Economic Highlights

New  Delhi, 16 May 2015

Silk Road Sweet-Coated

BEGINNING OF NEW TIES?

By Shivaji Sarkar

The Silk Road is mysterious, dazzling, posing hopes, even some fears but ultimately unavoidable. India has trudged it for millennia, traded heavily, earned gold and also lost to some marauders. Has all this changed? Is Prime Minister Narendra Modi seeking to alter it with business deals, gifting a Bodhi tree – eternal source of knowledge, or does it continue to be besieged by age-old border issues?

It is indeed a difficult and charming route. The coming century is being viewed as the era of the Chinese, whereas the earlier two were marked by the prowess of the UK, Europe and the US. While America still remains in the reckoning, Russia, under sanctions of the West, has too started looking towards Beijing and acknowledges its rise as an economic and military power.

Whether it likes it or not, southern neighbor India cannot ignore the growing might of China. It has two options: either to ignore it completely and slip into a utopia or live with it cautiously and gainfully through healthy participation and subtle moves. At the same time, India too is said to be growing. Its projected growth at 8 per cent would be faster than China’s falling growth, now veering around 7 per cent. While India’s trudging ahead sounds good, there is a difference in the volume of economy of the two countries. India despite steady progress is yet to match China—its manufacturing growth remains low while Beijing is on high trajectory. Yes, critics can say China also has slowed a bit, but that can be no consolation.

Economic dynamics is still favourable for China and is much ahead of what India is planning. New Delhi must learn from Beijing, whose business strategies are in perspective, has a bureaucracy, not merely the political leadership that is pro-active and well-versed with dealing with the psyche of its competitors.

This is what India needs to be apprehensive about. During the past year, Chinese businesses have almost bagged 60 per cent of the total standardization certificates issued by Indian Standards Institution (ISI), thus demonstrating that it’s dead set about giving the tough competition. 

So far Chinese goods were merely a ‘cheap’ buy. But now the price advantage is being offered with quality as well. Indian business needs to look hard for strategies to unseat these. It must remember that the Chinese businesses have done so long back in Europe and the US. Manufacturing of utilities there were cornered long back with this strategy – lower price and tolerable quality, which suited the ‘use-and-throw’ culture.

As against this, Indian business has been a bit too dependent on the Government. They are too protective, be it the licence-permit raj, the era of liebralisation or any other period. They gobble up public money for their ventures and never return the loan leading to a whopping Rs 3 lakh crore bank NPAs (losses) apart from another few lakh crore government subsidies and tax relief they garner. The nation’s loss is always their individual gain.

China is different. Indians often believe that it wants to capture its market, as they have virtually done so. But China also has taken care to do so in many other markets – entire south-east Asia, Pakistan, Sri Lanka, Maldives, Myanmar, West Asia and now is even penetrating Africa.

China is coping well with the high pace of home production through its foreign contracts. It is eyeing $10.6 billion rail projects in Thailand, $20 billion energy projects in Pakistan and building 3000-km road to strategic Gwadar port at the Makran coast in Pakistan. The projects have political connotations too. The Gwadar road is also a tool to check discontent in troubled Xinjiang. China has penetrated Sri Lanka with soft loans and virtually made a key base at Hambantota port.

Additionally, Beijing is eyeing mineral and petroleum resources in the Indian Ocean region. But it is pro-actively preventing India from having a tie-up with Vietnam in South China Sea, frowns at economic and military tie up with Japan and Taiwan. It pinpricks India on Tibet and even on Indian territories of Arunachal and Aksai Chin. Besides, it doesn’t mind marauding through Pakistan-occupied-Kashmir.

For increasing its business, Beijing goes to any extent mixing, diplomacy, gunboats and aggressive postures at international and UN bodies. New Delhi has to match this and not be just satisfied with the gains of some contracts or deals for building hi-speed train tracks and asking it to contain the balance of trade that is highly in favour of China.

However, the 10th Annual Business Confidence survey of European companies in China prepared by the European Chamber of Commerce shows business discontent. More than half of the 552 companies surveyed have been in China for over a decade and these have growing apprehensions of Beijing becoming stricter with its norms on finances, to competition, to pollution. Beijing, they have started feeling feel is becoming “less businesslike”.

And, here is where India should see an opportunity. It must also learn from China that a liberal attitude is often taken advantage of which could harm the host. Besides, on the HR front, rising labour costs are on the minds of executives. Thus New Delhi is mulling changes in labour laws to help such companies. Can we learn from the Chinese experience? The worst labour law violators are the western companies. How would India gain by extending facilities to such violators? Is it not possible to have a joint international approach on labour issues to protect the workers? China, of late, also has to think of worker protection.

“India is just not about IT and beauty. As Modi presses for greater market access for Indian companies, Indian companies also have to localize their services for the China market”, says Rangarajan Vellamore, CEO, Infosys China.

“New energy is evident in the relationship, as Modi and Chinese President Xi Jinping have a close rapport”, says BJP General Secretary Ram Madhav, accompanying the PM in Beijing. He, however, is concerned about China re-hyphenating vis-à-vis Pakistan, which is a problem. It doesn’t matter how many business deals India has with China, but what does is how strategically it matches every Chinese move. Beijing has eyes on West Asia and Europe. It will neither  overlook Pakistan nor give-up efforts at encircling India.

Indeed, it’s a difficult relationship. Modi’s efforts of sweet-coating it is a good diplomatic move. Recall former Prime Minister Atal Behari Vajpayee had in the context of China stated: “You cannot change your neighbour”. The present NDA government is following this precisely. But it must remember that the gains cannot be measured in terms of dollars, as eventually these may be much more. At the same time, ticklish points would remain and the love-hate relationship shall continue. --- INFA

(Copyright, India News & Feature Alliance)