Tag Archives | China

Why signing of landmark agreements with the US is in India’s National interest?

The concept of swing power mandates that India move closer to the US by signing agreements that signal closer defence and trade cooperation

By Guru Aiyar (@guruaiyar)

There have been media reports recently about India on the verge of signing agreements with the US that will move it closer to almost to a status of alliance.  There are basically three agreements—Logistics Support Agreement (LSA) which give the US forces access to Indian bases and vice-versa, the Communications Interoperability and Security Memorandum of Agreement (CISMOA) and Basic Exchange and Cooperation Agreement (BECA) for geo-spatial cooperation. The focus of bilateral cooperation will be on these agreements during the visit to India in April of Ashton Carter, the US defence secretary. Closely aligned is the Defence Trade & Technology Initiative (DTTI). There is opposition in some quarters in the Indian military and the government regarding some serious concerns on these agreements.

The concerns stem from the fact that “what do we do in case of war?” Alliance politics, balancing by world powers, miscalculation, miscommunication—all could lead to a major war according to John Mearsheimer, a renowned US professor on International Relations. He explains it succinctly in his book, the Tragedy of Great Power Politics  where he concludes that the world powers blundered into the First World War. India is justified in asking the question of “what to do in case of war?” as its bilateral relations, especially with countries in the Persian Gulf and Southeast/East Asia are markedly different than that of the US with them. In this debate, it is essential to clearly understand the concept of swing power.

According to Project for New American Security (PNAS),  a US based think tank global swing states are nations that possess large and growing economies, occupy central positions in a region or stand at the hinge of multiple regions, and embrace democratic government at home. Increasingly active at the regional and global level, they desire changes to the existing international order but do not seek to scrap the interlocking web of global institutions, rules, and relationships that has fostered peace, prosperity and freedom for the past six decades. Taking this argument further, K. Subrahmanyam, one of India’s foremost strategic thinkers had advocated India’s role in the international order as a swing power.

If the US is at the top of the hierarchy, China second, then it makes sense for India to be a swing power. The basis of being a swing power is this: India should have better bilateral relations with US & China than they have with each other. Rather than viewing it as containing China, being a swing power must be seen as defending Indian values of liberal, secular and pluralistic democracy. The defence ministry is having some apprehensions about signing these agreements with service chiefs of the view that there is little to be gained from such agreements.

It is important to gather what these apprehensions are? Is it, hypothetically, if US were to go to war with Iran in the future, what would be India’s stand? The answer to this conundrum can be simplified to walk away from the agreement if it does not suit our national interests. For example, Sri Lanka has signed these agreements but still goes to China for strategic partnership for Hambantota port. Let’s face it. India is not a banana republic whose foreign policy or strategic autonomy can be held to ransom. There is no need to shy away from signing these agreements.

Guru Aiyar is a Research Scholar at Takshashila Institution and tweets @guruaiyar 

 

 

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China’s interest in Southeast Asia: Implications for India

China’s interest in Southeast Asia:

China’s policy towards Southeast Asia can be termed as one of competition and colloboration. Traditional determinants like geography, cold war ideology, domestic and ethnic politics have been the binding factors in China-Southeast Asia relations. Placing the relations China had exerted its influence over the region and the principal manifestation was the tributary system, which reflected the subordinate status of others in the region.

Post 1949 China emulated  the role of a crusader and a champion of third world freedom and assisted revolutionary communist movements and insurgent groups. With the Sino-Soviet rivalry in late 1960s,  China  had to reassess its ideological leanings. The death of Mao Tse Tung  and the ascendancy of Deng Xiaoping to power, brought in  a paradigm shift in China-Southeast Asia relations.

China’s assurance to the Southeast Asian countries after the 1997 financial crisis, refurbished China’s image amongst the Southeast Asian Country. China’s emphasis on economic modernisation and regional stability, assured the Southeast Asian countries that China would no longer be a threat in the region. An ernest effort undertaken by China to re-assure and re-emphasise its position with the Southeast Asian countries.

Thus Southeast Asia house great powers competing  for economic and strategic benefits. This has constantly compelled the ASEAN countries to choose between the regional challenger and the dominant power.The Southeast Asian countries often are tossed between the heavy weights, nevertheless they are coping with their own strategies and interest in identifying and engaging with India, Japan, US and China.

