INDIA’S NEIGHBOURLY RELATIONS
1. India is strategically situated in the Asian sub-continent. It has been trying to build good friendly relations with its neighbours. Sri Lanka and India were traditional friends, but ethnic clashes between the Tamils and the Sinhalese embittered our relations. Relations with Pakistan have remained strained. That country has been abetting violence in the Kashmir region. Bangladesh was created after India defeated Pakistan in the 1971 war. The sharing of the Ganga waters has been a point of discord between Bangladesh and India. The policy of Panchsheel was shattered when China invaded India in 1962. Areas belonging to India have been seized by China. China has been aiding Pakistan in its nuclear programme. Nepal and Bhutan have maintained good ties with India, though there were occasional misunderstandings. SAARC has been established to promote cooperation among the member-countries.
2. Since independence India has been trying to build good relations with its neighbouring countries. Pt. Jawaharlal Nehru advocated the policies of non-alignment and world peace. He worked towards making the world free from nuclear warheads. India’s foreign policy has been formulated to promote cooperation, international peace, support for freedom and opposition to apartheid and non-alignment with any nuclear power. Towards this endeavour, India has worked to build good friendly relations with its neighbours. Over the years, however, relations with some of the neighbours have become strained. The country lost all the national leaders, who were replaced by incorrigible politicians. Corruption ruled over public life and they did not make any concerted effort towards building bridges of friendship. The result is that the image of India in the international forum has been maligned to an immeasurable extent. The foreign policy of India has got reduced to holding festivals only in other countries in an attempt to save its face.
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3. Sri Lanka and India, for several years, remained traditional friends. With a large number of Tamils of Indian origin in Sri Lanka, the traditions of both the countries co-existed in perfect harmony. It was ironical that the country was later ripped apart by the ethnic clashes between the Tamilians and the Sinhalese. The activities of the Liberation Tigers of Tamil Eelam (LTTE) in Sri Lanka embittered the relations between the two countries. In an attempt to save themselves, many Tamilians migrated to India. India was suspected of sending trained militants to promote violence in the island nation. At the request of the Sri Lankan govt India sent the Indian Peace Keeping Force (IPKF) to Sri Lanka. It resulted in an expenditure of Rs 1 crore daily from the national exchequer for two years and the country paid with the lives of more than a thousand soldiers. However, the Indian attempt to restore normalcy was a failure and was described as the “biggest foreign policy blunder since independence.” The relations between the two countries received a jolt when former Prime minister Rajiv Gandhi was assassinated by an LTTE suicide bomber. Relations have, since then, improved. The relations received a fillip, when Sri Lankan President, Chandrika Kumaratunga visited India in Dec 1998. It strengthened the economic ties between the two countries and promoted regional economic co-operation in South Asia. India specified that it will play no part in resolving the ethnic crisis in that country.
4. The divide and rule policy of the British resulted in the partition of the country into India and Pakistan in 1947. Relations between the two countries have remained strained ever since. The same year, Pakistan attacked Kashmir and captured parts of the area. The Ceasefire Agreement which was reached through the mediation of the United Nations established the ceasefire Line. In 1965 and later in 1971, Pakistan attacked India but on both the occasions, it was defeated. The territorial gains made in gains made in these wars were bartered for empty promises of establishing peace and tranquility in the region, at the Tashkent Summit and by the Shimla Agreement. The Shimla Agreement bound the two countries not to resort to force for the settlement of the Kashmir dispute and termed the ceasefire line as the Line of Control (Loc).
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Distrust among the two countries persisted because Pakistan continued to amass weapons of mass destruction and nuclear warheads in its arsenal. Simultaneously, it sent armed militants to Punjab and Kashmir for abetting violence. The 76 km stretch of the Siachen glacier has also remained a subject of dispute between the two countries. Talks pursued by successive Prime Ministers which till date have yielded no result. The two countries gained the reputation of being nuclear power heads which has further aggravated the situation in the sub-continent . The bus diplomacy, undertaken by Prime Minister Atal Behari Vajpayee, proved a failure because military skirmishes in the Siachen region and in some parts along the LoC increased. A big blow was received by India when Pakistan sent armed infiltrators across the LoC in Kargil, while the country was basking in the glory of the supposedly successful peace talks. Our Prime Ministers,from Pt. Nehru to Mr Vajpayee lacked foresight and remained gullible. They trusted the double stand of Pakistan, which declared its good intentions towards resolving the issue and simultaneously waged clandestine wars. Kargil has exposed the short-sightedness and a lack of strategic vision of India towards its defence.
