Easing border tensions would be great news for India's economic recovery
Published: Jan 04, 2022 12:40 AM
A view in in Delhi, India on December 29, 2021 Photo: VCG

A view in in Delhi, India on December 29, 2021 Photo: VCG

A positive signal recently emerged from the sustained border dispute between China and India, as Indian media reported that the armies of the two sides exchanged New Year wishes and sweets on the first day of 2022.

The new situation "ahead of the 14th round of corps commander-level talks later this month is yet another bid to defuse the 20-month-long military confrontation," The Times of India reported.

Whether tensions will see clear and continuous easing requires further observation, but it is certain that an improved bilateral relation is mutually beneficial and would be in line with India's tough recovery, especially when the South Asian economy has been hit hard by the COVID-19 pandemic.

Without solid recovery yet from the first two rounds of infections by the novel coronavirus and its Delta variant, the South Asian country is now facing new risks brought about by the fast-spreading Omicron variant. 

According to the latest update of local media outlets on Monday, India reported 33,750 new COVID-19 cases and 123 deaths in the last 24 hours. Indian Prime Minister Narendra Modi has repeatedly urged the people of the country to follow COVID-19 protocols.

Meanwhile, global brokers have recently downgraded Indian equities, including Goldman Sachs, Morgan Stanley, UBS and Nomura. And in early December, Fitch Ratings cut India's GDP forecast for fiscal year 2022 to 8.4 percent from its previous 8.7 percent forecasted in October.

The bleak outlook for India's economy is reflected beyond a series of slashed indexes. Moreover, the nation has seen tens of millions job lost during the pandemic as well as surging pressure caused by inflation. 

It is anything but an easy task for India to pull its economy out of the quagmire. Against such backdrop, what India should thoroughly reflect on is its relationship with China. The bilateral economic ties have shown strong resilience in spite of the pandemic, New Delhi's efforts of decoupling from China, as well as US' efforts of cajoling India into its anti-China clique.

Trade between China and India exceeded the $100 billion milestone by the end of October 2021, which might have been a surprise. In spite of the efforts of the Modi administration to disengage with China economically and a series of campaigns boycotting products made in China, what remains is the massive market demand for products from the manufacturing powerhouse.

It is not an easy campaign for India to find alternatives from both home and overseas. According to industrial reports, India remains highly dependent on China in about 86 product categories, including consumer electronics, computer hardware and telecommunications equipment. India's massive import of mechanical and electronic products from China, as well as Chinese investments in the country's smart phone sector, have not only met market demand in India but also helped boost Indian exports to third countries.

New Delhi may find the trade deficit with China undesired; however, boycotting goods made in China or cracking down on Chinese investments are clearly not advisable choices. On the contrary, India is suggested to enhance economic relations with China in various ways, including ramping up cooperation in industrial supply chain. Additionally, the two could also explore new fields where Indian producers could boost output to meet demand in the colossal Chinese market and decrease the trade deficit in a sustainable and mutually beneficial way.

In a broader context, enhancing industrial integration has become an irreversible trend in the Asian region. The freshly implemented Regional Comprehensive Economic Partnership (RCEP) will greatly boost the economic integration and development of economies under the agreement. Weakening economic ties with China may only end up in isolation from the regional value chain and stifle its own prospects of growth. 

The author is an editor with the Global Times.