Asymmetry in relationship between China and Southeast Asia exists. China’s exerts high influence in the Mainland Southeast Asia which comprises of Myanmar, Cambodia, Vietnam, Laos and Thailand. All these countries in some form or the other  is dependent  and remain a  soft underbelly of China. China maintain unique relations with each of the countries in the region.

Myanmar is critical from the perspective of “client state”, While in the case of Cambodia and Laos, China plays the role of a dominant external actor. Vietnam-China relations continues to remain complex and there are completing claims between the two countries. Vietnam has protested the recent deployment of advanced missile system on a disputed South China Sea island and  has condemned this  erroneous action of China.

China rarely resonates historical tributary system with maritime Southeast Asia.Interestingly the maritime countries in Southeast Asia Singapore, Malaysia, Philippines, Brunei, Indonesia of these several of them enjoy the patronage of Untied States thus posing a constant challenges to China. Competing and overlapping claims continues to exist between China and maritime Southeast Asian countries on the issue of South China Sea.

Countries in dispute have wrangled over the territory for centuries and there is a steady increase of  tension. China by and large have claimed the largest portion of the territory. The recent  deployment of China’s advanced missile system which  is claimed  purely as a self-defence mechanism is not viewed as a benign advancement. United States has called for tangible steps to  reduce tension in the region.

How could India strategies its Southeast Asian Interest:

India’s engagement  in Southeast Asia was accelerated with the announcement of India’s Look East Policy in the 1990s. With increased bilateral operation in areas of trade and commerce, people to people contact and capital flow. India-ASEAN partnership has been upgraded to areas of strategic partnership. The enhanced India’s engagement in the region is welcomed by the Southeast Asian countries, as a counter check against growing China’s assertiveness in the region. India’s Act East strategy is an initiative to expand Indian diplomacy and an initiative to involve the large Indian diaspora present in the region.

The Look East Policy was an initiative started by the Late Prime Minister Narasimha Rao which focused on economic engagement with ASEAN countries and India.  Southeast Asia connects Indian and the Pacific Oceans that includes vital maritime chokepoint and hence extremely critical from India’s geo-strategic interest and hence India works to evolve a peaceful regional order. India has interestingly maritime borders with three Southeast Asian countries Myanmar, Thailand and Indonesia. Interestingly India has no unilateral or hegemonic policy towards the region.

US President  Obama has urged India to an Act East  Asia policy .  Several   joint statements have been released both by India and Untied states  calling for  safeguarding maritime security, freedom of navigation and  countering piracy and maritime terrorism.  The ASEAN countries along with United States have welcomed India’s participation in there region. They have legitimised India’s status as a great power in Asia and looks forward for India’s support in maintatining the regional order and stability

The Southeast Asian countries see India as a great power and calls for more proactive engagement from the Indian side. This is indeed a great opportunity for India,  how much will the political leadership encapsulate the opportunity to shape Asia is something that has to be seen.

Priya Suresh is a research scholar @Takshashila Institute. She tweets@priyamanassa

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China deploys missiles to contested South China sea islands

China has recently deployed the  advance surface-to-air missile system to one of its contested islands in the South China Sea. The recent satellite images show tow batteries of eight surface-t0-air missile launchers as well as radar system on woody island, a part of the Parcel island chain in the south china sea. There are several claimants to the dispute and the Woody Island has been claimed by Taiwan and Vietnam. On several occasion there has been agreement on the peaceful settlement of the dispute. The missiles arrived in the Woody Island over weeks and according to news reports the missle were visible from 14 February.

Heightened tension and anxiety is seen among the claimants countries as well as United States. Recently president Obama and Association of South East Asian Nations (ASEAN) had several rounds of discussion to  ease the tension, but none of the dialogues ever had a mention of China’s assertive posture in the region

Though there have been several mechanism to thwart the tension and halt to the construction and militarisation of the disputed areas, the tension continues. US has pledged to conduct the freedom of navigation patrols for a free and smooth passage of ships were several countries like Vietnam, Malaysia, Brunei, Philippines and Taiwan have their contested claim over the isalnd.

China sending its missile is not something unusual and it has deployed missiles on several occasions. The South China Sea issue intertwines several countries to dispute with China. Several countries like  Brunei, Vietnam, Philippines, Taiwan, Malaysia and China are intertwined in the dispute over the South China Sea. Since 1950 China has laid its  claim over the Woody Island and the recent deployment probably is seen as a provocation.

