The report that Chinese President Xi Jinping will be bringing investment offers of over $100 billion is seen as a riposte for Japan’s promise of putting in $35 billion into India over the next five years.
Narendra Modi’s recent visit to Japan was invested with all manner of strategic significance by analysts suggesting that this could well be the beginning of a new strategic coalition to check the rise of China.
However, the outcome of the visit was a tad disappointing. India and Japan failed to sign the long-negotiated nuclear deal, or give any clearer indication of the future strategic partnership such as a defence cooperation pact, of the kind India has with the United States.
Narendra Modi’s recent visit to Japan was invested with all manner of strategic significance by analysts suggesting that this could well be the beginning of a new strategic coalition to check the rise of China. Pic/AFP
Let us look at the metrics: India-Japan trade stands at around $19 billion per annum in contrast to the India-China trade at $65 billion (Japan-China trade is around $350 billion).
Japan is India’s fourth largest investor, having put in about $16 billion since 2000. In 2011, India and Japan signed a Comprehensive Economic Cooperation Agreement, but it has not had the desired impact on trade growth.
India is the largest recipient of Japan’s Overseas Development Assistance, having got some $16 billion worth of loan assistance mainly in the infrastructure and energy areas along with a commitment of some $38 billion.
China has been a bit player in India till now. But, earlier this year, at the first India-China strategic dialogue, Beijing offered to invest $300 billion in India’s 12th Plan infrastructure requirements, which were estimated at around $1 trillion. Now, comes Mr Xi with his $100 billion.
None of these offers Japanese or Chinese are altruistic. Both follow the logic of market economics. Investing in India provides an outlet for Chinese and Japanese infrastructure construction giants who cannot build anymore at home. Both the countries have a surfeit of new and relatively new highways, railroads and bridges and are looking around for projects in the under-developed world.
But they are also part of a geopolitical competition which pits China against Japan and its ally, the US, in East Asia. India is being seen by Japan and the US as an important counterweight to the rise of China. They do not expect India to be some kind of a military ally, but they believe that a strong India, which has its own set of problems with China, will offset the increasing gravitational pull of Beijing in the East and South-east Asian region.
China has a somewhat limited aim keep India as a neutral in their real battle that for pre-eminence in East Asia, where they are pitted against the Japan-US combine.
India has no real stakes in the conflict, and it is not as if Japan supports the Indian position on our borders with China or Jammu & Kashmir. Yet, New Delhi needs to handle the issue with a great deal of care, and balance the pros and cons of any particular course. We can, as we are doing now, parlay an equidistant posture into obtaining investment and technology from both China and Japan. We already have difficulties with China over our border. Buying more enmity by getting involved in the East Asian power struggle would compromise our security situation, because China is much stronger than India, both economically and in military terms.
However, given our weakness relative to China, we also need to think of friends we may need if China were to turn up the heat against us. An autonomous posture requires a strong military posture, which is what India does not have. And, unless it reforms and restructures its national security system, it will not have in the next decade.
While the Chinese are eager, the Japanese seem to be getting ready to miss the Indian bus once again, to go by their reluctance to press on with the nuclear deal. In the 1990s, when India opened its economy, Japanese companies kept hemming and hawing, and coming up with all kinds of demands, including concessions on importing special food for Japanese expatriates in India. Meanwhile, the Koreans stole the march and established themselves across the country. This is despite the fact that a Japanese company Suzuki had nearly a decade’s advantage over everyone else in the Indian market.
The same could happen again. While Japanese companies like Toshiba and Hitachi are important in the nuclear power business, there are equally good Korean and Russian options available, and the Chinese are not too far behind. As it is, India must also contend with geopolitical unreliability of the Japanese and the Americans. Rich and powerful countries, like rich and powerful individuals, are usually more concerned about themselves. So, in our times of difficulty, Tokyo has ignored us. But, as it is now finding out, its American allies are not as firmly behind them on the Senkaku/Diaoyu Island issue as they would like.
So, India’s best bet is to take what it can, from wherever it comes and build up its infrastructure and keep its geopolitical head down, at least for the next decade. Indeed, we have been too squeamish in accepting Chinese investments. Beijing was not fussy about accepting Japanese and western investment and technology to build up its own infrastructure and manufacturing capabilities in the 1980s and 1990s. Yes, there are areas like telecommunications where discretion would be the better part of valour, but if the Chinese money and Chinese companies want to build roads, railways, bridges and industrial zones in the country, they should be welcomed.
The writer is a Distinguished Fellow, Observer Research Foundation, New Delhi