5. Bangladesh was created in Dec 1971 after Pakistan was defeated in its war with India. Lack of political grit has caused the relations between the two countries to deteriorate. The sharing of the Ganga waters has remained one of the core issues of conflict between the two countries. The commissioning of the Farakka Barrage in 1975 reduced the flow of the waters of the Ganga into Bangladesh considerably. According to the Indian silt deposition at the Calcutta port. Bangladesh took the issue to the United Nastions General Assembly but an amicable agreement could not be reached. The influx of the Chakma refugees from Bangladesh has posed a threat to the inhabitants of the north east India. To check the influx, India decided to fence off the entire Bangladesh-Assam border which was opposed by Bangladesh. In an attempt to resolve the crisis, caused by the Farakka barrage, an agreement on water sharing was signed by the Prime Ministers of the two countries in December 1996.
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6. Panchsheel or the five principles of peaceful co-existence, formulated by Pt.Nehru, were shattered during his lifetime when China invaded India in 1962. India was not prepared for a war and the obsolete weaponry could not defend India’s frontiers. China seized over 38,000 sq. km of Indian territory and occupied it illegally. Kashmir has remained the core issue of misunderstanding between the two countries. 4,000 sq km of land, located to the west of the Karakoram Pass was illegally ceded to China by Pakistan. According to the US intelligence reports, China has been aiding Pakistan in developing its nuclear arsenal, after India’s first nuclear explosion in 1974. China has been promoting a sense of insecurity in the region by indulging in nuclear proliferation. In 1988, the visit of late Prime Minister Rajiv Gandhi to China was seen as a breakthrough in normalising the Sino-Indian relations. But China continued to help Pakistan in developing its nuclear programme. China also helped Pakistan in developing the Intermediate Range Ballistic Missile (IRBM) named Ghauri. In1998, when India conducted a series of nuclear explosions, Chinese criticism was blatant. The tests were conducted in the interest of the country’s defence. China already had nuclear stockpile and provided military assistance to Pakistan. Beijing was “infuriated” on India’s justification of the tests. Kargil has exposed the fact that our borders are badly manned. Rajiv Gandhi wanted the Indian troops to be withdrawn from the Siachen region, which if unfortunately had been carried out, would have let the region fall on to Sino-Pak hands. India has always maintained a diplomatic attitude towards its neighbours, which has made it prone to direct or indirect war at the borders. Restraint, shown by India, has made it the butt of other nations’ ridicule. For strengthening trade and cultural ties with China India has meekly accepted Chinese occupation of Indian territory.
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7. Nepal and Bhutan have had close cultural ties with India. India has helped both the countries in their development projects in the field of industry, telecommunications and education. The cross-border activities of smuggling of drugs and valuable has been a grave concern for both the countries and India. In 1990, a unified trade and transit treaty was signed to normalize relations between India and Nepal. In 1995, the two governments formulated a number of measures intended to improve bilateral cooperation, trade and water resource development.
The South Asian Association for Regional Cooperation (SAARC) has its inception in December 1985 for promoting technical, cultural and economic cooperation in South Asia. Mr Atal Behari Vajpayee’s bus trip to Lahore was seen as the ushering in of a new era in Indo-Pak relations. Though, the illusion was short-lived, the Secretaries and Ministers of the seven member countries of the SAARC felt that the entire threat in South Asia would be restored to tranquility. They met at the Sri Lankan hill station of Nuwara Eliya in Mar 1999 and discussed a wide range of topics like realizing the South Asian Free Trade Agreement or SAFTA. The members lauded the diplomatic efforts of India and Pakistan to resolved the the Kashmir issue through bilateral talks. The SAARC meeting at Nuwara Eliya reiterated the need for a free trade area in the region. It is intended that by the year 2020, the SAARC countries would form a single economic union. The trade treaty between India, Pakistan and Sri Lanka is supposed to be implemented by 2008 while the other four countries would follow suit by 2010. SAFTA would promote the needs of the least developed nations. An attempt to improve ties among our neighbours has been undertaken. Along with maintaining good relations with our neighbours, India should also upgrade its arsenal and intelligence. India can not afford to be a loser every time.
INDO MYANMAR RELATION
General
1. Indo Myanmar relation prior to 1988 have been friendly and cordial without much content. However the relations deteriorated on assumption of Military Rule in Myanmar, as India lent its full support to the democratic forces in Myanmar. India repeatedly urged SLORC to transfer power to the elected representatives, to restore democracy and respect human rights. Provision of refuge status to a number of Burmese students and awarding of Jawaharlal Nehru Award to Aung San Suu Kyi (ASSK) in 1995 were considered as amounting to interfering in the internal affairs of Myanmar. Our relation reached the lowest ebb with Myanmar during this period, allowing China to fully exploit this opportunity caused by political isolation of SLORC.