US  has raised concern over the deployment, Japan and Vietnam have joined hands with US in condemning this deployment. South China Sea is a contested area with countries competing over the trade routes and mineral deposits. Does this deployment by China confirms China’s assertiveness  or as the Chinese Foreign Minster Wang Yi claims that an act to distort China’s image by the western media.

Priya Suresh is a Research Scholar @Takshashila. She tweets at priyamanassa

 

 

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China’s Central Asia Engagements

America’s entanglement in Middle East has given China the perfect ploy to increase its footprint in Asia. The much-hyped Asia Pivot is in doldrums, with no policy framework or strategy to manage China’s rise. China clearly senses that its power projection in the Pacific is limited by the vast US presence and its network of allies, but in Central Asia, a viable power vacuum gives it the opportunity to expand its presence and influence. Central Asia is critical for China in three sectors, mainly trade, energy supplies and the fight against terrorism emancipating from Xinjiang.

 Energy Heaven and Russia’s Backyard-

After the collapse of the Soviet Union, Chinese companies ran into Central Asia to chart out energy deals to secure China’s growing energy demands. Most of Oil and Gas Pipelines run through Caspian Sea, Central Asia and Xinjiang, deep into China. Russia continues to be the main geopolitical player in the region, with negligible US presence. But off late, it has been facing subtle yet stiff competition from China. With economic sanctions in place, it is becoming increasingly difficult for Russia to ward off China’s economic power play. China-Central Asia trade was valued at 50 billion dollars in 2014, a figure exceeding Russia’s for the first time. The China-Central Asia network of pipelines could supply up to 55 billion cubic meters of natural gas to China every year, or more than half of China’s total gas imports.

Xinjiang Factor-

Increasing terrorist activities in Xinjiang has put China on a high alert. Influx of the majority Han Chinese in the region termed as ‘Hanification’, and failure of developmental projects has angered the ethnic Muslim population to rise against Xi’s ‘Strike Hard’ campaign. Since most of the oil and natural gas pipelines pass through this region, China is concerned about the security of its investments, and has in recent years, tried to subvert the religious practices of the people in Xinjiang. Uyghur separatists used to move around the porous borders with other Central Asian states to reach Afghanistan, though in recent years their movements have been highly regulated due to increased Chinese clampdown. China’s domestic law enforcement agencies are coordinating with their counterparts in the region to capture the terrorists and bring them to justice. Stability and security is the buzzword in this region. China maintains a premium on stability, and will go at lengths to protect its trade interest in the region. After the killing of a Chinese hostage by ISIS, China has stepped up its counterterrorism efforts. Pakistan has also played a critical role in assisting China. Andrew Small’s ‘The China Pakistan Axis-Asia’s New Geopolitics’ provides a detailed description of their coordination on selective counterterrorism.

Trade-

Trade is a very important factor in China’s geoeconomic calculus in the region. President Xi Jinping unveiled the ‘One Belt, One Road’ initiative in 2013 to maximize trade and commerce between Europe and China, with Central Asia acting as a critical transit point. EU-China trade is worth around 580 billion dollars, with much of the trade traversing through Central Asia, a replica of the old Silk Road. During ancient times, China had become the most prosperous nation entirely out of trade with Europe and Middle East, and is using the old route to reemphasize its benefits to other nations. Furthermore, China wants to decrease its dependence on the lengthier sea route for trade with Europe, and hence has increased investment in infrastructure projects in the region. For this purpose, China has setup three institutions to fund the vast developmental projects in the region. AIIB, Silk Road Infrastructure Fund and New Development Bank will pool in a total of around 100 billion dollars, with the Silk Road Fund alone providing 40 billion dollars. They will mostly concentrate on connecting China to Europe through railway lines, roads and energy infrastructure. With slowing economic growth and output, OBOR is highly essential for China to succeed and provide the necessary impetus to bolster growth in coming years.

 

India is slowly engaging itself in Central Asia with oil deals and gas pipelines, the most notable being TAPI. But it continues to lag behind China in terms of investment and influence. India-Central Asia trade pegs at 800 million dollars, which would have been higher, if not for Pakistan. Lack of direct access to Central Asian region continues to be a hindrance in terms of trade, energy security etc for India. And as the Chinese say, India is still 2 decades behind them, more so in this region. Let’s see if India will be able to better engage itself in Central Asia, with its growing economic clout and energy demands. Prime Minister Modi visited all 5 Central Asian states in order to increase security cooperation and trade. As the TAPI pipeline finally materializes for India, another option for India is to let the pipelines pass from Xinjiang region through the disputed territory of Aksai Chin, though it is very less likely to get traction among policy makers on both sides. In choosing lesser of the two devils, China is a better option than Pakistan for energy trade.

