China’s aggressive actions against India at the Line of Actual Control (LAC) earlier this year resulted in an ongoing standoff between the two Asian giants. At the same time, China’s increasing belligerence towards the United States and Australia, and other neighbours, has led to global concern for China’s ambitions for the World Order. With a mix of employing ‘debt-trap diplomacy’ and ‘wolf-warrior diplomacy’, China has undertaken a strong ‘colonial enterprise’. In light of such actions, calls have been made in India across the aisle for it to decouple from China, with the government already having taken steps in that direction.
To bring the attention of the global community and stir a debate on the same, New Delhi based international affairs observer group Red Lantern Analytica (RLA) organized an Expert Panel Webinar on the topic ‘Why India Needs to Decouple from China: Understanding China’s Colonial Enterprise’ on December 24, 2020. The panel was chaired by BJD parliamentarian Dr. Amar Patnaik and the list of eminent speakers included – Senior Fellow at Institute of Peace and Conflict Studies Abhijit Iyer Mitra; China expert and activist Kyle Olbert; Professor of Economics at Christ University Dr. Shalini Sharma; and Assistant Professor at UASN, Poland, Dr. Pradeep Kumar. The discussion was moderated by Assistant Professor, Rashtriya Raksha University Jayraj Pandya.
RLA’s founder Abhishek Ranjan opened the webinar by introducing the moderator and referred to the need to address the ‘dragon in the room’ as India looks towards decoupling from China.
In his opening remarks, Dr. Amar Patnaik stressed on the need for a ‘quest for excellence’ as India plans to decouple from China. He argued that even though decoupling is the need of the hour, the path is difficult – which requires a complete overhaul of the manufacturing ecosystem of the country. India needs to enlarge its GDP and tap into the large market to be able to produce cost-competitive products that can rival China’s, and hence, develop its global supply chains.
Elaborating his thought on this, he argued, “Do we need to decouple? Yes! India and the whole world has recognised that. How to decouple? Reduce the trade imbalance India has with China and reduce the dependency on China.
At present, most of the materials India requires for its major projects and initiatives must be sourced from China. That is why the economic decoupling with China cannot be like a turn-on and turn-off approach. It has to be spread over a period of time – in the short term, in the medium term, and in the long term. The long term goal for India is to have some of the supply chains in India and become self-reliant. The supply chains that will be developed in India should not only be restricted to India. Even though these Indian supply chains will help reduce dependency on China, they must also help reduce India’s trade deficit and be exported to other countries around the world. Thus, India needs to make these supply chains cost-competitive. Therefore, I would suggest that India enters Bilateral FTA’s with its neighbours so that together India and its neighbours can become the supply centers of the world, not China. This is how an economic decoupling in the medium term and long term would work.“
“A few things India must be aware of in its efforts to establish end-to-end supply chains and it cannot run into the same problems plaguing China. It cannot have low wages for workers or mass produce non-essential goods that would later be dumped in other economies. It’s a tall order but India is heading in the right direction”, he concluded.
Abhijit Iyer Mitra, while appreciating the need for decoupling, argued that the path is laden with difficulties for India. He said that technically, the conversation of decoupling starts in the West. China only accounts for 0.9% of inwards investment into the US and 3% of inwards investment into the EU. China’s trade with the US and EU combined equals the amount of trade carried out between the US and EU. In terms of trade flows, China is important to the West. But in terms of investment flows, it is not! This is the starting point for a Western decoupling from China. The West is the technology supplier to China, either it is legal technology transfer, like Apple setting up a factory in China, or it is stolen technology which China is extremely good at. China has a much lower per capita income than the West and is a middle-income economy. China will be stuck being a middle-income economy and therefore will not be able to move up the production chain. In its efforts to decouple from China, the West will move additive manufacturing out of China and will rely more on 3D printing technology.
“India has to rapidly move into mid-level manufacturing if it wishes to replace China. The basic problems in India that make it unappealing for businesses are – an educational deficit (not spending enough on education), riots are very frequent and so are law and order situations. There is also a highly volatile law and order ecosystem, a volatile jurisprudence ecosystem, an enforcement deficit in past laws and atrocious regulations. All of these things combined, make it very difficult for India to move into the manufacturing sector. The nature of India-China trade is extremely colonial. India exports raw materials to China and imports finished goods from China. If India starts to decouple from China, then India’s service markets that also rely on China will start taking a hit. Decoupling from China is a very precarious task for India. It is almost impossible. A Western decoupling from China will hurt India very badly”, he added.
