India and China… Indicators of ascent and paths of competition

By: Shaimaa Abdelhamid

‘India has acquired the power to shape the new global order’, Indian Prime Minister Narendra Modi expressed, reflecting on his country’s growing capabilities in recent years. This comes especially after New Delhi managed to achieve a strong economic leap, positioning itself among the top five economies worldwide. Meanwhile, the Chinese economy has begun to suffer from growth weaknesses and cracks in several key sectors, raising urgent questions about the possibility of India becoming the “new China” in the future. This prompts speculation about whether the next two decades will witness a story of New Delhi’s ascent akin to Beijing’s experience in the first two decades of the 21st century.

Indicators of Indian ascent

No doubt that India has recently emerged as one of the rising powers on the international stage, relying on its economic and human resources, as well as its balanced political and diplomatic movements. Among the key indicators of Indian ascent are the following:

On the economic level

Economic growth rates: At a time when most economies around the world, including advanced ones, suffered successive crises over three years, starting from the COVID-19 pandemic to the Ukrainian crisis and worsening geopolitical risks in the Middle East, the Indian economy witnessed growth reaching 7.2% during the fiscal years 2022-2023. As for the Gross Domestic Product (GDP), it reached approximately $3.7 trillion by the end of 2023, with a growth rate estimated at around 6.3%. Forecasts indicate that Indian economic growth will continue during the current year, surpassing $4 trillion for the fiscal year 2024-2025. The Indian Ministry of Finance expects the country’s economy to become the third-largest in the world by 2027, with a Gross Domestic Product of $5 trillion.

Human resources: Since April 2023, India has become the world’s most populous country, with a population of 1.427 billion, surpassing China’s estimated 1.425 billion. India also boasts the largest diaspora spread across the globe, estimated at around 25 million Indians, whose remittances constitute significant support for the Indian economy. According to the World Bank’s report on migration and development in 2022, New Delhi achieved a record high of $100 billion in remittances from overseas workers. Furthermore, it should be noted that more than half of Indians are under the age of 25. Therefore, according to the United Nations, nearly one-fifth of individuals aged 15 to 64 worldwide will be Indian by 2030. This immense human resource will undoubtedly be advantageous for the Indian economy.

Information technology: Given the escalating trade war between China and the United States, particularly regarding electronic chips and information technology, India has become an increasingly favorable destination for multinational companies to invest in. Here’s why:

• Suppliers of Apple such as “Pegatron” and “Foxconn” erected new factories in India in 2023 to commence the production of iPhone. Additionally, Google announced its intention to initiate the manufacturing of its mobile phones in India, particularly the Pixel 8, in October 2023.
• The Indian Cabinet approved a plan by Micron Technology, a specialized semiconductor manufacturer, to invest $2.7 billion in the country. This investment aims to establish a new semiconductor testing unit in 2023. Additionally, Amazon announced its intention to invest around $13 billion in India by 2030 in cloud computing infrastructure.
• On February 29, 2024, the Indian government announced its approval to establish three semiconductor factories in the country, with construction set to begin within the next 100 days. The Indian Minister of Electronics, Information Technology, and Communications stated that the construction of these three factories is part of New Delhi’s efforts to become a global industrial hub and to enable self-sufficiency in some vital sectors and industries.
• As a result of these initiatives, the information technology industry in India witnessed an 8.4% increase in total revenues in 2023, reaching $245 billion. India’s exports of electronics to the United States as a percentage of China rose to 7.65% in November 2023, up from 2.51% in November 2021. Similarly, in the United Kingdom, the share increased to 10% from 4.79%.

On the political level

India has been keen on adopting a balanced foreign policy focused on establishing economic relations and partnerships with various major powers such as the United States, the European Union, and Russia. It has become a member of many blocs, including BRICS, the G20, and the “I2U2” grouping with Washington, Abu Dhabi, and Tel Aviv, which was established as an economic and logistical alliance in 2022.