Piyush Singh is Junior Research Associate at Takshashila Institution and a student of law at Hidayatullah National Law University, Raipur.He tweets at @Piyushs7

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Thoughts on India’s approach to China’s 1B1R initiative

How can India respond to a Chinese project that is aimed at creating a geo-strategic realm for itself?

By Pranay Kotasthane (@pranaykotas)

Last week saw two articles in Indian media on the challenges and opportunities for India posed by China’s One Belt One Road (1B1R) project. This post looks at the arguments made in the two reports and puts down thoughts on India’s response to 1B1R.

To understand what 1B1R is, look no further than this succinct The Wire article by Shyam Saran. Suffice to quote this section in the piece that points to the strategic angle of the project:

China sees the twin-dimensional initiative as a long-term project to secure its geo-strategic realm, which has both a continental and a maritime dimension. It is not just an economic initiative. It has obvious political and security implications. In any case, China’s strategists do not draw lines separating economic and security objectives. Each dimension reinforces the other, even though the economic dimension may sometimes mask the security imperative.

1B1R then, is likely to remain the anchor around which China’s global outreach will be shaped. How should it be seen from an Indian National Interest perspective? Two pieces that appeared in the Indian newspapers last week offer a few leads while responding to this critical question.

One Belt One Road Plan. Source: China Daily Europe

One Belt One Road Plan. Source: China Daily Europe

The first piece in The Hindu while conceding that “Chinese political expansion and economic ambitions, packaged as 1B1R are two sides of the same coin” argues:

India needs to match ambition with commensurate augmentation of its capacities that allows it to be a net security provider in the Indian Ocean region. This will require New Delhi to not only overcome its chronic inability to take speedy decisions with respect to defence partnerships and procurement, but will also necessitate a sustained period of predictable economic growth; OBOR can assist in the latter.

Besides resuscitating economic engagement with the world, there are other advantages of being a part of groups such as 1B1R. A thumb rule helps: in the amoral setting of geopolitics, it benefits an entity to be a member of many clubs, rather than being outside them. It is easier to be a part of the clubs and use them to build one’s own capacities, rather than spend inordinate efforts on opposing such formations. Hence, this author strongly supports India’s presence at other clubs like BRICS, AIIB and SCO as well. Applying this thumb rule to 1B1R, India is better off being a part of it, particularly because the capabilities for India to float a competing vision altogether, possibly in partnership with the Japanese PQI just don’t exist.

Even if India decides to be a part of 1B1R, two critical questions raised by the authors remain unanswered: Can India seek reworking of the CPEC (China Pakistan Economic Corridor) by Beijing in return for its active participation? Furthermore, for the stability of the South Asian arm of OBOR, can Beijing be motivated to become a meaningful interlocutor prompting rational behaviour from Islamabad?

On the first question, India finds it unacceptable that the China Pakistan Economic Corridor passes through Pakistan occupied Kashmir. However, as the second editorial on 1B1R in Mint rightly points, New Delhi might now find it too late to extract Chinese concessions on CPEC in return for support on 1B1R. Moreover, India’s opposition or otherwise to CPEC will have little impact on the project itself. A more realist approach would be for India to de-hyphenate the CPEC leg from the overall 1B1R initiative.

On the second question, it is highly unlikely that China will restrain Pakistani actions against India in any meaningful way. In fact, China is most comfortable keeping the India—Pakistan conflict on the boil: on one hand, the conflict keeps India focused on its western border. On the other, the conflict allows gaining Pakistani friendship at minimal costs.

Overall, India can look at 1B1R from the dual lens of competition and complementation: In the Indian sub-continent, visualise 1B1R as an aggressive competitor: use it as an excuse to accelerate India’s own projects of connecting markets in India’s own neighbourhood. Outside the Indian sub-continent, look at complementing 1B1R. For instance, in East Africa, India can work with China under the aegis of 1B1R to expand its own reach.

Pranay Kotasthane is a Research Fellow at The Takshashila Institution. He is on twitter @pranaykotas

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What is Pyongyang’s goal

As the UN Security Council condemns the North Korean act of aggression, several countries including South Korea, United States have condemned this dastardly action. North Korea on several occasions had committed to abandon its nuclear programme. But despite the commitment North Korea has continued to keep the international community on tender hooks.

