India-China Relations

Introduction: India-China relations have long been complex and multifaceted, characterized by a combination of cooperation, competition, and border disputes. The two Asian giants, with their vast populations, economies, and regional influence, share a significant border and have a history of diplomatic engagements, trade ties, and occasional tensions. The border disputes, particularly in the Western and Eastern sectors, have been a major point of contention, leading to military standoffs and occasional clashes.

Border Dispute

• Traditional Boundaries: The Himalayas historically acted as a natural boundary between India and China.
• Line of Actual Control (LAC): The disputed 3488 km border is separated by the LAC, which was established after the 1962 war.
• Border in Different Sectors: The border spans across four Indian states and two union territories, with different sectors having varying levels of disputes.

Reasons for Unresolved Border Disputes

• Geographical Constraints: The difficult terrain, harsh climate, and complex topography make it challenging to demarcate the border accurately.
• Cartographic Issues: British-era agreements and maps have left many areas unmarked or arbitrarily marked, leading to conflicting claims.
• Pressure Tactics: China's use of the border dispute as a pressure tactic and its timing of aggression in response to certain events.
• China-Pakistan Relations: China's reluctance to settle border disputes with India due to its close ties with Pakistan and implications for the Kashmir region.
• Lack of Trust: Differences in long-term regional aspirations and lack of mutual trust hinder cooperation and resolution.
• Other Contentious Issues: Divergent stances on Tibet, Kashmir, and other global forums, as well as nationalist sentiments, contribute to the complexity.

India's Measures in Border Areas

• Infrastructure Development: India has invested in critical border infrastructure, including strategic roads, bridges, and communication networks.
• Strengthening Border Forces: Deployment of the Indo-Tibetan Border Police (ITBP) and the induction of Rafale jets to enhance border security.
• International Cooperation: Collaborating with Japan and promoting connectivity projects in the Northeast region to counter Chinese influence.

Bilateral Trade

• Increasing Deficit: The trade deficit for 2021-22 reached $73.31 billion, with imports at $60.27 billion and exports at $8.77 billion.
• Growth in Bilateral Trade: Annual two-way trade exceeded $100 billion in 2021, with India's imports accounting for the majority.
• Background of Trade Ties: Trade between India and China surged since the early 2000s, driven by Indian imports of Chinese machinery and equipment.
• Dependency on Chinese Goods: Significant imports from China in machinery, organic chemicals, automotive parts, and fertilizers, integrating China into India's manufacturing supply chain. 
• Active pharmaceutical ingredients, auto components, and a large number of medical supplies (since 2020) are other notable imports.
• India's Export to China: China is a major destination for Indian exports, ranking third, but India's share in China's total exports is relatively low. Over the past two years, Indian exports to China have witnessed a remarkable growth rate of over 50%.

• However, the majority of these exports comprise raw commodities such as ores, cotton, and seafood, rather than finished goods.

• The economic relations between India and China have undergone significant changes in the past two years.
• New Delhi has emphasized that it cannot be business as usual while tensions persist along the border. As a result, tighter restrictions have led to a decline in Chinese investment in India.
• Chinese investment in technology and telecommunications start-ups have come to a halt. Prohibitions on 200 apps and restrictions on Chinese firms' participation in 5G trials have been imposed.
• Increased scrutiny of Chinese firm, including tax investigations on companies like Xiaomi, has been initiated by India.
• New Delhi is contemplating a long-term plan to reduce import reliance and identified 12 sectors to boost India's global supplier status and reduce import bill.

Considerations and Implications

• View on Trade Deficit: Trade deficits/surpluses are not direct indicators of a weaker or stronger domestic economy.
• Interconnected Trade Dependencies: India's trade imbalance with China should be viewed in the context of interdependencies, such as imports of ingredients for pharmaceuticals and growing seafood exports to China.
• Challenges of Persistent Trade Deficits: Concerns about foreign exchange reserves availability and the need to enhance domestic production capacity.

India’s Trade War with China 

• Negative Consequences: Banning trade with China would primarily harm the Indian poor, punish Indian producers and exporters, and negatively impact sectors like pharmaceuticals.
• Limited Impact on China: A ban on trade with China would have minimal repercussions for China's overall trade, while hurting India's economy.
• Broader Engagement: India's integration with Chinese investments in technology startups and the importance of maintaining policy credibility and attracting foreign investment.
• Trade War and Border Dispute: Turning a border dispute into a trade war is unlikely to resolve the underlying issues, and it would disproportionately harm India.

Way forward

• Diplomatic Engagement: Maintain regular high-level meetings and negotiations to address issues and build trust.
• Border Management: Strengthen border management mechanisms to prevent tensions and ensure peace and stability.
• Economic Cooperation with Caution: Balance economic cooperation while protecting domestic industries and reducing dependence on Chinese imports.
• Enhancing Strategic Alliances: Strengthen partnerships with like-minded countries to balance China's influence and promote regional stability.
• Defense Preparedness: Strengthen defense capabilities to protect national interests and maintain deterrence.

Conclusion

• Political Consultations for Peaceful Resolution: Political commitment and mutual dialogue are essential for resolving border disputes between India and China.
• Military Communication: Maintaining effective military-to-military communication can help prevent and resolve border-related issues, ensuring peace and tranquility.