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How India can rebalance the China-Pakistan axis

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Minhaz Merchant
Minhaz MerchantApr 21, 2015 | 16:31

How India can rebalance the China-Pakistan axis

Chinese President Xi Jinping finally made it to Pakistan yesterday (April 20). In September 2014, he had cancelled a visit to Islamabad - scheduled to take place after his meeting with Indian Prime Minister Narendra Modi - due to security concerns. Pakistan was engulfed by political violence bordering on anarchy as Imran Khan's Tehreek-e-Insaf and cleric Tahirul Qadri challenged the Nawaz Sharif government with unprecedented street protests.  

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Xi then accepted an invitation to be chief guest at a military parade on March 23, Pakistan's National Day. Again, the Chinese president didn't show up. The Pakistanis are pleased to be third time lucky: Xi is spending two days (April 20-21) in the country. On the agenda: a $46 billion investment package in the China-Pakistan economic corridor. The agreement was signed yesterday along with several others. The project is a part of Beijing's ambitious Maritime Silk Road (MSR). China will also develop Gwadar, which lies at the mouth of the Persian Gulf just outside the Strait of Hormuz, into a major port. On the anvil as well: power projects and electric-powered submarines with nuclear missile capability.

The importance of Xi's visit was underlined by the presence of three men who received him at the airport: Prime Minister Nawaz Sharif, army chief General Raheel Sharif and President Mamnoon Hussain.

China's economy may be slowing down to a six percent growth plateau but its appetite for energy remains insatiable. A 3,000 km pipeline will transport oil and gas from Gwadar in Balochistan through Pakistan occupied Kashmir (PoK) to China's western-most province of Xinjiang.

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On paper that seems to present both India and China with several problems. The most critical is the pipeline's passage through PoK. The Chinese have been quick to assure India that the route through PoK should be of no "concern" to India: China recognises PoK is disputed territory and the pipeline will not impact its position on the matter.

Chinese assistant foreign minister Liu Jianchao said last week: "The project between China and Pakistan does not concern the relevant dispute between India and Pakistan. I do not think the Indian side should be over-concerned about that."

China has lately also been making conciliatory statements over its border dispute with India, saying it has faith in the Modi government's resolve to settle it swiftly and fairly. Huang Xilian, Deputy Director-General of Asian Affairs, observed: "We have a very long border. You can see anywhere in the world there will be shooting crimes, but generally speaking, along the border we have maintained peace and stability, there have been no shooting incidents in the past decade. What is important is that both sides should work together to avoid such kind of incidents and promote tranquillity and stability."

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Prime minister Modi's visit to China next month will set the course of Sino-Indian relations for the next decade. The Chinese are therefore keen not to muddy the waters. Unusually, too, China has been self-critical of its past stand on Indo-Pak issues, including its muted criticism of Pakistan-sponsored terror attacks.

Hu Shisheng, director of the government-run Institute of South Asia, South-East Asia and Oceanic Affairs, which is part of the China Institute of Contemporary International Relations, remarked: "China feels quite awkward (about its neutral stance on the 2008 Mumbai terror attack). It does not mean China is sympathising with terrorist attacks. It needs to handle this ticklish issue in a more diplomatic way. India's concerns over terrorism will be addressed in a more constructive way."

All of this does not take away from the second problem with the 3,000-km Chinese pipeline from Gwadar to Xinjiang: the threat to it from Islamists, especially in terror-prone Xinjiang where the oil and gas from the Middle-East will be transported east to major Chinese refineries. China has over the years transformed the demographics of Xinjiang. A formerly Muslim-majority province, Xinjiang now has an ethnic Han Chinese majority. Uighars are down to around 44 percent of the population and face significant discrimination.