North Korea nuclear test

There seems to be clear cut violation of North Korea’s commitment to abandon its Nuclear programme. The recent launch of missile which North Korea claims as peace observation satellite has sparked several questions as to how much has  Pyongyang developed its ballistic missile programme. So far each of its test Unha, Taepodong and Nodong Ballistic missiles seems to hasten the development of Inter Continental Ballistic Missiles (ICBM) and the test on Sunday resulted in Kwangmyongsong 4 satellite entering the polar orbit. The Sunday’s testing further intensifies the rate of missile testing. Has this test boosted North Korea’s nuclear capability.

North Korea after its test in early January this year and had made claims to test in the future.  The international community had clamped North Korea’s test as a dastardly act and breach of its commitment to abandon its nuclear weapon testing. What is the reaction of United States and China. China has advocated dialogue with North Korea as an act would further provocative and add tension to the stability of the region. China is very clear that the region has to be denuclearised and nuclear proliferation to be stalled to bring order and peace in North East Asia.

Despite severe condemnation and calling the act as breach of security, North Korea is clear in its mission and intends to continue rocket carrying satellite to space. Committed to its vision and mission North Korea is bent on launching more man made satellite into the space. US claims that this is an tacit approach to develop North Korea’s capability to attack United States. A reality check is often required, North Korea continues unswervingly in building its capability targeting the United states.

Series of testings have been carried by the North Korean Government over a period of time. North Korea claims this as a peaceful purpose but with the clandestine approach there seems to be a major ambiguity in what it is claiming. Is this just the right to develop a peaceful program or boosting its power capability and equation is something that has to be carefully watched. North Korea’s move remains very speculative and unsure, what would Kim Jung-un do, remains a big question and challenge.

Priya Suresh is a Research Scholar at the Takshashila Institute. She tweets @priyamanassa.

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West Asia Engagement with Chinese Characteristics

Four parameters that are likely to guide China’s engagement in West Asia

By Pranay Kotasthane (@pranaykotas)

My previous post Talking about the Asia beyond Pakistan was in light of the Indian External Affairs Minister’s visit to Israel and Palestine. Using The Economist’s Grid of Grievances, the post argued that:

if India were to be mapped on this graphic, it would perhaps be the only state that maintains a non-adversarial relationship with every West Asian state.

Apart from India, there is another state which is missing from the mosaic, and one that has been the quickest off the mark in dealing with the transformed power structure of West Asia: China. President Xi’s visits to Saudi Arabia and Iran, coming immediately after lifting of international sanctions against Iran, have garnered widespread attention in policy circles.

There is a broad consensus that China will be a force to reckon with in the new West Asia but there is little discussion on the direction that China is likely to follow in the process. This post tries to sketch out the parameters of a greater Chinese engagement in West Asia.

First, the Chinese government sees West Asia as an unsaturated market. West Asia in general and Iran in particular have the potential to boost demand for Chinese production. It is no surprise then, that Xi’s arrival was greeted with talks about the ancient Silk Road, reminiscent of a time when the supply chains between China and West Asia were robust.

Second, the Chinese government wants West Asian countries to bandwagon on its side in its efforts to create a new world order that challenges the West. On the geopolitical axis, this means China wants more West Asian participation in institutions like the Shanghai Co-operation Organisation. On the geoeconomic axis, China will look to get greater West Asian commitment to the Asian Investment Infrastructure Bank (AIIB).

Third, China will side with the incumbent political leaderships in West Asia. As a geopolitical actor, China has shown less inclination to regime change except in conditions when a state’s internal political situation directly affects China’s security adversely, as seen in Afghanistan. Going ahead, China will continue to engage the ruling dispensations of all important West Asian countries.

Fourth, China will let others do the fighting against IS. Apart from supporting the incumbent leaderships militarily and economically, China will not put any feet on the ground against the IS, as long as the IS threat remains away from its borders.

These four parameters are likely to guide China’s greater engagement in West Asia. While it remains to be seen what aims this engagement will accomplish, China faces the same challenge as India does on the issue of increasing proximity with West Asian countries: thus far, the two countries have maintained fairly good terms of engagement with West Asia by allowing them to settle at a low level equilibrium, with none of the engagements taking the form of a strategic partnership. As these two states tries to scale these local maxima, the geopolitical environment is bound to throw up new challenges and tough choices that can upset the delicate balance they lie in currently.