Change in Indian Policy Since 1991
2. Despite international pressure, SLORC proved capable of effectively countering political opposition and Ethnic Tribes within Myanmar. Myanmar consolidated its relation with China and to a lesser degree with Pak. Realising the predicament, based on pragmatic assessment of our national interests, India resorted to a twin track policy of constructive engagement with Myanmar and to continue general support for restoration of democracy for international consumption.
India’s Security Concern
3. Myanmar is strategically located between South Asia and Southeast Asia with China on her North and Northeast. Hence, it has importance for India’s look east policy, as a bridge between South and Southeast Asia. However there are few areas of India concern with Myanmar. The details are given in succeeding paragraphs.
Support to Indian Insurgent Groups (UGS)
4. Due to Myanmar’s contiguity with our Northeastern States and ethnic affinity all along the Indo-Myanmar border, Myanmar plays an important role for coordinated and cohesive drive against insurgency along the border. Therefore, it is imperative for us to elicit continued Myanmar cooperation in curbing it on a reciprocal basis. NSCN (IM), NSCN (K), UNLF and PLA maintain camps in Myanmar and indulge in arms and drug smuggling. Myanmar Intelligence Agencies are reported to be close to PLA and UNLF. There are a number of important leaders based in Myanmar, including UNLF Chairman RK Meghan. In Nov 2001, Myanmar army for the first time raided UNLF camps and arrested their cadres in Tamu area. Approximately 1600 weapons were recovered and 47 UGs cadres apprehended. Reportedly UNLF and PLA had secured release of their cadres by paying huge amount of money to MA. However, MA maintains that 20 of the 47 UG cadres are still in jail. Myanmar avoided Indian request for joint interrogation of the apprehended personals. NSCN (K) camps including their GHQ under Chairman SS Khaplang are located in Myanmar Naga Hills. Myanmar Army had clashed with them, which generally precede or follow important visit between the two countries. Details of Indian Insurgent Groups (UGs) camps along the Indo – Myanmar border are as under: -
(a) The Myanmar Naga Hills (MNH) Area. The MNH Area has been a hostage to NSCN (K) for a very Long time, housing major camps of NSCN (K). Other UGs like ULFA are co-located in few camps.
(b) Area Tamu. Area around Tamu and North of it upto Somra Tracks host significant number of UGs. As per reports, there NSCN (IM), UNLF and PLA camps in the area.
(c) Chikka –Phaisat Stretch. The stretch of 15 Kms between Chikka and Phaist opposite South Manipur has NSCN (IM), UNLF and PLA camps.
(d) Tri Junction to South Manipur. The stretch from Tri Junction to area bordering South Manipur is generally used for transit both by NSCN (IM) and UGs of Manipur. The UGs tend to stay within the Myanmar side of the border to avoid detection by Indian troops. Thin presence of Myanmar Army along this portion of border facilitate easy movement of the insurgents.
Drug Trafficking
5. Myanmar is the major source of international drug supply. Myanmar’s Shan Plateau constitutes the largest portion of the infamous Golden Triangle. Drug abuse is increasingly becoming a social means for our country particularly the Northeast, which may lead to narco terrorism. Myanmar cooperation in this field is vital.
Smuggling of Arms
6. Arakan and Karen rebels in conjunction with Rohingiya National Front are operating along Myanmar – Bangladesh border. They transit through Andaman sea and smuggles arms and equipment into India via Bangladesh. They bring arms from Thailand, which is one of the major source of arms supply to our Northeast insurgents. From Thailand, the arms are shipped to Cox Bazaar in Bangladesh and there after through land route along Indo-Myanmar border and finally to our Northeastern states. There is a pressing need to undertake coordinated/joint operation, both sea and land by the two countries.
Chinese Influence
7. The Chinese Influence in Myanmar has been steadily cascading since 1990. China has been providing defence related equipment and also carrying out infrastructure on the Irrawady Corridor Project would further enhance economic cooperation between the countries. We had been drawing comfort from the fact that Myanmar so far has not permitted the Chinese to carryout any activities West of River Chindwin, but this equation may change. China had assisted UGs in the Northeast in the past and holds an option to rejuvenate the present low key relation. In all possibility, China is likely to remain our main strategic adversary in the post cold war era. The manner in which we neutralize the Chinese influence in Myanmar, will determine our ability to manage China in future.
