Amidst a backdrop of increasing trade tensions with the United States under President Trump's administration, India finds itself at a critical juncture where it needs to recalibrate its foreign policy to safeguard its economic interests and maintain regional stability. Trump's recent imposition of tariffs on Indian exports, including a potential 50% tariff, has strained the traditionally strong relationship between the two countries, prompting New Delhi to explore alternative strategies. One potential avenue for India is to strengthen ties with China and explore a way to integrate its "Act East" policy with China's Belt and Road Initiative (BRI).
The "Act East" policy, launched by Prime Minister Narendra Modi, aims to promote economic, strategic, and cultural relations with countries in the Asia-Pacific region. Simultaneously, China's BRI is a massive infrastructure development project that seeks to connect Asia with Africa and Europe through a network of roads, railways, ports, and other infrastructure projects. While India has traditionally been wary of the BRI due to concerns about sovereignty and debt sustainability, the changing geopolitical landscape may necessitate a reassessment of its position.
Several factors suggest that closer cooperation between India and China may be beneficial in the current circumstances. First, both countries share a common interest in promoting multilateralism and resisting protectionist measures. By working together, they can strengthen the World Trade Organization (WTO) and other international institutions to ensure a level playing field for trade.
Second, increased trade and investment flows between India and China can help to mitigate the impact of US trade policies. China has already emerged as India's largest goods trading partner in recent years. Despite a significant trade deficit, India relies on China to achieve its economic growth targets. Further easing of trade barriers and promoting the movement of people can boost bilateral commerce and reduce India's dependence on Western supply chains. Recently, China has lifted export curbs on rare earths, fertilizers, and urea, signaling economic goodwill, while India has sent its first diesel cargo to China in three years. Moreover, China has agreed in principle to resume trade through Shipki-La in Himachal Pradesh.
Third, cooperation between India and China can contribute to regional stability and security. The two countries have a long-standing border dispute, but recent diplomatic efforts have led to a thaw in relations. Resuming direct flights and border trade, and forming new working groups on boundary issues and peacekeeping can reduce the risk of future skirmishes and promote a more peaceful environment.
However, several challenges remain in fostering closer cooperation between India and China. One major obstacle is the deep-seated mistrust and suspicion between the two countries. China's close relationship with Pakistan, its military modernization program, and its growing presence in the Indian Ocean continue to be sources of concern for India. Similarly, China views India's growing strategic partnership with the United States and its participation in initiatives like the Quad as attempts to contain its rise.
Another challenge is the economic imbalance between the two countries. India's trade deficit with China has been continuously widening, raising concerns about its long-term sustainability. To address this issue, India needs to enhance its manufacturing competitiveness and diversify its export basket to China.
Despite these challenges, the potential benefits of closer cooperation between India and China are significant. By working together, the two countries can promote economic growth, enhance regional stability, and strengthen multilateralism. To achieve this, both sides need to build trust, address their differences through dialogue, and focus on areas of common interest. India may need to cautiously recalibrate its approach to the BRI, exploring potential benefits while safeguarding its strategic interests. This could involve selective participation in specific projects that align with India's development goals and do not compromise its sovereignty. Finding a way to harmonize the "Act East" policy with the BRI could unlock new opportunities for economic cooperation and regional integration, ultimately benefiting both India and China.
The visit by Wang Yi, China's top diplomat, to Delhi came before an expected visit to Beijing by Modi to meet China's leader, Xi Jinping, in October. It will be Modi's first trip to China since 2018. Relations between the two nuclear powers plummeted in 2020 when a border dispute in the remote Himalayas turned deadly.