China has warned Pakistan that Uighars are the principal source of terrorism in Xinjiang. By building the China-Pakistan economic corridor, leasing Gwadar port for 40 years and investing heavily in Xinjiang where the oil and gas pipeline ends, China hopes to exercise greater control over the joint anti-terrorism steps it is taking with Pakistan. The Chinese know that Uighar militants receive operational support from jihadis trained by the Pakistani army and the ISI. They believe being in the rogues' den will help neutralise the rogues more effectively. Equally important, the pipeline will give Beijing access to energy-rich Central and West Asia and a direct route to Africa.

What does this mean for India? To answer that question, consider China's three strategic priorities in the Asia-Pacific region. One, to keep a potential rival like India under constant tactical pressure. Pakistan is Beijing's partner-of-choice to achieve that objective. Two, limit India's ambitions to the Indian Ocean and deter it from expanding its reach into the South China Sea with the acquiescence of several littoral states like Vietnam and Japan with whom Beijing has serious disputes. And three, continue cordial talks with India to resolve the 2,000-km-long boundary dispute in Arunachal Pradesh while ignoring India's concerns on Aksai Chin and PoK.

This, Beijing hopes, will be enough to checkmate New Delhi's emergence as the third angle in a long-term "triangle of power" with the United States. China recognises that the world's three largest economies - and militaries - in 2030 will be the US, China and India. It does not want to alienate India beyond a point. Washington is its main concern and Beijing will do everything to ensure New Delhi does not lean too far towards the US as a new tripolar world order takes shape.

India could thus find itself in a unique vantage position - if it plays its cards well. The main card is the economy. With a GDP of $2 trillion, India is well behind the US ($18 trillion) and China ($10 trillion). Assuming an annual growth rate of 9 percent for the next 15 years, as recent International Monetary Fund (IMF) forecasts deem feasible, India's GDP will be nearly $8 trillion in 2030. China's GDP, at an annual estimated growth rate of six percent, would by then have leapt to around $24 trillion. The gap between India's and China's economies would have closed from today's ratio of 5:1 to 3:1. The US, assuming an annual growth rate of three percent, would have a GDP of around $27 trillion by 2030 - ahead of China's $24 trillion though the gap with it would likely disappear in another decade. (In purchasing power parity (PPP) terms China's GDP is already larger than America's.)

Between them, the world's three largest economies - the US, China and India - would in 2030 have a combined GDP of $59 trillion. For perspective, consider Pakistan's likely GDP in 2030: assuming 3.5 percent annual growth, it would have crawled from $0.25 trillion today to $0.40 trillion - around one-twentieth of India's economy by then (it is one-eighth of India's economy today.) Terrorism has cost Pakistan not only lives and a reputation as a respectable country but the opportunity to be one of Asia's premier economies. By 2030, even Bangladesh will have a larger GDP and a higher per capita income than Pakistan.

For India, and specifically for the Modi government, the focus for the next four years must be economic reforms. A lot needs to be done to convert India into a truly modern economy. Tax policies must be simplified. The 2012 retrospective tax legislation must be repealed. If the law did not exist on the statute books for 65 of India's 68 independent years, there is no reason why it should exist today. Monetary policy needs to be loosened, interest rates reduced, gold imports (now running at an annualised $58 billion) curbed, public investment increased and red tape cut.

Ratan Tata said last week: "There's a great deal of hope in the inspirational leadership of Modi. He is still in the early stages of defining what he hopes to deliver in a new India. The implementation hasn't really taken form this year. But we still have to give him the opportunity to implement what he has promised."

Tata is right. The prime minister is doing many things right. Some of his ministers too are doing a good job. But many are not. A cabinet reshuffle is needed. Too many public institutions are headless. Vacancies need to be filled up fast. A new Chief Information Commissioner (CIC) must be appointed quickly. The Right To Information (RTI) act must not be diluted.

Public perception is like water: it slips out of your hands and is gone forever. As this government completes a year in office next month, the engine of governance must shift into fourth gear. A robust economy and a clinical, professional approach to tax, investment and reforms will ensure that the China-Pakistan axis does not pose a threat to India's long-term security. As Bill Clinton said, it's the economy, stupid. Strengthen it first. Everything else will follow.

Last updated: April 21, 2015 | 16:31
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