The recently concluded talks between Indian national security adviser Ajit Doval and his Chinese counterpart, foreign minister Wang Yi, who are the special representatives for the China-India boundary question, is a confirmation of the reset in relations between the two countries.
The talks – the 23rd in the series – were held after a gap of five years because of the Sino-Indian confrontation in eastern Ladakh leading to the clash at Galwan. This followed a sudden Chinese blockade of Indian patrols at five disputed points on the LAC and the massing of substantial forces there.
While the Indian readout of the talks was fairly anodyne, the Chinese issued two notes detailing the outcome of the talks. Both sides agreed that the issues of the past five years had been “properly resolved” (China) and they “positively affirmed”(India) the implementation of the disengagement agreement of October. There was common agreement, too, that their task ahead was the need to work on “a fair, reasonable and mutually acceptable framework for settlement of the boundary question.”
There was a difference, however, on the issue of the centrality of the border issue to the state of their relations. The Chinese felt that India should “put the border issue in an appropriate position in bilateral relations,” while India said a peaceful border was necessary for the “normal development of bilateral relations.” In the last five years, China had been trying to persuade India that the border issue should be separated from their wider relations in other areas. India, however, made it clear that the developments on the border in 2020 were central to their relationship and unless the status quo ante April 2020 was achieved there would be no normal ties.
As a further sign of normalisation of ties, China has agreed to resume the Kailash-Manasarovar yatra and resume providing data on river water flows relating to the Brahmaputra and the Sutlej. In addition both sides will resume cross-border trade at Nathu La in Sikkim.
The obvious question that comes to mind is just why this change has taken place.
Till early this year it appeared that Indian and Chinese positions had hardened. After agreeing to resolve issues in four of the blockade points, the Chinese had refused to move on Depsang and Charding Nala. For its part, India tightened the web of measures it had taken to restrict Chinese trade and investment in India in the wake of the 2020 developments. Yet, it found that goods imports from China surged 63 per cent and India’s trade deficit nearly doubled to $85 billion since 2020.
We do not know much about Chinese decision-making, but it would appear that the state of the Chinese economy and the COVID disruptions the country suffered in 2022-23 played a role. The Chinese could not but have noticed that the Indian response had not been aggressive and had focused on dealing with the issue through diplomacy and negotiations. In an environment, where the Biden Administration was tightening the screws on China and taking along allies in the EU and Japan in the process, India could be a stable and vast market for Chinese goods and investments.
The Indian calculation was at two levels.
In countering China, India came closer to the US. It participated in the steady evolution of the Quad into a strategic grouping of nations to counter China’s rise in the Indo-Pacific. It also signed far-reaching technology sharing agreements in the area of defence with the US. Yet, India’s strategic goal has been to become a pole in a multipolar global order, something that could be negatively affected by too close ties with the US.
At the second level India had its own economic issues. First and foremost was its dependence on Chinese imports and the massive trade deficits they engendered. Efforts to promote manufacturing in India through the Production Linked Incentives (PLI) have not quite worked as India realised that to grow its manufacturing it needed China more, not less. China may have major problems, but it remains a global leader in EVs, high speed trains, batteries, solar technology and UAVs. By 2030, they could be accounting for 45 per cent of global manufacturing.
Pressure also built up from the business community which felt that restrictions placed by the government on investments, imports and travel in relation to China were hurting them. They said goods and specialiSed manpower from China was needed in the current phase of India’s efforts to emerge as a manufacturing power.
The government’s approach became apparent with the Economic Survey 2023-24 issued in July which wanted India to encourage investments from China, even while discouraging the import of finished goods. Last month, NITI Aayog CEO B.V.R. Subrahmanyam called for India to join the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). This is notwithstanding New Delhi’s precipitate decision to not join the RCEP on account of concerns that India would get swamped by China.
There will be no status quo ante on the measures that India has taken on the economic front with China. But there will be a major tweak that will ensure that India can take advantage of what China has to offer, in the manner other countries have been doing so. Pragmatism is the name of the new game.
Manoj Joshi is a distinguished fellow at the Observer Research Foundation in New Delhi.
This piece was first published on The India Cable – a premium newsletter from The Wire & Galileo Ideas – and has been updated and republished here. To subscribe to The India Cable, click here.
