Could India be an Alternative to China?

Recent international pressures placed on China during and before the COVID-19 pandemic could stand to benefit India’s geopolitical position and economic development, albeit it at a potential cost.

Could India be an Alternative to China?

Tensions between China and India increased sharply in June 2020 as military frictions along their border led to the deaths of 20 Indian soldiers. While these instances are nothing new, bringing to mind the 2017 border clashes, observers note that the recent skirmishes are the most violent since the Sino-Indian Border War of 1962.

This crisis takes place in a context in which China has been at the center of increasing tensions both in its immediate region and in its relations with the US, especially after Donald Trump came to power. The Corona crisis and the consequent deterioration of the global economy has also reinvigorated debate on China’s role on the world stage, with those who see the rise of China as an economic opportunity on the one side and those who see it as a danger to international strategic balances on the other. In this context, the Trump administration believes that developing US relations with India could be one of the most effective economic and strategic mechanisms to curb an increase in Chinese influence. When the Corona crisis reared its head, a number of major countries, including those in Europe, began to focus on existing imbalances in the structure of their economic relations with China, and therewith began considering transferring production out of China and moving it to other countries and regions, the most important of which is India.

During the escalation of tension between the Trump administration and China, India has found an opportunity to attract the investment of foreign companies operating in China. This was particularly the case when the US president issued an order for American companies to withdraw from China after Beijing raised customs duties on American goods in August 2019. Donald Trump’s visit to India in February 2020 encouraged the New Delhi authorities to launch economic initiatives meant to besiege China. In this context, Indian Minister of Communications Nitin Gadkari indicated in an interview with CNN that the Corona crisis provided an opportunity for India due to Chinese tensions with the US, mentioning the possibility of diverting Western and foreign investment in China to India. The Indian minister also indicated that “Japan has allocated 2 billion dollars in financial aid to its companies out of China, and New Delhi hopes that Japanese companies will turn to India.” During the same period, Indian Business News reported that India was having consultations with one thousand foreign companies currently investing in China with the intent of enticing them to transfer their business to India.

The government of India’s border state Uttar Pradesh is going to great lengths to communicate with foreign companies in a bid to attract their investments away from China. On May 8, 2020, Siddharth Nath Singh, the minister in charge of small and medium-sized enterprises in the government of this state, conducted a video interview with the European Business Group Federation, which includes 74 members, in order to persuade its companies to invest in the state of Uttar Pradesh. For this purpose the minister has communicated with the ambassadors of Italy, Belgium, Denmark, Latvia, Japan, and others. During a virtual seminar organized by the US- Indian Strategic Partnership Forum on April 28, 2020, representatives of several American companies expressed their desire to leave China and seek other destinations, including India. These companies invest in important sectors such as agriculture, electronics, defense, and aviation. During the same seminar, Indian Minister of State Raj Singh pointed to legal incentives, facilities, and guarantees that would encourage investment in Uttar Pradesh. Around the same time, Indian media also indicated that more than 100 American companies might transfer from China to Uttar Pradesh.

In view of these developments, Beijing sees the Prime Minister of Uttar Pradesh as a major challenge, as confirmed by the Uttar Pradesh’s Deputy Prime Minister Dinesh Sharma in an interview with Times of India. In fact, India not only wants to attract foreign companies away from China, but is also considering changing its trade policy with its Chinese neighbor by reducing its imports therefrom and by working to locally manufacture goods traditionally imported from China.[6]

China feels that its economic growth has become a target, especially of the US. From Beijing’s point of view, Washington has taken advantage of the Corona crisis to tarnish China’s global image by vocally warning of the dangers of its economic model and promoting it as an overall challenge to global stability. This situation has become a justification for Beijing in its recent emphasis of “medical diplomacy”, or its dispatching of medicines and equipment to aid certain countries in their own battles with the Coronavirus. Overall, when we consider the crisis of anti-China demonstrations in Hong Kong, and the relevant positions of Washington and London thereto, in addition to the recently enacted US law targeting Chinese officials accused of suppressing the Uyghur minority we can better understand China’s driving motivations and the heightened sensitivity and tension in Sino-Indian relations.

It is true that the American-Chinese conflict provides great opportunities for India on the economic and geostrategic levels, but for India to continue its economic rise, it must do its utmost to build and reinforce internal social mobility on the one hand and to ensure that all social groups benefit from the country’s economic development on the other. In other words, India needs to embody the spirit of Gandhi’s philosophy of peaceful coexistence in order to reap the benefits of a balanced rise at home and to promote its model abroad.

In short, international pressures on China may strengthen India’s geopolitical and economic position, but a capitalization on this reality has its drawbacks as well, as Beijing may push more to militarize its economy and foreign policy. China’s support for Myanmar’s military and economic projects, its establishment of a military base in Djibouti, and its strengthening of security and military ties with African countries such as Zimbabwe are examples for China’s growing confidence in the realm of security affairs. Other questions as to how India might be able to work with countries such as Vietnam, Thailand, and Indonesia that stand to benefit from pressures on China could also point to further shifts in global balances on the horizon. 

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