Its balanced policy was evident in its stance on the Russian-Ukrainian war. New Delhi maintained its economic partnership with Russia, which supplies it with arms and energy, while continuing its strategic alliance with Western countries, particularly the United States.

Furthermore, India sought to enhance its international standing by adopting the issues of developing countries and supporting them in international forums. In early 2023, India hosted a summit titled “Global South Summit,” attended by more than 120 countries, to address these issues. Additionally, during the recent BRICS summit, India supported the expansion of the group’s membership to include six new countries: Egypt, Saudi Arabia, the United Arab Emirates, Iran, Argentina, and Ethiopia.

Moreover, India chose the slogan “One Earth, One Family, One Future” as the theme for its presidency of the G20 in 2023. It called on the leaders of Southern countries to reform the global political and financial system through mutual cooperation and joint efforts to ensure the development of developing countries.

On the military level

India is seeking to enhance its military capabilities, especially its navy, to counter various security threats, notably from China and Pakistan. It has taken a series of steps to serve this purpose, including:

• India has allocated 490 million rupees to purchase the Naval Anti-Drone System (NADS), which is the first anti-drone system to be independently integrated by the Indian Armed Forces. This system provides effective and comprehensive defense against the growing threat of unmanned aerial vehicles (UAVs) to vital naval installations. The NADS can detect small UAVs, jam them, and employ laser-based kill mechanisms to destroy targets.
• On September 16, 2023, the Indian Ministry of Defense announced the addition of 12 Su-30MKI fighter aircraft to its air force. These aircraft were manufactured as part of an extensive defense equipment deal between India and Russia worth $5.4 billion. The Su-30MKI is the latest addition to the Indian Air Force’s fleet, which already comprises over 250 aircraft of this model. It is capable of conducting long-range patrols, radar surveillance, and utilizing smart weapons without entering hostile territory.
• The Indian Navy intends to build a second base in the Lakshadweep Islands, which are located just 258 kilometers from the Maldives. This strategic location lies along the route of shipping lanes from the Gulf of Aden and the Strait of Hormuz to the Malacca Strait. New Delhi has justified this move as enhancing security in the region and assisting Indian ships in conducting operations against piracy and drug trafficking.
• The Indian Navy recently deployed, for the first time, a massive fleet consisting of 12 warships in the Gulf of Aden and the Arabian Sea. This makes India the largest naval presence in those regions, surpassing its previous deployments since 2008 aimed at countering piracy operations off the Somali coast, which were limited to at least one ship.
• On March 11th, India conducted the first test launch of the Agni-5 missile, capable of carrying multiple nuclear warheads. This missile is one of the most advanced medium to long-range missiles in New Delhi’s arsenal and is a crucial component of its deterrence program.
• Furthermore, New Delhi has strengthened its security alliances with major regional and global powers. It joined the Quadrilateral Security Dialogue (Quad) with the United States, Japan, and Australia in 2017 and participated as an associate member in 2022 in the joint naval force led by Washington to secure navigation in the Gulf.

Chinese resentment and escalating points of contention

This Indian ascent serves as a serious alarm for China, especially with the United States adopting a policy of containing China and the “China+1” policy. These policies are based on supporting New Delhi to become the “industrial capital” of the world, thus threatening Beijing’s status, which Washington considers “the greatest threat” to American national security. Areas of competition between China and India include:

The loss of human resources in favor of New Delhi: China has lost its global first position in terms of population to India, a strength that has long supported Beijing’s economy. This comes after China’s one-child policy led to a decline in newborns, leaving the country with fewer births and a larger elderly population. This threatens the labor market and domestic demand, resulting in an increase in the average age to 38 years in China compared to just 28 years in India.

Outflow of investments from Beijing to New Delhi: The Chinese economy is currently facing several problems, including slowing growth, a real estate debt crisis, which accounts for about 25% of the economy, and a decline in domestic and global demand. These issues have contributed to a sharp decline in the Chinese stock market, with the Hang Seng Index losing about 14% of its value in 2023.

