India’s disillusionment with the West, its need for Chinese investments, and China opening its doors to Indian tycoon and Modi acolyte Gautam Adani account for the bid for rapprochement.
Indian Prime Minister Narendra Modi and Chinese President Xi Jinping had a very significant bilateral meeting on 23 October on the sidelines of the Shanghai Cooperation Organization’s summit in Kazan, Russia.
Both leaders signalled a breakthrough in the long-drawn-out and tortuous negotiations to ensure peace along the troubled 3,000km border between the two countries.
Speaking at a think tank in New Delhi after the Kazan summit, India’s Defence Minister Rajnath Singh said that the two countries have reached a broad consensus to restore the ground situation “based on principles of equal and mutual security.” The new agreement allows Indian forces to resume patrolling in key areas such as Depsang and Demchok, which had been flashpoints in the India-China standoff on the border.
The resumption of patrolling opens areas for Indian herdsmen to take their flock for grazing, which has been a major demand of people on the Indian side of the border.
Although the deal does not amount to “disengagement” as such, it is an arrangement that will lessen friction on the ground, allow the two countries to discuss de-escalation and disengagement, and hopefully pave the way for the demarcation of the border in due course.
Experts said that the resumption of these activities is a confidence-building measure and a signal that both countries are willing to reduce military tensions. “Continuous dialogue has paid dividends,” said Defence Minister Rajnath Singh.
Surprise for Most
To most observers in India and abroad, the deal, however small, came as a surprise because the prevailing wisdom was that India and China are such incorrigible rivals that even the smallest détente is inconceivable. However, economic compulsions and geopolitical developments combined to shape events in favour of a détente.
In 2020, in Galwan Valley, 20 Indian and four Chinese soldiers were killed as the two sides fought ferociously with clubs and stones. This unusual medieval-type clash led to a marked deterioration in Sino-Indian relations. India banned more than 50 Chinese apps, including TikTok.
But all the bitterness appears to have disappeared into thin air, and euphoria is the order of the day. A combination of diverse factors, such as India’s growing disillusionment with the West, its need for Chinese investments, and China opening its doors to Gautam Adani, an Indian tycoon believed to be close to Prime Minister Modi, accounts for the change.
Geopolitical Dimension
To take the geopolitical dimension first: India’s relations with the Western bloc, particularly the US and Canada, had hit rock bottom. India did not back the West’s case against the Russian attack on Ukraine. On the contrary, it bought crude oil from sanctioned Russia at a concessional rate, refined it, and made money by selling it to energy-starved Western Europe, to the chagrin of the US.
An angry US Ambassador to India, Eric Garcetti, told an audience in Kolkata that he does not think that India and the US are friends. Friends, he said, come to each other’s aid when one of them is in need. India hadn’t come to the aid of the US and Ukraine at a time of need.
Before Garcetti’s admonition, US foreign policy expert Dr Ashley Tellis wrote a paper urging Washington not to count on India because India takes a lot from the US, especially sophisticated defence equipment, but does not reciprocate. In American eyes, India’s bid to exercise “strategic autonomy” in international affairs while being a “strategic partner” of the US is not on.
More recently, the US, Canada, and India have been at odds over an alleged Indian government involvement in the killing of a Sikh Canadian, Hardeep Singh Nijjar, on Canadian soil in June 2023, and an attempt to kill an American Sikh, Gurpatwant Singh Pannun, in New York. The latter case is currently in court in the US. Nijjar and Pannun have been campaigning for the secession of a part of India to form an independent Sikh state of “Khalistan.”
For the US and Canada, any Indian official involvement in the assassination of Nijjar or the attempt on the life of Pannun is unacceptable and an invasion of their sovereignty.
India denied any official involvement in the two cases but accused Canada and the US of disregarding India’s sovereignty and territorial integrity by brazenly mollycoddling known terrorists and separatists of Indian origin.
Though talks are ongoing about the Pannun matter, an understanding is not on the cards as of now.
India and the US are at odds over China policy. The US would want India to be more active and cooperative in containing China in Asia. However, India is not willing to go to war with China, even on the border issue, preferring to build up its defence and negotiate across the table.
Indo-Russian ties have been continuously strong for 75 years and are expected to remain so. China is shedding its total antagonism towards India. It has been showing interest in economic cooperation, putting the intractable border issue on the back burner. And India is shedding its stance that there can be no normalisation of ties as long as the border is tense.
Economic Factor
India’s need to develop its industry is pushing it to establish closer ties with China, the world’s factory. It is shedding some of its fears about Chinese infiltration and sabotage through investments.
The reason for the change in the Indian attitude is that key Indian industries are heavily dependent on Chinese intermediaries. According to economists Biswajit Dhar and K.S Chalapati Rao, India depends on China for the supply of a wide range of products, from the simplest, like nails/tacks and umbrellas, to sophisticated telecom and electronics products, as well as pharmaceutical intermediates called Active Pharmaceutical Ingredients (API).
Chinese domination in India’s imports of telecom and electronic products has increased manifold over the past few years since the Indian government initiated the Digital India programme in 2015.
Chinese APIs have helped Indian generic pharmaceutical manufacturers provide cheap medicines not only to Indians but also to people in the developing and developed worlds. Due to its deep penetration in global markets, India has acquired the name “Pharmacy of the World.” India would certainly like to maintain that status.
Large volumes of mobile phones are sourced from China. In 2019–20, more than 83% of imports of mobile phones were of Chinese origin. Nearly 90% of colour TV sets imported into the country were from China. India continues to depend substantially on imports of Chinese telecom transmission equipment.
The motorcycle industry sourced 85% of its imports of parts and components from China in 2018–19. While most motorcycle components are obtained locally, India imports critical parts like wheel rims from China. India is heavily dependent on China for solar photovoltaic cells. More than 90% of imports of silicon wafers and solar lanterns in 2019–20 were from China, Dhar and Rao say in their paper.
To support the production of Indian textiles and garments, another important export industry, India has been ramping up imports of yarn and fabric from China. Even the automobile industry—considered a success story for both domestic and export sales—has been increasing its imports of vehicle parts and accessories from China. India has made significant strides in producing solar panels but now relies even more on the Chinese solar cells that go into them. No wonder then that China is India’s largest trading partner.
Bid for Chinese FDI
In July, India’s Chief Economic Adviser Dr V. Anantha Nageswaran said that to boost global exports, India should either integrate into China’s supply chain or promote FDI from China.
For some time now, India has been allowing Chinese companies to invest, albeit on a case-by-case basis. It has also been allowing minority share-holding in some companies and relaxing visa rules for Chinese experts.
Dr Nageswaran is keen on reducing the adverse trade balance with China, which was US$83.36 billion in 2023 and is increasing.
Adani’s, a Critical Entry
On China’s part, it did something very significant to resolve issues with India. In September, it allowed Adani Global Pte, a Singapore-based subsidiary of Adani Enterprises owned by Gautam Adani, to establish a wholly-owned subsidiary, Adani Energy Resources (Shanghai), with a registered share capital of US$2.1 million.
AERCL was incorporated and registered under the Company Law of China on 2 September 2024. This was a month before Prime Minister Modi was to meet Xi Jinping in Kazan, smile, and shake hands.
With Prime Minister Modi’s favourite Indian tycoon having a stake in China’s economy, it could be an “all clear” signal for Chinese investments in India. This may even lead to some kind of détente over the border and a smoother political relationship in the course of time.