India's sagging economy urgent than border tensions
Published: Sep 13, 2020 07:28 PM

Illustration: GT

Chinese State Councilor and Foreign Minister Wang Yi met with his Indian counterpart in Moscow on Thursday and reached a five-point consensus that is widely believed will help de-escalate border tensions between the two states.

Apparently, China and India have the desire to prevent their divergence from escalating into a military conflict, as the two governments clearly understand that a military confrontation or a war could be hugely destructive for both sides, which is a dreadful scenario which would be particularly unbearable for the Indian economy struggling in a dire contraction. 

There is no denying that India's economy has been experiencing a frustrating and protracted recession, with its GDP contracting by a staggering 23.9 percent in the second quarter of this year. Rating agencies have also been busy cutting its GDP forecast. For instance, Moody's lowered its forecast of India's GDP growth to negative 11.5 percent for the current fiscal year, down from the previous estimate of a 4 percent contraction; while Fitch cut its forecast for India's GDP to negative 10.5 percent for the year.

Behind Indian economy's groaning are several unusual factors. For starters, despite its national lockdowns, India is still far from containing the spread of coronavirus, with the second-highest number of COVID-19 cases recorded in the world, second only to the US. Because of the spreading pandemic, domestic consumption, private investment and exports have all taken a precipitation, which has become an "unbearable weight" for New Delhi. 

In the meantime, the Modi government has taken various protectionist trade measures against countries bordering India by land. Measures, including but not limited to app bans, investment restrictions, import restrictions and discriminatory treatment for foreign tenders all make it impossible for India to gain new impetus from regional economic cooperation.

Instead, the protectionist attitude has directly pushed up the purchasing and operating costs of Indian businesses, weakening their competitiveness and delivering a severe blow to investors' confidence in India's economic prospects.

As India's foreign policy appears to be more radical than ever, perhaps due to its current domestic nationalistic sentiment, concerns over a potential military conflict at the border between China and India have not been completely dissipated. 

India may truly believe it has gained some geopolitical advantage over China by connecting the current border tensions with Indo-Pacific geopolitics. But in fact such a radical foreign policy approach taken by the Modi government is aggravating the burden on the economy by disrupting the government's original plans and arrangements.

It should be pointed out that China's stance to avoid military conflicts with India hasn't changed, but that is not the reason for India to underestimate our resolve to defend China's territorial integrity. The five-point consensus between the two foreign ministers is a good step, and we hope the Indian government can cherish this opportunity to really ease the border tensions so as to focus more on its economic issues.
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