Muslim Fundamentalist Activities
8. Reportedly five Moulvis from Deoband Sharif (UP) visited Tamu Myanmar five times from 29 May to 02 Jun 2002. Abdul Rashid the Moulvi of Mores Mosque is suspected to have links with Pak ISI. He is reported to have escorted the group. There are about 800 Muslims and one mosque in Tamu, however there are no reports of Myanmar based MFOs operating in this area. The arrival of Deobandhis in the area spells that the hard core Sunni fundamentalism has taken roots. It indicates likely transfers of money to Mosques and the Moulvi becoming political mentors of local groups. Conversion and outward flow of students for Islamic students to Middle East and elsewhere can also be expected. It will contribute to a rising strain of fundamental militancy and natural linkage to militant groups in the long run. Though SPDC is exercising check on MFOs activities in Myanmar it has the potential to erupt in future.
Present Economic Interaction
9. The Indian Northeastern states, which are relatively underdeveloped, needs to be given a viable opening and Myanmar represents a natural trade outlet. A modest beginning has been made in this respect by opening of additional trade posts, but progress is slow. On the other side India has undertaken construction of various projects in Myanmar. The detail are as under:-
(a) Road Tamu – Kalemyo. 160 Km long road constructed by BRTF at a total cost of Rs. 101.73 crores was formally inaugurated on 13 Feb 2001. A draft MoU has been signed in Jun 2001, under which the border roads (BRTF) has undertaken maintenance of the road for the next six years.
(b) Kaladan Project. The project envisages transportation of goods on Kaladan river from India to the Bay of Bengal through Myanmar. An Indian concern Railway India Technical and Engineering Services (RITES) has carried out the pre-feasibility study and river survey for the project in Jan 02. The same has been shared with Myanmar. Detailed project study is in progress and is likely to be completed by Oct 03. RITES has also surveyed the possible linking of the highway system in Southern Mizoram with a road into Rakhain state of Myanmar, as an alternative or a supplement to proposed riverine link. A possible pipeline to carry natural gas from coastal Myanmar into India using Kaladan river valley has also been studied.
(c) Tamanthi Hydel Project. Tamanthi is located on the bank of Chindwin river, to the North of Tamu. A joint survey for the project has been completed and a pre-feasibility study has been carried out. Three sites have been identified for setting up the project and data pertaining to these is being collected. Based on comparative analysis of the available data, a final decision on the subject will be taken. On completion of the project, it will generate 110 MW of electricity, out if which 75 percent would be shared with India.
(d) Tiao River Bridge. Construction of a class 24 bridge across the Tiao river has been completed in Sep 01. It has opened up a second border trade route linking Mizoram and Chin state in Myanmar.
(e) Road Champai. To encourage border trade through Champai Myanmar Govt has asked for improvement of 60 Km road from Rih to Tiddim. BRTF has carried out survey and acceptance of Govt of Myanmar is awaited.
INDO-NEPAL RELATIONS
1. Nepal has always been of strategic importance to New Delhi and its scenario merits serious considerations.
2. Like Bhutan, it is a buffer state between China and India. With this buffer state gone, the Chinese and Nepal Maoists will be sitting on Indo-Nepal border.
3. Nepalese Prime Minister Mr Sher Bhadur Deuba vis India during third week of Mar 2002.
4. Home Minister Mr LK Advani offered India’s assistance to control the insurgency in Nepal. He also called upon updating the extradition treaty.
5. India has also offered sharing of information and corporation between the intelligence agencies of the two countries. India is concerned about ISI’s growth in Nepal as it could destabilize the strategic Siliguri border that connects the North East with the rest 0f the country.
6. He felt other areas also have growth possibilities like energy- intensive industries, tourism, IT, agro enterprises, horticulture, sericulture, herbal and livestock products, pharmaceutical and service sector industries such as health care etc.
7. Following agreements were agreed upon: -
(a) Clamp down any activity in their territory against the other country.
(b) Nepal acknowledged Pakistan’s ISI working in Nepal and has undertaken to crackdown on its activities directed against India.
(c) Sharing of intelligence.
(d) Border patrolling.
(e) Anti dumping duties
(f) Greater access to Indian market.
(g) Early completion of Raxaul-Birgunj Railway Line.
(h) More teeth to Extradition Treaty.
(j) India placed a point about floods in areas of UP and Bihar caused by the rivers flowing from Nepal.
(k) Nepal showed its worries on inundation of parts of Nepal due to construction of dams on the Indian side.
Boundary Committee to complete its work very soon. Special attention is to be given in Kalapani area at the trijunction of China, India and Nepal.
