Decoupling self-defeating move for Indian economy

By Qian Feng Source: Global Times Published: 2020/7/29 20:48:40

Illustration: Tang Tengfei/GT

Ever since the June 15 China-India border brawl, authorities and militaries on both sides have been striving to calm tensions via diplomatic channels and mechanisms to resolve border-related issues. 

China's Foreign Ministry confirmed Wednesday that Chinese and Indian border troops on the frontlines have mostly dis-engaged at the frontiers. However, India seems intent on sticking to its strategy of "decoupling" from China.

India's Economic Times earlier reported that India has drawn up a list of 275 Chinese apps that it will scrutinize for violation of its national security or user privacy rules. The news came after a series of recent moves from India that have been seen as antagonistic toward China, such as restricting foreign companies from participating in government procurement bids.

If New Delhi chooses to indulge in anti-China sentiment, it is likely it will continue to roll out administrative and judicial measures, among others, to confront Chinese businesses operating there 

The word "decouple" has been receiving buzz in mass media since the coronavirus pandemic broke out. The US has been recklessly leading the trend. As the world's largest economy, its toolkit includes advantages in technology and capital, as well as its upstream positions in certain high-tech sectors. 

India's campaign to "decouple" from China seems lacking in comparison. It is a country that is lagging behind in global industrial chains, relying heavily on Chinese suppliers for production and consumption, and is in high demand for foreign investment. Its strategy of cutting economic ties with China is a self-defeating move. 

And the South Asian country is now facing many challenges: a contracting economy, surging unemployment and businesses hit hard by the pandemic. Decoupling from China will throw its long-term development plan off track.

China has been India's largest trading partner for years, and India is China's largest trading partner in South Asia. In 2019, the bilateral trade totaled $100 billion. More than 1,000 Chinese companies have been increasing their investments in India, with cumulative investment exceeding $8 billion. Economic and trade cooperation between China and India has brought tangible benefits to the businesses and consumers in both countries.

Global industrial chains have become highly integrated over the years. And China is widely regarded as a manufacturing giant. The Modi administration's ambitious "Make in India" campaign may not be plausible if the country cuts cooperation with China.

India's imports of manufactured goods from China have reduced the costs of production for local companies, improved production efficiency and increased the global competitiveness of Indian products. India relies heavily on Chinese suppliers for bulk pharmaceutical chemicals, auto parts, smartphone parts and electronic products.

China enjoys greater comparative advantages among many economies. Highly cost-efficient Chinese products have lowered daily costs for residents in India, whose per capita income is only a quarter of China's.

As the coronavirus continues to spread across the world, India, with an inefficient prevention and control regime, is witnessing climbing confirmed cases. If the public health crisis is not brought under control quickly, the Indian economy could shrink more than 5 percent in 2020.

India urgently needs to attract more foreign investment, expand production and create jobs, rather than work against economic rules to antagonize China and oust Chinese investment.

The author is director of the research department of the National Strategy Institute at Tsinghua University.


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