With losses in the Chinese markets, investors are rushing to exit. The four largest US-traded funds investing in China saw outflows of $800 million in the last quarter of the previous year. India has been the preferred destination for funds leaving China, as investors are optimistic about New Delhi, which some see as a future alternative to Beijing.

Competition for leadership of the Global South: Beijing has always presented itself as the suitable developmental model for developing countries of the Global South, promoting the idea of similarity in situations and conditions between itself and these nations. This has gained it popularity and significance among countries aspiring for development through the Chinese growth model, away from the political conditionalities that are a mainstay of the Western development model.

However, recently, this idea has been threatened by the rise of India, especially economically. This has prompted New Delhi to also present itself as the better developmental model capable of leading Global South countries towards development. This encouragement comes from the United States, which supports New Delhi to be a leader of the Global South instead of Beijing.

It is likely that this competition will escalate in the coming years, resulting in significant and multi-dimensional ramifications, including in the areas of financing, economic support, infrastructure projects, and multilateral institution reform.

The policy of corridors  between India and China: China has worked to enhance its economic presence, especially in the Middle East, through the launch of the Belt and Road Initiative (BRI), which aims to make Beijing the cornerstone of the regional trade network and infrastructure framework. This supports China’s efforts to lead the Global South. Consequently, the initiative has been a key economic tool for implementing China’s political vision.

The momentum gained by Beijing through this project has aroused the displeasure of the United States, which has realized its importance in achieving Chinese aspirations. This was the reason behind the launch of the Indian-European Economic Corridor project on the sidelines of the G20 summit hosted by India in September 2023. This corridor project mirrors the Chinese Belt and Road Initiative with the aim of excluding Beijing from the strategic and economic structure in the Middle East and undermining its influence in the region.

Competition over the South Asia region: which includes Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka, has intensified. China has exploited the deterioration of India’s relations with its neighboring countries to weave a network of alliances aimed at encircling New Delhi both on land and at sea. This is in order to replace India as the dominant power in the South Asia region. Some factors include:

• The participation of all South Asian countries, except Bhutan, in the Belt and Road Initiative has allowed Beijing to secure access to key ports along the Indian Ocean, such as Gwadar Port in Pakistan, Hambantota in Sri Lanka, and Chittagong in Bangladesh. This development has raised concerns in New Delhi.
• The rise of China-friendly governments, wielding power in the Maldives, Nepal, Sri Lanka, and Pakistan, poses a significant threat to India. This was starkly reflected in the recent crisis between New Delhi and the Maldives following the election of President Mohamed Muzammil in 2023, who insisted on the withdrawal of Indian forces from the island on March 15th of this year.
• The arrival of the Chinese research vessel “Xiangyanghong 03” in Maldivian waters, following the visit of Maldives President Mohamed Muzammil to China in January last year, and Beijing’s provision of free aid to the island totaling 920 million yuan, equivalent to 128 million dollars.
• Additionally, there is the growth of Chinese influence in Sri Lanka, shifts in Bhutan’s behavior, protests in Bangladesh due to the minority-unfriendly policies adopted by the Indian government, and tensions in Nepal.
• Border disputes between China and India continue to escalate: with tensions persisting along their shared border, which stretches for 3500 kilometers. The disputed region, particularly in the Himalayan mountains, remains a focal point of contention. Skirmishes between the two countries often flare up, such as the clashes in June 2020, resulting in the deaths of at least 20 Indian soldiers and an unspecified number of Chinese troops. Military confrontations along the border resurfaced in June 2023, leading to the deaths of three Indian soldiers.

In response, China has significantly expanded its airports along the disputed border with India to bolster its air power. China has also developed offensive capabilities and missile bases in the region. Meanwhile, India has recently deployed additional troops, numbering 10,000 soldiers, to strengthen its disputed borders with China.

These moves have been met with strong disapproval from Beijing. The Chinese Ministry of Foreign Affairs emphasized on March 8th that deploying more forces along the disputed border between the two countries does not contribute to easing tensions or maintaining peace and stability in the border areas.