8. Relations with Nepal have traditionally been good but security lapses in the Kathmandu Airport Administration, which caused hijacking of IC-814 in 2000 and resulted cancellation of Indian Airlines flight to Nepal and agitations caused due to certain alleged remarks of Hritik Roshan have been some irritants in the past.
Renewal of Trade Treaty
9. India is Nepal’s largest economic partner and accounts for more than 40% of its trade. India has suggested some changes in the treaty, which are as follows: -
(a) Curb the import of Nepali hydrogenated cooking oil, acrylic yarn, copper wires, steel pipes and zinc oxide as this is hurting domestic production.
(b) India has complained about cheap Chinese goods entering India through Nepal, a charge that Nepal denies.
Area of disputes
10. Security concerns: - New Delhi is concerned about the use of Nepali soil by the Pakistani agency ISI for subversion activities in India.
11. Boundary dispute:- The Boundary Committee to prepare ‘Strip Maps’ of the boundary areas.
12. The treaty of 1950:- Nepal is keen on reviewing some of the security clauses of the 1950 treaty.
13. Extremist activities :- India and Nepal have decided to intensify the crackdown on cross-border terrorist.
14. Water dispute: - It was decided to complete the detailed project report on the construction of the 6000 MW Pancheswar Dam on the Mahakali River.
15. Trade Dispute:- Both the Prime Minister directed that the Inter-Governmental Committee on trade and transit and unauthorized trade, headed by the Commerce Secretaries of the two Governments, be convened soon to address certain issues in a constructive manner.
16. An agreement on science and technology was also finalized. The two Prime Ministers agreed that the large hydro-electric potential needed to be tapped in an environmentally sustainable manner on both side of the border.
CHINA – INDIA
EXPANDING ECONOMIC ENGAGEMENTS
Introduction
1. The bilateral trade and investment between China and India have been the most agreeable as also the most reliable positive link in the history of their not-so-correct relations. Therefore, despite being very negligible compared to their individual growth patterns and especially compared to their potential, economic engagement between these two Asian powers presents one example of how increasing mutual stakes and common understanding flowing from purely economic interactions can contribute to improving of overall inter-state relations. However, while economic engagement may function as a cushion for absorbing much of their misperceptions or genuine problems at the political level, yet this also shows that not-so-correct relations do have an impact in slowing down the pace of progress in their economic engagement. Therefore in the context of China and India , the success of their economic interactions must be assessed from the angle of :-
Its contribution to improvement in their overall relations and,
Its limitation in achieving its full potential in normal time span.
It is in this context that I will try to examine the nature and role of Sino-Indian economic engagements.
2. According to most experts, the coming years will see both China and India join the ranks of the world’s major economic powers. This is simply because these large size resource-rich countries have a strong market potential and with 1.4 million and 1.1 billion people respectively, both China and India have been successfully experimenting with economic reforms that have since increased the purchasing power as well as consumption levels of their large populations. Indeed calculated on the basis of purchasing power parity (PPP), by the year 2010, both China and India are expected to respectively emerge as the largest and the fourth largest economies of the world.
Comparative Indicators of Economic Growth
Year 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
GDP Growth
China - 13% 13.4% 11.8% 10.2% 10% 8.8% 7.8% 7.6% 7.5% 7.3%
India - 5.3% 6.2% 7.8% 7.8% 7.8% 5% 6% 5.9% 5.2% 4.8%
FDI (Contracted)
China ($ Mn) 11977 58124 111438 82680 91282 73276 54 45600 40400 60380 69200
India ($ Mn) 325 1781 3569 4332 11245 11142 15762 6976 7050 8090 10000
Foreign Trade
China ($ bn) 135.63 165.53 135.7 236.62 280.86 289.88 325.08 324 316 324 425
India $ bn) 46.39 40.42 49.42 62.75 75.89 83.08 86.86 81.84 84.95 91.26 93.28
3. However, there is one basic difference that needs to be understood at the very beginning. This is that since China had started her economic reforms as early as 1979 and India only in 1991, China is way ahead in being an economic success though India seems to fully conform to the initial stages of the trajectory of China’s economic reforms and a curious proposition is that these two rapidly growing large economies share such close physical proximity to each other and yet they have not developed economic engagement that has come to be increasingly viewed as the most potent panacea for resolving their politico-strategic problems. Indeed, it is this inherent linkage between their gradually expanding economic engagement to their long standing politico-strategic problems that will continue to determine the prospects of their mutual cooperation in the coming years. And, it is against this backdrop that I will try to examine some specific aspects of their expanding bilateral trade, investments, border trade and other evolving frame works of economic engagement which seem to have far reaching implications for regional and even global peace and development.
