Modi's opportunity in China

Prime Minister Narendra Modi has the political capital needed to push for a settlement of the boundary dispute with China. This could open up avenues to strengthen economic ties with China and also give India political space on multilateral stages like the World Trade Organization and the climate change negotiations

When Prime Minister Narendra Modi heads to Beijing in a few weeks, he will find the Chinese leadership basking in the warmth of a diplomatic coup. The Asian Infrastructure Investment Bank (AIIB), promoted by China, has drawn the support of many more countries than Beijing could have envisaged, including key American allies. As a prospective founding member of the AIIB, therefore, India should welcome the recent developments without being concerned about whether we are helping cement Chinese hegemony. Not only do we need infrastructure financing from China and Chinese-sponsored ventures, but the knock-on effect of institutions like AIIB for the existing IFIs will also be important.

China beyond the border

Working with China on “multilateral” issues is hardly accorded the importance that it deserves. Take the multilateral global trading system. Although the World Trade Organization (WTO) was its own brain-child, the US now feels that the prevailing rules are working to the advantage of competitors like China and that there are too many obstacles within the system to push it in a desirable direction. Hence the US has opted to negotiate mega-trade pacts such as the Transatlantic Trade and Investment Partnership (TTIP) with the European Union and the Trans-Pacific Partnership (TPP) with a dozen major economies in the Asia–Pacific region.

India will stand to lose from the American attempt at rewriting the rules of the game to suit its interests. If anything, China’s ability to cope with such new standards is far better than that of India. Indeed, the implications of these developments for the Prime Minister’s cherished “Make in India” programme are grim—not least in terms of access to the markets of the advanced economies. In such a situation, it is very much in India’s interest to work with China (and other similarly positioned countries) to prevent a wholesale transformation of the multilateral trading system.

Climate change is another issue where working with China makes eminent sense from the perspective of Indian interests: if only to ensure that the US and China do not cut a deal between themselves that imposes unacceptable burdens on India. That said, the security dimension of our relationship with China cannot be wished away. The question is not whether India should upgrade its own military preparedness for any crisis: of course, it should. At the same time, though, New Delhi should make a determined effort to settle the boundary dispute with China.

The previous National Democratic Alliance government under Atal Behari Vajpayee started out by pressing the Chinese to clarify the LAC. They were understandably concerned that any full-fledged clarification of the LAC would effectively decide where the final boundary would run. Hence, they insisted that working towards a boundary settlement would be better. The Vajpayee government agreed with this, leading to the appointment of Special Representatives. The sensible course would be work towards a settlement of the boundary while upgrading the existing confidence-building measures along the LAC.

This is, of course, contingent on Beijing’s readiness to accord the boundary negotiations high priority. Prime Minister Modi would be best placed to ascertain this in his discussions with President Xi. This will be their sixth meeting in the year since Modi has taken office. The Prime Minister evidently understands the important role that China could play in his plans for the Indian economy. But to unlock the true economic potential of the relationship, he must demonstrate his willingness to tackle thorny political–security issues.

By Srinath Raghavan