Sanjaya Baru writes | It’s time to resume the India-China strategic economic dialogue

Recent events, including the last summit between Prime Minister Narendra Modi and President Xi Jinping, give some hope for a more positive approach to the bilateral relationship in both capitals.

Last week in New Delhi, India’s national security advisor Ajit Doval told his Chinese interlocutor, foreign minister Wang Yi, “India and China are partners, not rivals,” and added, “a stable India-China relationship serves the common interests of both sides.” Echoing these sentiments, Wang suggested that both sides should “respect each other’s core interests, properly handle sensitive issues, place the China-India boundary issue in its appropriate position, and prevent it from affecting the overall situation of bilateral relations.”

He then called for both sides “to accelerate the resumption of dialogue mechanisms and promote exchanges” in trade, finance, and other fields. It is a timely suggestion that should be taken up in right earnest. Fifteen years ago, at a time when India-China relations were on a more even keel, Prime Ministers Manmohan Singh and Wen Jiabao agreed to launch a bilateral strategic economic dialogue. The Indian delegation was headed by the deputy chairman of the Planning Commission, and subsequently the deputy chairman of the Niti Aayog. Between 2011 and 2019, six meetings were convened. After 2019, the dialogue has remained suspended. Not much seems to have come out of those dialogues.

With the recent improvement in India-China bilateral relations, there have been several interactions at the military, security and diplomatic levels. There is an urgent need for a resumption of a meaningful and focused economic security dialogue. India’s chief concern remains the wide and widening trade deficit, with mercantilism occupying an important place in Beijing’s economic policy toolbox.

The strategic economic dialogue had a wider remit and was aimed at improving macro-economic policy coordination, promoting exchanges on economic issues and enhancing India-China economic cooperation. Working groups were established on a wide range of subjects, including energy, infrastructure, pharmaceuticals, high tech, resource conservation and environmental protection. After the events of 2020, the stand-off and clashes along the line of actual control, this dialogue was suspended.

In the new global context in which India now finds itself and given the thaw in India-China relations, it is necessary that the focus of bilateral relations should not be confined only to extant differences on the border issue. While it is not clear if the leaderships of both countries are today in a position to resolve those differences amicably, the definition of “core” issues must extend beyond the geopolitical to include India’s developmental concerns.

India’s own developmental priorities necessitate a wider engagement with China on economic issues. China must recognise that sustaining economic growth and building India’s industrial capacity is also a core issue for India.

One of the positive outcomes of the dialogue on energy security was a willingness on the part of both countries to work together in dealing with energy supply challenges. China and India have an enormous stake in the stability of energy supplies. Going beyond traditional sources of energy, the two should explore opportunities to develop non-traditional energy. Such cooperation would be a global public good.

The weaponisation of trade, finance and energy by the United States that began almost a decade ago and became intense following the Russia-Ukraine war, remains a matter of concern for both countries. The fact is that initially, China was the principal target of US and European action, but India suffered collateral damage. The trade measures that President Donald Trump took against China in his first term also hurt India. In his second term, Trump has directly targeted India on trade and energy.

The expression of solidarity within BRICS, as has recently been in evidence, is a sign of wider developing country concern about developed economy actions. It is becoming increasingly clear that as Asian economies rise, the “West vs Rest” divide stares us in the face. As the second largest economy, can China play a more positive role in the rise of the Rest, instead of being seen as contributing to their deindustrialisation?

To be sure, the huge and persistent trade deficit today is also a reflection of the fact that the Indian private sector has become dependent on imports from China. Consider the business traffic between the two countries. Many Indian companies, large and medium-scale, continue to make a beeline for China in search of machinery and technology. Clearly, a growing economy like India can no longer afford to minimise economic links with the world’s second-largest economy, especially when signals from the largest economy remain worrisome.

The difficulties Indian trade negotiators are facing in concluding a bilateral trade agreement with the US point to the need for a more nuanced approach to trade with China. Any strategic economic dialogue today will have to once again emphasise Indian concerns about the trade deficit but go beyond it to find meaningful ways in which India and China can pursue win-win economic cooperation. India’s rise should be viewed as offering opportunities to many Asian economies, including China. A strategic economic dialogue between Asia’s largest economies can meaningfully explore these opportunities.

When Prime Minister Wen met Prime Minister Singh in 2006, the former began his conversation with the observation that Asia’s rise is contingent upon the rise of both China and India. It is a different matter that over the past two decades, China has risen at a faster pace and now occupies a commanding position in the global economy. However, increased economic cooperation between the two biggest Asian economies can be a win-win proposition if China adopts a more forward-looking policy towards India. It is necessary to explore these possibilities.

All this requires a change in mindset in both capitals. Between 2006 and 2019, there was a willingness in both leaderships to explore areas of potential economic cooperation. After 2020, it would appear that the military and security leadership had taken charge of the relationship, relegating economic interaction to the background.

Recent events, including the last summit between Prime Minister Narendra Modi and President Xi Jinping, give some hope for a more positive approach to the bilateral relationship in both capitals. However, just as the national security dialogue is conducted by the NSA, the economic security dialogue should be conducted by an economic czar who can command the PM’s attention and ensure speedy implementation of decisions taken.

The writer is chairman of the board of trustees, Forum for National Security Studies (FNSS) & Centre for Aerospace & Strategic Studies (CAPS)