Experimenting with Economic Reforms.
4. The overall success of their experiment with economic reforms is perhaps the most critical factor that will guide their economic integration. Apart from their domestic factors, external factors like the recent long drawn financial crisis amongst once booming economies of East Asia, will also have a major role in determining the course of their economic interactions.
5. As a result, in addition to making themselves more competitive with their existing partners and in existing sectors, both India and China have been trying to explore new opportunities in terms of expanding trade in new sectors and with new partners. More specifically, both India and China seem to have gradually diverted towards trading with neighboring countries. To site some statistics, despite China’s trade boom with countries like Japan and South Korea, the share of its Asian trade as part of its total foreign trade has grown only by 9.55 percent during the previous decade, by comparison, the share of China’s trade with South Asia as parts of its total Asian trade has increased by over 26 per cent during the same period. Even within the South Asian region, China’s trade with India and Bangladesh have witnessed impressive increase while China’s trade with all other five South Asian countries has actually declined. During these last nine years of the 1990s China’s trade with India has gone up by 650 per cent.
China’s Bilateral Trade with South Asian States
(% age Share during 1993 and 2000)
Country 1993 2000
India 35.22% 49.03%
Pakistan 44.22% 25.80%
Bangladesh 11.13% 19.58%
Sri Lanka 7.52% 5.55%
Nepal 1.89% 0.02%
The Maldives 0.02% 0.02%
6. Seen in terms of their specific achievements, their economic reforms have created strong fundamentals in both Chinese and Indian economies e.g. Foreign exchange reserves of China stabilizing around $ 200 billion dollars and India’s position in this field also considerably improving. India’s foreign exchange reserves have though been far smaller by comparison but they have gradually grown since India came out of its foreign exchange crisis of 1991. However, both are required and compelled to continue experimenting and locating new partners because of the following reasons :-
(a) Falling FDI. Thanks partly to India’s decision to exercise its nuclear option in May 98, the impact has been particularly severe on India’s actual FDI inflow.
Declining Foreign Trade and Trade Surplus.
(i) China’s trade surplus that stood at $ 43.6 billion for 1998 was constrained to $ 10 billion for 1999.
(ii) India’s foreign trade continued to rise steadily until 1997 from where it slid for 1998-99.
Decline in demand from South-East Asian countries.
Growing competition from some countries with devalued currencies.
Sluggish domestic market in both countries.
Big Debtors. Both China and India stand as the 3rd and 8th largest debtors.
7. All this shows that while any destination may be welcome for steadily growing Indian trade and commerce, China may have already over exploited its easy destinations and seems to be exploring new partners where as India seems to be quite fit into its requirements.
8. At the outset, it must be stated that statistics alone cannot explain the contribution of India-China bilateral trade, which has to be viewed against the backdrop of their problematic politico-strategic equations. Nothing perhaps compares to the India-China bilateral trade that has gradually came to be the single most reliable as also single most agreeable confidence building measure (CBM) thereby strengthening their mutual understanding during the last 20 years. Conversely this rapid progress in India-China trade and commerce has clearly coincided with their overall period of rapprochement since the early 1990s. The beginning of this process can be traced back to the two sides signing protocols for economic cooperation in 1984 granting each other the most favoured nation (MFN) trading status. Since then India has become China’s 20th largest trading partner and its largest trading partner from the South Asian region since 1994. Between 1993 and 2000, while Pakistan’s share in South Asia’s bilateral trade with China declined from 44 per cent to 25.80 per cent, India’s share has increased from 35 per cent to 49.03 per cent. Similarly, for 1998, following the nuclear explosions in India and Pakistan, while Pakistan’s annual trade with China registered a negative growth of nearly 9 percent, India’s trade with China still remained positive showing a 5.02 per cent increase. All these trends have clearly boosted the argument of economic engagement being the most potent tool for resolving their politico-strategic problems.
China-India Bilateral Trade 1991-2000
(in US $ million)
Year India’s India’s Total Deficit/
Exports Imports Volume Surplus
1991 120.33 144.48 284.81 -24.15
1992 180.99 158.44 338.39 +22.50
1993 416.57 259.18 675.73 +157.41
1994 322.00 573.00 894.00 -251.00
1995 398.00 785.00 1,162.00 -387.00
1996 719.16 689.54 1,408.70 +29.62
1997 897.26 933.06 1,830.32 -35.80
1998 905.70 1,016.59 1,912.28 -110.89
1999 825.74 1,161.88 1.987.62 -336.14
2000 875.76 1,200.56 2,076.32 -324.80
9. As regards evolving the framework for expanding India-China economic engagement, both sides had set up an India-China joint working Group for promoting mutual trade and commerce in 1984. This group conducts annual meetings alternately in Beijing and New Delhi and is supported by a joint Business Council that represents business interests especially of non-state sectors from both sides. Their efforts have since resulted in many more agreements for vacillating their trade and commerce and for establishing joint ventures between these two countries. A few of the important ones are :-
(a) The first India-China joint venture between India’s Mid East integrated steel Ltd and China Metallurgical Import-Export Corporation commissioned in Orissa in Jan 1993.