Dr. Shalini Sharma, through her presentation, argued that even though the path of decoupling is a difficult one, India is well on its way to achieving success in it. She pointed out to various successes of the government policies and projects like Make in India and Atma Nirbhar Bharat, which have given a huge impetus to startups in India. She noted that India is also attracting global value chains and that the Foreign Direct Investment (FDI) inflows have increased in recent times as a result of these policies.
Describing the path of India’s trade deficit with China broadened over the past few years, Dr. Sharma explained, “In 1989, maximum imports into India were from the US, followed by the UK. In 1999, the structure changed slightly but China was not visible at all in the top 5 countries. By this time, India was not dependent on China. All that changed in 2009 as Indian imports from China grew to 11% and in 2019, Chinese import became 13% and was almost reaching 15% by the end of the year. On the export side, India’s basic exports were with the Soviet Union and in 1999, India began exporting to the United States. In the same year, 6% of India’s exports were going to China, while India’s imports from China were negligible. In 2009, India’s exports to China fell from 6% to 5% and in 2019, the exports to China further fell, leading to the growing trade deficit between India and China.
India needs to break its dependence on China. As per the latest data, during the pandemic period, India’s exports to China have risen to 6.5% and imports from China have decreased. There are multiple projects in India currently that are aiding India’s efforts to decouple from China. Make in India is one such initiative, which encourages companies to manufacture in India and incentivises dedicated investment into manufacturing. The government also encouraged zero-defect production and maintained high quality so that Indian products could readily be accepted by consumers around the world. The Indian Government has facilitated innovation, skill development, and protected intellectual property.”
As her concluding remarks, she argued that the current world perspective on China and burgeoning anti-China sentiments across the world will help India and has already dealt a huge economic blow to China.
Mr. Kyle Olbert, through his comprehensive presentation, highlighted that the need for decoupling emerges due to the strategic concerns that India has against China. He observed that China is following Alfred Thayar’s strategy of “who controls the seas” and that India should be wary of China’s naval network and the String of Pearls strategy to encircle India. He further noted that China being an authoritarian state has a disregard for human rights like the right to privacy and therefore, India should not allow Chinese companies to access its data at any cost.
On China’s expansionism through technology, Olbert argued, “Modern China is not a nation; it is a prison of nations. China is built on oppression and is held together by the force of the state and the CCP. China is essentially a prison for anyone within its borders. China is a threat unlike the world has ever seen before. China has also come up with a new strategy to control cyberspace. China’s rollout of 5G technologies, as well as fibers, is an effort to control data chokepoints. Data is the new resource and China is collecting. China’s data is locked behind the Great Firewall, but China has free access to the world’s data through data brokers. These data brokers collect data through online surveys and through cookies on websites which we visit. They then make a profile and then sell this data. The main problem is that we do not know where they sell this data to. They could be selling it to China, but we would never know.”
As concluding remarks, he argued, “As difficult as it might be, the best option for India to decouple is to not play into China’s game – to not play into its very obvious traps and pitfalls.”
Dr. Pradeep Kumar noted that India needs not just economic decoupling from China, but also cultural and security decoupling from it. He further elaborated, “Why are we talking about decoupling with China today? For several decades, India and China had no casualties of soldiers on the border. India and China, both knew that if peace was maintained at the border, then both the countries could continue their relationship. But if the peace at the border cannot be maintained, then that will negatively affect all other aspects of India’s relationship with China. China, in recent months and weeks, has been trying to dictate terms to India and has been trying to unilaterally decide the border demarcations. China is essentially trying to tell India that it has to accept China’s hegemony. These actions have led us to the topic of decoupling with China. India is reacting to China’s hostile actions and is rejecting China’s hegemony”.
The webinar closed with a vote of thanks by Media Adviser of RLA Karneet Bhasin, wherein she highlighted the importance of the topic and thanked the panelists and the audience for making the event a success.