Pranay Kotasthane is a Research Fellow at The Takshashila Institution. He is on twitter @pranaykotas

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India’s West Asia policy — is it losing out to China?

India needs to inject fresh thinking into its West Asia policy to further its national interest and avoid being left out due to China’s foray

The Chinese president Xi Jinping’s recent visit from January 17-23 to Saudi Arabia, Iran and Egypt signal Beijing’s intentions to play a proactive role in this region. China’s ravenous appetite for energy notwithstanding, it has been very astute in dealing with the countries in West Asia. The visit was all the more significant because tensions had arisen between Iran and Saudi Arabia due to execution of a Shiite cleric, Sheikh Nimr al-Nimr by Saudi Arabia in early January 2016. This led to break in diplomatic relations between Saudi Arabia and Iran. Unfazed, China went ahead with the visit.

What is of interest is how once a staunch anti-communist nation like Saudi Arabia warmed up to China’s overtures.  Saudi Arabia established diplomatic ties with China in 1990.  This was preceded by China offering CSS-2 intermediate range ballistic missiles to the Saudis. In 2007, China sold Dong Feng(DF) 21 medium range ballistic missiles with the tacit approval of the US Central Intelligence Agency(CIA). Saudi Arabia is the largest supplier of crude to China. According to the International Monetary Fund(IMF), trade between the two countries increased from US $1.28 billion in 1990 to US $ 74 billion in 2012.   China’s demand for oil is expected to grow from 6 million barrels per day to 13 million barrels per day by 2035. In order to diversify its sources, China has naturally looked towards Iran.

China played an important role in lifting the UN sanctions against Iran. It was a key negotiator with US and other permanent members of the UN to persuade Iran in capping its nuclear program.  So it was not a surprise that Xi Jinpeng was the first world leader to visit Tehran after sanctions were lifted on January 17, 2016. China and Iran have agreed to enhance security cooperation through intelligence sharing, counter-terror measures, military exchanges and coordination.  Iran is a crucial link in the strategically ambitious China’s ‘One Belt One Road'(OBOR) project. According to a Chinese government report, OBOR aims to connect China with Central Asia, Russia and Europe (Baltic).  It will connect China with the Persian Gulf and Mediterranean Sea. With the US practically vacating the Middle East, China seeks to step in to fill the vaccuum.

As the US seeks to pivot to Asia-Pacific through Japan, allies in South East Asia and India, it is natural for China to enhance the contours of its relationships with countries in West Asia. China is in for the long haul. On the other hand, India has been trying to play catch up. It did not balance the relationships between the West and Iran during the economic sanctions. Suitably placed for negotiations role, it ceded space to China. With Chabahar project also getting delayed due to slow progress on India’s part, it shouldn’t surprise us if we lose it. Least of all to China.

 

Guru Aiyar is a research scholar with Takshashila Institution and tweets @guruaiyar

Featured Image: Khezr beach, Hormuz(Iran), licensed from creativecommons.org

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Taking Advantage of Lower Commodity Prices

By focusing on those industries that rely on oil as a producion import, India can take maximum advantage of falling global commodity and oil prices. 

The biggest headlines in the economic world over the past year has been news of slowdown in the Chinese economy and the resultant fall in commodity prices. The slowdown in China, which has been the engine of growth in the past decade, has had significant impact on most other economies. China has been the biggest consumer of commodities and oil and thus, a slowing Chinese economy will import lesser amounts and this reduced demand leads to a fall in prices. Commodity prices have fallen by over 40% since their peak in the early part of this decade. Apart from oil, copper, iron ore, zinc, and many metal prices have been declining consistently. Price of energy related commodities, such as coal, has also significantly dropped. The reduced prices have hit many commodity and oil exporting countries. Brazil, Russia, South Africa and many other emerging markets have had severe declines in their exports and consequently in their GDP growth.

Commodity prices have fallen by 40% since their peak.

Commodity prices have fallen by 40% since their peak.

How is India poised? Is it going to be hurt by the Chinese slowdown or can it be a tailwind to increase growth?

First, the negatives: Indian apparel and yarn exports have declined considerably. China has been a big importer of Indian textile products and its decreased pace of income generation has meant lesser demand for Indian exports. Further, with China devaluing its currency considerably as a means to improve their trade, Indian competitiveness has been further eroded. India’s exports have fallen in every single month from April to November 2015 in comparison with the same month a year ago.

