The International Monetary Fund (IMF) has emphasized the crucial role of collaboration between Asian nations, including those with existing geopolitical tensions like India and China, to foster sustained economic growth and stability in the region and beyond.

Despite ongoing border disputes and trade imbalances, the IMF underscores that a strong India-China partnership is vital for the global economy. Both countries are significant contributors to global growth, and their collaboration can serve as a counterbalance to Western influence, promoting reforms in international institutions.

Several factors highlight the potential for India and China to come together for mutual benefit:

• Economic Interdependence: Both economies have shifted from import substitution to export promotion strategies, increasing their focus on economics. Globalization has further increased interdependence and the potential for mutual gains.
• Trade Growth: Despite existing trade imbalances, the share of China in India's overall imports and exports has been rising.
• Global Influence: Cooperation between India and China can amplify their influence in multilateral forums like BRICS and the Shanghai Cooperation Organisation (SCO).
• Regional Integration: Deepening regional integration in Asia, including lowering non-tariff barriers, could significantly boost GDP growth in the long term.

However, several challenges need to be addressed to facilitate effective collaboration:

• Geopolitical Tensions: Historical geopolitical issues have often framed the relationship as a zero-sum game.
• Trade Imbalance: India faces a significant trade deficit with China, which has been continuously widening.
• Geo-economic Fragmentation: Increasing trade-restrictive measures and fragmentation could disproportionately affect Asia, which has greatly benefited from regional integration and supply chains.

To overcome these challenges and foster greater collaboration, the IMF suggests several policy recommendations:

• Maintaining Openness to Trade: Open trade policies are crucial for economic prosperity, especially for Asia. Policymakers should focus on reducing trade restrictions to avoid retaliatory measures and promote global economic dynamism.
• Prudent Fiscal Policies: Asian countries should utilize monetary and fiscal tools to address economic challenges while ensuring long-term fiscal sustainability.
• Structural Reforms: Implementing structural reforms, such as those related to the Goods and Services Tax (GST) in India, can strengthen the consumer market and improve fiscal transparency.
• Regional Cooperation: Strengthening regional trade and cooperation can help Asian economies diversify their export markets and build economic resilience. Initiatives like the Regional Comprehensive Economic Partnership (RCEP) can deepen cooperation in trade, services, the digital economy, and regulatory harmonization.
• Investment in Digital Capabilities: Adopting artificial intelligence and other advanced technologies, supported by investments in skills, infrastructure, and regulatory frameworks, can boost productivity and generate new jobs.

The IMF emphasizes that Asia is a powerhouse of the global economy, and regional cooperation is essential for maintaining resilience amid trade tensions and other global challenges. By addressing existing challenges and implementing appropriate policies, countries like India and China can unlock their collaborative potential and drive sustainable economic growth for the region and the world.