(b) Signing of a trade agreement on avoidance of double taxation between two countries in 1994 during Chinese foreign minister’s visit to New Delhi.
(c) China and India signed following major agreements in Nov 1996 during president Jiang Zeemin’s visit to New Delhi :-
Putting in place double taxation avoidance mechanism.
Providing MFN status to each other’s sea borne trade commodities.
Combating smuggling of narcotics & arms and other economic offences.
10. As of 2001 the principle commodities exported from India to China include :-
(a) Mineral products.
Prepared food stuffs (has shown a growth of 1125% from 1996).
Lac and resins.
Inorganic chemicals.
Textiles and textile articles.
Precious and semi-precious stones, granite and articles of stone.
Organic chemicals.
11. Top inputs in China’s Export to India are :-
Chemicals and allied products (constitute 33% of China’s trade with India).
Mineral products (15% metallurgical coke).
Raw silk and silk yarn.
Pulses.
Mercury and antimony.
Fresh water pearls.
Pig Iron.
Newsprint.
China-India Border Trade.
12. Though formally only a negligible part of their bilateral trade India-China border trade needs special attention for being most effective in improving politico-strategic equations. The increasing India-China border trade has been able to :-
(a) Solidify overall mutual confidence between people of both countries, inhabiting and manning border areas.
(b) Reduce border management expenses and contributed to the scaling down of their military presence.
(c) Rebirth of local cottage industries - As a result of increasing border trade and CBMs since 1990s complete transformation of situation has taken place. The traditional interactions which had got severed after 1962 war have started getting re-established thus giving a boost to local manufacturing trades.
13. The two sides have lately expanded their framework and have been exploring possibilities of opening their border trade as party of sub-regional cooperation amongst India’s North-East, China’s South-West, Bangladesh and Myanmar. This may finally lead to China’s official recognition of Sikkim as part of Indian union and solving of long standing Arunachal Pradesh problem.
14. However, assessing India-China border trade in monitory terms, It remains extremely low. During the last 10 years since the two sides officially resumed their border trade in Dec 1991, the monitory value of this has stayed less than $ 1 million per annum. But there are a variety of factors that can explain this low figure :-
The items exchanged across the India-China border are traded largely in barter.
Items are not capital intensive value added manufactured goods.
Border trade is seasonal.
(i) Weather.
(ii) Communication.
Both India and China have allowed free trade in very low cost 15 items.
Illegal and informal trades.
Sikkim, Arunachal Pradesh and Kashmir (Aksai-Chin).
15. Apparently their monitory value can never reflect their contribution to India-China economic integration and to improving politico-strategic climate between the two countries.
Joint Ventures and Other Investments
16. Compared to this ancient art of trading goods in term of selling and buying, joint ventures wholly owned subsidiaries have been a phenomenon of more recent times. This requires actual capital investments in manufacturing or providing services inside another nation and presupposes greater mutual confidence then what happens in case of normal inter-state transaction. The track-record in such long time investment can, therefore, be described as the perfect barometer that reflects the level of mutual understanding and mutual trust between the involved countries. Accordingly, this also remains far more vulnerable to their politico-strategic equations then any other economic interaction. Though mutual investments between China and India have been low mainly because of both being developing countries and more recently due to India’s nuclear test in 1998. However, there are also factors that facilitate their economic engagement. These are :-
Soft landing of China’s over heated economy of early 1990s.
Onslaught of East-Asian financial crisis.
(c) The sudden rise in China’s foreign exchange reserves in mid 1990 coinciding with negative global trends and investments.
(d) China’s small but fast growing non-state sector.
17. At the end of it all, it can be said that the broad trends in India-China mutual investment do not present a very discouraging picture.
Impact of India’s Nuclear Test.