However, with India being a net importer of oil and commodities, it should really focus on taking advantage of the lower global commodity prices and falling oil prices. Here’s a few things that India can focus on:

1. With oil prices set to decline further in the first half of 2016, this is the time for India to seriously consider building a large enough strategic oil reserve.

2. India should get its current account balance in line. The rupee has also been declining significantly and if India can increase its exports, and with a reduced import bill, the current account deficit can be corrected to an extent.

3. Lower oil prices will imply smaller oil, petroleum and fuel based subsidies. This should be a golden opportunity for the government to get its fiscal accounts in check.

4. A lower import bill will also have positive effects on inflation and inflation expectations. This should give more room for a more accommodative monetary policy.

5. Most importantly, the government should focus on those industries that uses imported material, commodities and oil, as raw materials for production. The Indian auto industry should get a considerable fillip due to lower input prices. If policy can be more accommodative, the auto industry can soar. Other industries that rely on oil, such as, plastic industries including pipes, chemicals and resins selectively, paints, footwear manufacturers etc can really benefit from oil prices and the government should focus on creating a friendly climate for these industries. Apart from oil, reduced price of iron-ore, copper and even coal should help a large number of Indian industries by lowering input costs.

6. Finally, since India’s nearest peers – Brazil, China, South Africa, and many other EMs – not faring well in terms of economic opportunities, it is poised to receive a lot more of global funds, both FII and FDIs. The next round of liberalising reforms cannot come soon enough to attract global capital into India.

After the stagflationary episode in 2010-12, India is finally getting back to the higher growth track and global conditions seem to be favouring India. It should do all that it can to take advantage of these conditions and accentuate the positives.

Anupam Manur is an economics Policy Analyst at the Takshashila Institution. Connect with him on Twitter @anupammanur

 

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China building indigenous second aircraft carrier

China has confirmed the building of its second aircraft carrier, but the first carrier in the indigenous category.  Military observers say that the second aircraft would be completely different from the country’s first carrier Liaoning a Soviet designed carrier purchased in 2012. The new carrier will be built with a brand new propulsion system, and the IHS Jane first noted the new hull under construction. Further the carrier would be  designed to accommodate the native  developed J-15 fighters and an  upgradation from the first aircraft carrier Liaoning.

 

aircraft

The image shows an overview of the Dalian shipyard in Northern China where China is building its indigenous second aircraft carrier.  White Paper entitled “China’s Military Strategy” is an endeavour to rejuvenate China’s capability. As the White Paper testifies it is important and relevant that China develops its maritime forces in way that it safeguards China’s national interest. The second aircraft carrier is a move toward this direction. Enhancing China’s blue water naval capability as a means to contain the US pivot in East Asia is an important directive towards this interest. China is currently working on the aircraft capability that would be on par with the USS Nimitz class super carriers. It is also speculated that the Chinese aircraft could be much smaller than the aircraft used by United States. There is also a good possibility that the new aircraft carrier might be stationed at a new facility on Hainan Island near the South China Sea. A  showcase of China’s might over the South China Sea.

The most critical objective of the program is the visualization of a blue water navy that could be operable beyond the first and second island chains. Beijing is keen to bolster its naval capabilites  as means to safeguard its maritime security. Further with China embroiled in conflict over East and South China Sea and the presence of United States in the region, convinces China to further enhance its deterrent capability. A raison d’être for China’s military expansion which is more global in nature rather than just looking at homeland defence.

Is China’s military expansion a tactics to  counter US primacy in the region or  stratagem of    reaching the Oceans, a part of its maritime strategy. Further it could be a modicum to  protect its Sea Lanes of Communication (SLOC) vital to China’s modernisation drive.  Despite several factors have been attributed to China’s expanded maritime interest, there is an interesting theory that unfolds China’s motivation. With China embroiled in maritime conflict in East Asia with Japan, the presence of United States a long time ally of Japan poses a major challenge to Chinese supremacy and rise. Further there is also a growing triple entente between Japan-United States-India which could be used to counter weight China.  Though India unlike the United States is not a traditional partner in East Asia, but today it is making a concerted effort to drive its economic, military and foreign policies eastward. There is a strong possibility that a Quadripolar Structure could emerge thus reframing the geo-strategic order of East Asia.

Priya Suresh is a Research Scholar with the Takshashila Institute. She tweets @priyamanassa.

 

 

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