Covid-19: India’s Gain, China’s Pain

By |2020-07-20T18:33:49+01:0020th July, 2020|

Coronavirus is a very strange phenomenon. It has caused all kinds of suffering and pain, and yet it also signifies potentially great positive changes in the world. One of the most significant of these changes will be the rise of India at the expense of China.

It is undeniable that China’s reputation and global stature have suffered immensely as a result of its perceived role in spreading the deadly virus around the world.  Companies have folded, jobs disappeared and lives ruined as country after country has struggled to deal with the virus. The shattered dreams, lost opportunities and could-have-beens are all being laid at Beijing’s door, and the political repercussions are serious for China. An alliance of democracies to balance Chinese military power is forming in Asia, with the United States and India at the centre of it. India stands to gain most from the outwards shift of global business from China.

Already, this dramatic change in global power dynamics is manifesting itself. Google just recently announced a $10bn investment in India to be operationalised over five to seven years. That will go into Indian digital services, putting India in a position to lead the global information revolution as this Information Age continues to develop. Mukesh Ambani has just announced plans for his company, Reliance Jio, to set up an indigenous 5G platform. Mobile phone and tablet manufacturing giants Samsung and Foxconn (which is contracted to make most iPhones for Apple) have announced $1 billion worth of investments shifting their operations to India. These are seismic steps, with a considerable impact on the economic future of the world.  It used to be China which enjoyed these major manufacturing and digital technology investments. It was hailed as the manufacturing powerhouse of the world. It shows the extent of the global alienation of China, whilst India, with a smaller economy and comparatively poorer infrastructure, is now seen as the major replacement for Beijing.

Needless to say, this will have significant beneficial effects on India’s economy, society and international standing. Whilst there will be a loss to India’s economy in the initial stages due to the lingering after effects of the Covid lockdown, there will also be a significant recovery and return to economic growth afterwards. India is projected to recover the fastest compared with any major global economy.  The multiplier effect of such massive investments into manufacturing and technology from foreign companies will increase the quality and quantity of Indian economic growth. The country will enjoy faster GDP growth as well as a greater percentage of jobs in the manufacturing sector, potentially reaching the 9-10 percent growth enjoyed by China for over three decades. This is an important inflexion point because India has long struggled to get enough jobs for its vast and young population. India is currently reliant to a lopsided degree on services, which do not benefit less educated rural workers. This influx of investment could be the moment that PM Modi’s plans for India begins to be realised, having struggled for years to make the dream of ‘Make in India’ a reality.

The geopolitical impact of these changes will be profound. It is India that will be at the centre of plans to balance China, from a political, military and diplomatic perspective. Politically it will be able to fully exploit the benefits and advantages of being one of the largest economies in the world. Indeed by 2030 it is widely projected to be the world’s third largest economy. With a vast GDP and industry rising, it is likely that India, as the global growth engine, can go on to begin restructuring the world in the way it wants. It will also have considerable resources to spend on its military, helping to balance the Chinese military power. New Delhi will finally have the resources needed to fully modernise its defence forces.

A reformed, modernised and integrated Indian military will cause even more strategic challenges for China, from the frozen Himalayan plateau to the expanses of the Indian Ocean. Indeed, the Indian Navy oversees key transit routes for much of China’s trade and oil supplies. The deployment of a powerful Indian Navy is something that will be particularly worrisome for the Chinese, as they will have to deal with an assertive India threatening their key trade routes through chokepoints such as the Malacca Straits, where trillions of dollars in trade passes through. Such a scenario is hardly unimaginable given the fast deteriorating Sino-Indian relationship, and growing Indian capability. India has the world’s fourth largest navy including a nuclear attack submarine and a serving aircraft carrier, with a second aircraft carrier set to enter service shortly. It therefore enjoys the capability to hold the Indian Ocean against Chinese submarines and warships for a protracted period of time, especially as it co-operates with the United States to do so.

China will have to deal with this even as it strives to contest with the so-called ‘Quad’ of the United States, India, Japan and Australia, with France and the United Kingdom possibly joining them soon. This could go on to become the world’s most powerful military alliance, causing considerable stress on China.  The combined military and economic capability can inflict harsh punishment on China. For example, India banned 59 Chinese apps in the aftermath of the deadly border clash between Chinese and Indian troops in the Galwan valley of Ladakh Union Territory on June 15th 2020. The United States followed suit by banning Huawei, underpinning India’s role as a global security leader. Where Delhi goes in balancing China, the rest of the world now follows.

In the aftermath of Coronavirus, which has been lethal to both lives and livelihoods, the flow of manufacturing and digital investment into India is only rapidly increasing. Coupled with an increased security partnership with the United States, this could lead to India being more at the centre of major global diplomatic initiatives, whether in the economic or security sphere. The Great Power competition between China and India may have only just begun, but from here on it is Delhi that will enjoy a clear edge.

The world is in for some interesting times.

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