18. Having established the linkage between India-China politico-strategic equations affecting their decisions on mutual trade and commerce, one must also explore how much their economic integration has strengthened itself to deal with their political polemics or skirmishes. And here, their interactions during and following India‘s nuclear test in May 1998 perhaps provide one such potent case to evaluate the future prospects of India-China economic cooperation, and here, re-enforcing traditional notions of their economic engagement being the most agreeable as also the most reliable pillar in India-China ties, their bilateral trade proved to be the most potent catalyst in facilitating their post Pokhran-II initiatives towards mutual accommodation. No doubt, this period saw some of the Sino-Indian economic interaction being cancelled or postponed and Indian exports suffering a considerable set back specially during the 3 or 4 months around India’s nuclear test in May 1998. Nevertheless, their annual growth rate for the entire year of 1998 did not crash and only came down from an average of 9% during the presiding year to 5.02% for 1998. Even during those difficult summer months of 1998 India signed agreements for 5 joint ventures, involving an investment of $ 8 million and other 6 joint ventures during 1999 involving investment of $ 1.9 billion.
19. Given the overall regional and international sluggish trends, India-China economic interactions during 1998 were surely not the most discouraging slowdown. In 1998, India actually increased its share of China’s international trade to 0.59% from 0.56%.
20. This clearly shows that India ‘s nuclear tests and political polemics had little impact on India – China economic interactions and in fact it were the economic interactions which facilitated their political turnaround. This surely indicates positive prospects for India – China economic ties.
Prospects for Economic Engagement
21. The most cited arguments against India – China economic integration paints them as natural competitors in labour intensive exports where success of one would reduce opportunities for the other. No doubt there remains a certain validity to this line of thinking yet, given the track record of managing their economic interactions even the most conservative estimates should put a positive picture about future prospects. A closer look suggests that India ‘s liberalization has started nearly two decades after that of China which means that even in its labour intensive exports India‘s structural patterns are not completely identical to that of the Chinese which have since become relatively advance, but increasingly less cost effective. The two also continue to have their inherent differences in their strength and weaknesses. Exploring India‘s growing expertise in computer software, e.g. has since attracted the attention of Chinese leaders especially because it provides an alternative to their over dependence on Western powers. Other uncharted areas for future explorations include joint development of aircraft and spares (for civilian needs to start with), ship-building and repairs, railway equipment etc. both India and China have, in fact been gradually moving forward towards expanding cooperation in more advance area of sharing technologies even in more sensitive areas like nuclear technologies and China had supplied enriched nuclear fuel for India’s Tarapore Nuclear Power Plant in Jan 1996. from time to time, China has also shown increasing interest in collaborating in other high technology areas like joint production of 100 seated civilian aircraft or participating in India’s light combat Aircraft Project. As a result, despite being known to be reluctant in investing in the Chinese market, about half a dozen Indian business houses have established joint ventures and wholly owned subsidiaries inside the China main land. India and China have also been working together at various regional forums like Economic and Social Council for Asia Pacific (ESCAP), Asia Pacific Economic Cooperation (APEC), Asia Development Bank (ADB) etc. One such major initiative currently under serious consideration involves the region that comprises China’s South-West, India‘s North-East, Myanmar and Bangladesh. This region has potential for development by exploiting its mineral resources, forest, fertile lands and favourable weather. The political differences amongst these countries have not only made it difficult to take any joint initiative for common development of this region, but actually resulted in encouragement of various insurgencies and other anti state activities. Some positive initiatives have, no doubt been made during more recent years yet it leaves much to be desired. This lack of development has only further complicated matters by enhancing problems like spread of small arms, drug trafficking, refugee, migrations, AIDS and insurgencies across each other’s borders.
22. Similarly, India and China have also supported each other at various international forums. India, for example, supported the case for China’s inclusion into the Word Trade organization. New Delhi has also been galvanizing support amongst developing countries to get China elected to the Executive Committee as representative of the developing countries. This is because all the developing countries put together account for only a quarter of World Trade and they rank still lower in terms of investments. Most of the developing countries are heavily dependent on foreign aid from developed countries and highly unlikely to go against the policies of their donor countries.
Conclusion.
23. To conclude, therefore while India – China politico-strategic equation will continue to have their impact on the potential of their economic integration, there interactions in trade and commerce have evolved their own strong fundamentals that remain poised to withstand such occasional political polemics. However, there is definitely need to continuously take stock of the nature and composition of their bilateral trade and commerce and to explore fresh investment opportunities. And while both sides open new vistas of economic cooperation, neither should underestimate the value of rectifying imbalance that may otherwise aid to factors that disrupt their economic integration. Both have to work together to promote each other’s contribution towards their bilateral and multilateral initiatives.
HELLO FRIENDS, develop yourself and find your weakness and build up your strength ,aware about your locality and your self ,truth is necessary to clear your SSB interviews.
