On China, put India first
Self-interest must guide the response to China’s aggression
India should react to China’s act of aggression in eastern Ladakh through all means at its disposal — economic, military, and diplomatic. That is a given and there can be no argument about it. None. That said, India should also ensure that everything it does is driven by self-interest above all else, particularly in the economic domain.
There is a clamour for cancelling contracts given to some Chinese companies across areas such as engineering and construction. So, how should New Delhi go about this?
It is easy to see why Chinese companies should be barred from all strategic areas — not just defence but also domains such as information technology and communications. There is a very opaque relationship between the private sector and the government in China and most Chinese private companies and entrepreneurs ensure their objectives are in sync with Beijing’s larger vision. In return, the Chinese government has supported these private companies, helping them grow and spread their network across the globe. In these areas, India’s answer, when it comes to participation by Chinese firms, should be a straightforward and unambiguous No.
But the line can’t be as hard when it comes to other areas. As this newspaper has reported, India depends on China for several raw materials and intermediary products (or components). Chinese companies are good at heavy engineering. India would do well to tap this expertise and continue to keep these supply chains going in its own interest. Sure, it is always good to manufacture locally, but it won’t be possible to do so overnight. Even when it does become possible, it may not make economic sense in the case of some products. Nor, for that matter, does it make sense to say no to Chinese capital, as long as investments aren’t allowed in strategic areas and there continues to be a clear line between ownership (or beneficial ownership) and management. Over the past few days, some state governments have cancelled contracts issued to Chinese companies for largely non-strategic work. This is not a good idea for two reasons. One, doing so may result in protracted and expensive arbitration. Two, more important, most of these contracts were given out to the lowest bidder. Re-tendering those contracts may cause delays that India can ill-afford as it seeks to rebuild its economy. We must get back at the Chinese, but always driven by the principle of self-interest.