“Will India Become the New China?”

According to the political and economic tensions characterizing Sino-Indian relations, and Beijing’s recent economic challenges, a debate has arisen over whether India could replace China and emerge as the “new China” in the future. Opinions are divided on this matter:

First viewpoint: It is believed that India could emerge as a strong alternative to China in the future. This opinion is based on several factors, including:

• Support from the United States and its increasing allies for India’s efforts to lead the Global South, by enhancing New Delhi’s efforts to restructure the debts of poor countries, and involving India in competition with the Belt and Road Initiative, through launching the Global Partnership for Investment and Infrastructure initiative under the supervision of the Group of Seven, the Global Gateway Initiative launched by the European Union, and announcing the Indian Economic Corridor.
• The geopolitical strength of India, supported in making it a competitive industrial center vis-à-vis China in the long term, especially as it is a member of blocs such as the G20, BRICS, and other alliances.
• Promising growth opportunities for the Indian economy, as projected by a report from an American investment banking group, anticipating Indian economic growth of over 6% during the current decade. Additionally, a report from the International Monetary Fund forecasts that the Indian economy will surpass the $4 trillion mark for the first time in 2024, continuing its growth trajectory to surpass both the Japanese and German economies before 2030, thus claiming the third position.

Second viewpoint: It is believed that India is still unable to match China economically or assume its place in the near or medium term. This opinion is based on several factors, including:

• Reports suggest that India would need at least three to five years to begin competing with China, assuming annual growth rates of over 8%. Other forecasts suggest that India would need about 18 years to catch up with China, provided that Indian investments triple and assuming Beijing achieves zero growth rates.
• Western investments in Indian sectors are primarily focused on information technology, indicating that the Indian economy lacks the same level of diversity as the Chinese economy. There is also an urgent need for more reforms to accommodate Western investments, particularly in reducing protective trade measures, such as export bans and tariffs on foreign production inputs.
• High illiteracy rates in India have hindered projects from fully benefiting from its large population size, giving China an advantage over India in this regard. Beijing’s clear superiority lies in its larger pool of trained and adequately educated workforce.
• Poverty still prevails in large parts of India, in addition to the high cost of entry into financial markets; Indian stocks are among the most expensive globally. Moreover, the nature of the Indian economy differs from its Chinese counterpart, as agriculture still constitutes a significant portion of India’s economy and employment, while industry accounts for around 15% of the Indian economy, compared to approximately 30% in China.
• There are some investment risks within India; companies still lack confidence that Indian policies in place at the time of investment will not change later. Companies cannot be certain that regulations will be enforced impartially, and it is not in favor of the large national Indian conglomerates preferred by the government.
• China still accounts for about 30% of global investment, while India’s share is less than 5%, and HSBC Bank expects the economic gap between China and India to widen to $17.5 trillion in 2028 from $14.5 trillion in 2023.

In conclusion, the Indian ascent on the international stage cannot be denied, reflecting the economic capabilities that New Delhi has successfully developed. This is further bolstered by its adoption of a balanced foreign policy between divergent poles, focusing on economic partnerships with major powers to serve its developmental goals. India’s achievements in 2023 underscore this trajectory: it rose to the fifth position globally, becoming the most populous country, and successfully landed its spacecraft on the moon, making it the fourth country after Russia, the United States, and China to do so. These milestones are indicative of the technological advancement achieved by New Delhi.

However, this does not mean that India has become qualified to displace China and become a new Beijing in the near future. There are still numerous obstacles and challenges that India must overcome, including:

1. Restoring momentum in its relations with neighboring countries, which have deteriorated in favor of China.
2. Addressing investment issues that investors may face.
3. Continuing to achieve high growth rates in the coming years.

Therefore, there is much for New Delhi to do to become the future Beijing. This means that promoting this scenario at the present time, maximizing India’s image as a rising power, and attempting to export it as a leader of developing countries, is nothing more than an American vision aimed at pressuring China and containing its influence.