs is an enhancement in efficiency. A domestic solution to the management of ports presents as a better option. This will also benefit Indian port management industry. A China initiated connectivity project need not necessarily be the saviour.
There are serious doubts about achieving the proposed objectives of OBOR in the Central and South Asian region. China’s extension of its helpful hand to countries in the region does not seem to reflect the set agenda. What these countries are left behind with is huge debt burden. An example to illustrate this fact is Sri Lanka.
There have been reports pointing to the modus-operandi of Chinese contractors in executing projects abroad. Sri Lanka is faced with a $8 billion debt to China. This is largely due to the exorbitant rate of interest the Chinese demand for the loans they have sanctioned to Sri Lanka for infrastructure development. Such financial practices are against international lending norms for development projects. This also takes away the opportunity for countries along the OBOR in achieving mutually beneficial economic interdependence.
Reports also suggest that the Chinese contractors do not create employment opportunities for the domestic population. Chinese workers migrate to construction sites taking away jobs from the Sri Lankans. These workers are also said to be Chinese prisoners, which is a violation of human rights. Such practices must not be encouraged by India in any region.
Not endorsing OBOR does not imply that India is non-cooperative with China. India is part of various Chinese initiatives such as the Asian Infrastructure Investment Bank (AIIB) where it is the second-largest shareholder, the Regional Comprehensive Economic Partnership (RCEP) which is a multilateral trade agreement under progress and the Bangladesh-China-India and Myanmar (BCIM) economic corridor which is a connectivity project similar to CPEC. India is also now a full member of the Shanghai Cooperation Organisation (SCO), a multilateral forum that aims to develop Central Asia and enhance security in the region. The AIIB, RCEP, BCIM and SCO have significant roles to play in the outcome of OBOR. These are components in which India cooperates not only with China but with all other stakeholders as these are in India's national interest and practices international norms.
Weighing the advantages and disadvantages, India has rightly chosen to not endorse OBOR as it does not hold any significant value to do so given the status-quo. While strongly objecting CPEC, India has also kept its options open for the future. Cooperating on a case to case basis and treading a cautious path will safeguard India’s national interests in the longer run. India’s policy makers seem to have picked the wise choice indeed.
Sundeep Kumar S is a Research Officer at the Chennai Centre for China Studies.
Views expressed are the author's own.