Reset ties with China

Policymakers and businesses must put in real hard work and not resort to lazy solutions such as banning trade or raising tariff barriers

AuthorPublished: 23rd Jun 2020  12:35 am

There are clear signs of India altering the terms of engagement with China in the wake of the brutal face-off in the Galwan Valley of the Ladakh region that claimed the lives of 20 soldiers. Bilateral relations are not going to be the same again in the wake of China flexing its muscles and displaying territorial hegemony in the region. The investment of over three decades of diplomatic efforts towards building a working relationship spiralled southward last week with blatant incursions by Chinese troops. The diplomatic and military contacts, though not snapped, are certainly on a razor edge. The military officers on the ground all along the Line of Actual Control (LAC) are now being given the freedom to act as per the evolving situation at the border. India has now deployed its specialised high-altitude warfare forces along the 3,488 km LAC to repel any transgression by the People’s Liberation Army (PLA). The uneasy relationship between the two neighbouring nations with diametrically opposing ideologies — one wedded to the values of multi-party democracy and the other to an autocratic command-control regime — is bound to undergo a reset. There are reports of the Centre seeking a detailed status about the imports of non-essential items from China so that there can be a policy intervention for course correction. It is understandable that the death of soldiers has triggered nationwide outrage and calls for retaliation. The NDA government must rein in the voices of jingoism and adopt a blend of smart diplomacy, measured military response and intelligent trade moves to restore balance in the bilateral relationship.

Despite the obvious asymmetry between the two nations — the size of India’s economy is one-fourth of China’s while Beijing enjoys military superiority — India continues to punch above its weight. However, cautious aggression is the way forward. Banning Chinese goods could be counter-productive, given the dynamics of the bilateral trade. India imports a lot of intermediate goods from China and stopping that trade will affect the country’s ability to produce finished goods and the overall competitiveness of the manufacturing sector. Such a move will be counter-productive in the import-dependent sectors such as automobile, pharmaceuticals, electronics and telecommunications. The path to overcoming India’s dependence on Chinese goods requires the policymakers and businesses to put in real hard work and not resort to lazy solutions such as banning trade or raising tariff barriers. The harsh reality is that India’s poor share in global trade is a reflection of its acute lack of competitiveness. It is pointless to attribute India’s stagnant exports performance to the weak global demand. Domestic bottlenecks such as poor infrastructure, lack of reliable electricity, logistical delays, regulatory hurdles and problems in enforcing contracts are the real culprits.


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