INDIA-US-CHINA – INTERNATIONAL
News: China
will want to make India’s U.S. ties costly, says Joseph Torigian
What's in the news?
● Looking
at the Cold War, China has historically seen the subcontinent through the lens
of geopolitics with regards to the United States, but also Russia.
● What’s
changing now is that the competition between the United States and China is
intensifying at precisely the moment that leaders in New Delhi are drawing
conclusions about Beijing following the Galwan incident.
● The
future remains to be seen, as China will be concerned about pushing India too
far in the direction of the United States, but also will want to make India’s
relationship with the U.S. costly.
Key takeaways:
● World
order is posed to change with emerging economies like China and India.
● The
rivalry between the global power United States and rising China is increasing
and is likely to deepen.
● It
has intensified in the past two years covering
trade, technology, naval activities in the South China Sea, and diplomacy.
This has enormous strategic implications for all including India.
How will the US-China rivalry impact India?
1. Relocation of Companies:
● US
tariffs are likely to induce foreign-invested companies to relocate from China.
Vast majority of China’s exports are still accounted for by foreign-invested
companies. This may lead to companies moving to India.
2. Reduced Capital flows:
● Due
to China US rivalry, economies will go for Protectionist measures that will
impact overall capital flows.
3. Opportunity for India:
● US-China
rivalry offers an opportunity for India. India can become more competitive in
segments such as textile, garments and gems and jewellery since India already
has an edge.
4. Weakening of rupee:
● The
rupee will weaken more due to decreased capital flows.
● This
will make imports costly but would help Indian exports which will become
cheaper.
5. Economic growth:
● Current
global economic order will be dismantled.
● This
could impact India’s exports and imports impacting its economic growth.
6. Inflation:
● This
would reduce supply of finished goods and raw material which will increase the
general price for the consumer. This would lead to inflation.
● Moreover,
the burden of increased tax from the duties will also be borne by the final
user.
7. Indian stock markets:
● Indian
share market will go down as seen recently through drop in stock markets, due
to the cautious approach of the investors.
● The
flow of foreign investment may also be reduced.
How should India approach the US and China?
Under
present uncertain circumstances, there is a need for different plans suitable
to different economic environments.
● India
should develop a balanced foreign policy
outlook for both the nations focussing
on its economic growth and development.
● India
should push the US on visa reforms
and on increasing foreign investment in India.
● Strategic defence deals
at lower price should be pushed using India’s increased strategic significance
in the region.
● India
should exploit this opportunity to emerge as a new manufacturing hub by pushing US companies through better and
easy regulations supported by labour reforms.
● India
should focus on the US market for items in the categories of machinery,
electrical equipment, vehicles and transport parts, chemicals, plastics and
rubber products. The supply chains in China for all these products are likely
to shift to other economies.
● India
should correct its negative balance of trade with China through increased
exports of pharmaceuticals and agricultural products to China, as the situation
presents the right time for India to further its cause.
● India
can focus on numerous goods for expanding
its exports to the US and China markets following the hike in duties by
both countries on imports from each other.
● Foreign direct
investments from the US and China should be
encouraged by boosting confidence of firms in India’s business climate. In the
domestic industry, it is important for India to enhance productivity while
adding technology to its domestic production in the identified products.
India
is a major emerging power in the world.
With present US-China rivalry it should not miss an opportunity to further its Make in India and Aatmanirbhar Bharat
initiative and emerge as an export hub.