Recent developments in global trade have brought India and China closer. The US imposed steep tariffs on Indian exports, straining India-US relations. This opened a window for India and China to explore cooperation. Both countries, key players in the Global South, seek to navigate a fractured multilateral order. Their engagement offers new geopolitical and geoeconomic dynamics.
China’s Financial Strategy in the Global South
China has invested heavily in Global South countries. It uses state and private finance to fund infrastructure and energy projects. This reduces these countries’ dependence on Western finance. China gains geopolitical influence through this approach. However, India’s democratic setup and geopolitical concerns limit this model’s application. India has strong domestic finance and infrastructure projects. Hence, Chinese financing must evolve beyond traditional investments to engage India effectively.
India’s Manufacturing-Led Structural Transformation
India is focused on manufacturing growth to boost exports and meet rising consumption. Initiatives like Make in India and Production Linked Incentives show this goal. The National Manufacturing Mission is planned to support this trajectory. India aims for macroeconomic stability through manufacturing resilience. Cooperation with China should centre on manufacturing potential. This includes green energy sectors where China leads, such as solar, wind, electric vehicles (EVs), and batteries.
Industrial Collaboration and Technology Sharing
Chinese firms are technologically advanced in key sectors. Indian firms face challenges in supply chains, workforce skills, and technology transfer. Collaboration can help overcome these hurdles. Political wariness on both sides has hampered partnerships. For example, Chinese EV-maker BYD struggled to invest in India, while Tesla was welcomed without production plans. Successful ventures like JSW and SAIC Motor’s joint EV project show promise. MG Windsor, their EV, became India’s fastest seller. Such partnerships can boost technology transfer and supply chain integration.
Emerging Joint Ventures and Future Prospects
Recent collaborations include Ashok Leyland and Chinese battery maker CALB working on next-generation batteries. These ventures demonstrate the potential for scaled cooperation. China’s technological edge can complement India’s market and policy reforms. India must create enabling conditions for these synergies. This cooperation can strengthen the Global South’s agency amid global disruptions. The current moment offers a unique opportunity for India and China to align shared goals.
Questions for UPSC:
- Point out the implications of tariff hikes on international trade relations and their impact on bilateral partnerships, with examples from India and the United States.
- Critically analyse the role of manufacturing-led growth in India’s economic transformation and its relevance in global supply chains.
- Underline the challenges and opportunities in technology transfer between developing countries, with suitable examples from the India-China context.
- Estimate the geopolitical significance of financial investments by China in the Global South and how it influences global power dynamics.
Answer Hints:
1. Point out the implications of tariff hikes on international trade relations and their impact on bilateral partnerships, with examples from India and the United States.
- US imposed sharp tariff hikes on Indian exports, straining India-US trade relations.
- Tariffs disrupted established trade flows, leading India to seek alternative partnerships.
- This disruption catalyzed unexpected rapprochement between India and China.
- Tariff hikes can cause realignment of geopolitical and economic alliances globally.
- Such trade barriers often push affected countries to diversify trade and investment partners.
- Example – India’s pivot towards China and Global South cooperation amid US tariffs.
2. Critically analyse the role of manufacturing-led growth in India’s economic transformation and its relevance in global supply chains.
- India pursues manufacturing-led growth to meet rising domestic consumption and export resilience.
- Initiatives like Make in India, Production Linked Incentives, and National Manufacturing Mission drive this agenda.
- Manufacturing growth aids macroeconomic stability and structural transformation.
- Integration into global supply chains is essential for scalability and technology access.
- India’s manufacturing focus includes green energy sectors where China leads technologically.
- Collaborations can help India overcome supply chain and technology bottlenecks.
3. Underline the challenges and opportunities in technology transfer between developing countries, with suitable examples from the India-China context.
- Challenges include political wariness, distrust, and regulatory barriers on both sides.
- Indian firms face supply chain bottlenecks, workforce skill gaps, and limited tech access.
- Chinese firms possess advanced technology, especially in green sectors like EVs and batteries.
- Successful joint ventures (e.g., JSW-SAIC Motor) illustrate potential for tech transfer and market disruption.
- Failed or limited collaborations (e.g., BYD vs. Tesla in India) show political and strategic sensitivities.
- Policy space enabling cooperation can unlock mutual benefits and industrial upgrading.
4. Estimate the geopolitical significance of financial investments by China in the Global South and how it influences global power dynamics.
- China’s financial investments reduce Global South countries’ dependence on Western finance.
- Infrastructure and energy loans increase China’s geopolitical influence and strategic reach.
- These investments support China’s Belt and Road Initiative and global stature.
- India’s democratic setup and strong domestic finance limit the applicability of China’s financing model.
- China’s approach shapes global power by creating alternative financial and development networks.
- However, evolving strategies are needed for engagement with countries like India with distinct geopolitical goals.
