- Tensions between India and China are likely to intensify during the Indian prime minister’s third term in office.
- Both countries have made self-reliance a policy priority, which in both cases means focusing on manufacturing.
- India is looking to boost its manufacturing industry as it competes with China for economic leadership.
Indian Prime Minister Narendra Modi was elected to a historic third term in power this week, a move that is likely to intensify India’s economic competition with China.
As David Rubin, a senior fellow at the London-based think tank Chatham House, wrote on Thursday, the conflict is likely to intensify because Modi and Chinese leader Xi Jinping share the same obsession with “self-reliance” for their countries.
Modi has a vision of a “developed India,” or a “developed India,” setting the South Asian giant on a path to become a developed economy by 2047.
Meanwhile, President Xi Jinping’s vision for China is for it to dominate the world by 2049.
“The race for economic leadership in Asia is on,” Rubin writes.
Both India and China will focus on manufacturing
To achieve the goal, Modi’s India is likely to focus on manufacturing.
“The pursuit of national greatness is an inherently relative game, and the key comparison for India is with China,” Rubin writes.
Because self-reliance is a policy priority for both India and China, “it is likely to involve an obsession with manufacturing,” Rubin writes.
India’s GDP is $3.9 trillion, well below China’s $18.5 trillion, and while China has been the world’s factory for the past 40 years, the tides are turning.
Companies are diversifying their operations outside China to avoid over-dependence on any one country, and India is aiming to become the new China.
India is currently the most populous country in the world. 65% of the population With a rapidly growing young population under the age of 35, the South Asian country offers huge opportunities.
But Modi’s party’s loss of its majority in parliament will make it much harder for his government to push through badly needed land and labor reforms to boost growth.
Moreover, Raghuram Rajan, former governor of the Central Bank of India, said: “Planet Money” on NPR India, along with other emerging economies such as Vietnam, Bangladesh and Malaysia, are vying to enter the highly competitive sector.
Rajan said India already has a large English-speaking population, so it would be better to focus on the service industry.
But the Indian government is pumping money into catching up with China, with more than $20 billion in incentives and subsidies to boost production in 14 key sectors, including electronics, autos and EV batteries.
It also provided another $10 billion for the semiconductor chip industry, a strategically important sector in which Taiwan has a large presence.
India has been trying to attract Taiwanese semiconductor factories to invest in India, with some success.
India and China’s uneasy relationship
As the Indian leader begins his new term, India-China relations are also off to a rocky start, given the ongoing conflict between the two countries and the Modi administration’s keenness to attract investment from Taiwan.
Modi on Tuesday accepted congratulations from Taiwanese President William Lai after India’s general elections, angering China, which claims the island as its territory.
“China opposes any form of official exchanges between the Taiwan authorities and countries that have diplomatic ties with China,” Chinese Foreign Ministry spokesman Mao Ning said at a news conference on Thursday.
Ivan Ridalev, an Asia security scholar at King’s College London, told Channel NewsAsia that China’s foreign policy would likely remain unchanged even after Modi’s re-election.
“India has for many years pursued a very aggressive foreign policy of moving closer to the West and countering China,” he told the network. “There is a very strong consensus on this within India.”
China, on the other hand, will try to limit India’s influence on the global stage, he said.
“I think India has been trying to position itself as a leader in the global south, and of course China wants this status too,” Ridalev added. “So I think this competition is going to intensify, and China is going to do a lot to thwart India’s attempts to be seen as a natural leader in the world.”
