Arunabha Bagchi
05 July, 2015
It has finally become official. Kaushik Basu, Chief Economist and Senior Vice-President of the World Bank, has declared India to be the fastest growing economy of the world. We Indians are delighted. Our newspapers have been highlighting this achievement already for the last month or so. We have edged out China in growth rate by 0.1 per cent. Our current per capita GDP is less than one-third of China’s. How long will it take for us to catch up with China with this excess growth rate could be a nice exercise for our school children. With our burgeoning population that is set to cross that of China in the medium term, we may set even a nastier exercise for them.Recently Soutik Biswas wrote a piece in BBC News under the title, “Is India’s Growth Exaggerated?” Even if he were wrong, we have an uphill task in front of us to be taken seriously as an economic power. Without economic strength, our military will remain perpetually vulnerable. While Mr Modi talks about this century the Asian Century, every other country talks about this century as the Chinese (and American) Century. Why would the Chinese want to share their glory with other Asians? Did the British call the nineteenth century the European Century, or the Americans call the last century the North American Century? We also do not have an all-weather friend after the collapse of the Soviet Union. We know that no other country would at the outset commit to unconditionally help us militarily if we were confronted with hostilities in future. This makes our foreign policy very tricky and our Ministry of External Affairs is acutely aware of that.
To strengthen his “Look East, Act East” policy, our Prime Minister is trying to use Buddhism as the common cultural thread between India and the East/South-east Asian countries. To use his Buddhism diplomacy, Mr Modi during his recent visit to China expressly went to see the Great Wild Goose pagoda in the Chinese President Xi Jinping’s hometown of Xian. Despite the symbolism, one must realise that the trajectories of Buddhism were radically different in India and China. While Buddhism in India has been absorbed into the pantheon of Indian gods and Buddha is considered an Avatar of Lord Vishnu, Buddhism (and Taoism) in China got fused with the fundamentally ethical/social doctrine of Confucianism during China’s “transition from the ancient regime of the Qing empire to the modern Republic.” This was essentially a secularist project of nationalising and rationalising religion. All this happened even before the Marxist revolution of Mao in 1949. Mr Modi has much better chance of building a genuine Buddhist bond with the ASEAN countries.
Our Minister of State for Finance recently asserted that India could double the economy in a decade. This is equivalent to saying that India would have 7 per cent growth rate consistently for the next ten years. But this is not very dramatic, as we saw remarkable growth rate in the middle of the last decade during UPA rule as well. That is why the minister had to twist the fact to make it sound more glamorous than what it actually means. All the big claims about our future growth rates are made with China in mind, although no one says that explicitly. There is nothing wrong in having healthy competition with other countries. European countries have done that for decades. Cold War was, to a large extent, economic competition between the United States and the Soviet Union. The problem with India is that our politicians do not face squarely the huge gap between our economy and that of China, tell the facts as they are to the public, and make it a national mission to improve our economy with the support of our citizens, irrespective of their political affiliations.
When China started on the present growth path a little less than four decades ego, there was considerable hesitation among Western companies to shift their production facilities to China. There were two reasons that helped get over the initial prejudice about China and unfamiliarity with both the Chinese language and culture. One was political; leveraging China’s economic strength to counter the Soviet Union. The other was economic; cheap production in China acting as a hedge against inflationary pressure in the West. China also played her part and gradually won over the trust of Western businessmen. At present, 20 per cent of all transactions between Europe and China are conducted in the Chinese currency - Renminbi. In March 2014 the reserve banks of China and Germany decided to set up the “Renminbi Centre” for the Eurozone. Already more than fifty European banks joined this hub in Frankfurt. Some people are speculating that Renminbi could some day eclipse the dollar as the most used trading currency in the world. China has already amassed enormous foreign currency reserves and started flexing her economic muscle all around.
The latest is the Chinese initiative to set up two new international financial institutions - the New Development Bank (NDB) and the Asian Infrastructure Development Bank (AIIB). The first one is officially a bank of the BRICS countries of which India is a member, and is a direct challenge to the hegemony of the World Bank. The second is meant to finance redevelopment of the historical silk route connecting China to Europe, along with its maritime counterpart, and is a direct challenge to the Asian Development Bank. Despite America’s clear disapproval, 57 countries have signed up, including all major European countries, to be the founding members of the AIIB. The notable exceptions are the United States and Japan, the largest shareholders of the World Bank and the Asian Development Bank, respectively.
The silk routes show most vividly India’s China conundrum. While Central Asia and Europe, as well as Pakistan, are supporting this initiative wholeheartedly, we have no role in the land silk route, while we would feel encircled by China if she succeeds in realising the maritime silk route. As part of this plan, China intends to create a 2,000-mile economic corridor between Gwadar, on the south-west corner of Baluchistan where China has already built a port, to north-west China with roads, rail links and pipelines crossing Pakistan. The proposed trade route will pass through the POK. Pakistan has brilliantly used her geographical location with huge strategic significance to make America, China and Saudi Arabia, all three of them, her all-weather friends.
The famous American political scientist Samuel Huntington, in his best-selling book, The Clash of Civilizations, predicted that these three powers representing the “only three distinct civilizations” would clash in the “New World Order.” Pakistan seems to have proved him wrong.
China can safely ignore our protest against her military and construction activities in the POK. Our concern about Chinese submarines reportedly anchoring in Karachi should leave them cold. There is no incentive for China to resolve the LAC dispute with us, despite our PM’s express desire to do so. Their violation of the LAC during President Xi’s visit to India testifies to that, despite all protestations to the contrary. China can continue to give stapled visa to Indian citizens residing in Arunachal Pradesh and Kashmir, while we unilaterally opened e-visa facility to Chinese citizens. China is going to pile up huge trade surplus with us as long as they have willing partners among Indian traders to dump their goods in the Indian market; the yoga mats used on Rajpath for the International Yoga Day illustrates this at its symbolic best. It is not the first time in our history that our traders sold our national interest to foreigners.
The Chinese have pulled themselves up by the bootstraps. Indians have no choice but to do the same. We should not delude ourselves into believing that we are at the threshold of becoming an economic superpower. To pull us up, economically and thereby militarily, cannot be a matter of political one-upmanship, but a long-term concerted effort of thinkers of all major political parties. All democratic countries have such non-partisan think-tanks that work out their long-term strategies. We cannot have an intimate partnership with the US, Japan and Australia axis, as they are never going to commit to defend our security interests at all costs. We cannot be too close to China, because this would lead us to submit to China’s terms in the not too distant a future. This explains our China conundrum. Our current foreign policy manoeuvres do not reflect any brilliant thinking on the part of our Foreign Office. They merely reflect the exigency of our circumstances.
Read more at http://www.thestatesman.com/news/opinion/the-china-conundrum/73675.html#HFRv6FA6udG5lHRS.99