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Unpacking the India-China relationship: A dangerous stalemate
China is India’s largest neighbor and second-largest trading partner. At the same time, China is India’s primary external rival, and relations between the two countries have grown more tense amid violent clashes on the Himalayan border.
On GZERO World, Ian Bremmer discusses the precarious India-China relationship with Samir Saran, President of the Observer Research Foundation, a leading Indian think tank. Saran says there is a paradox in the current status quo, where despite tension in the Himalayas, trade between the two countries is expanding in China’s favor.
“I think we have a double challenge for the Indian establishment,” Saran tells Bremmer.“How do you continue to flex your muscles to prevent expansionism of the Beijing variety, and on the other hand, how do you rebalance economic ties?”
Saran believes China isn’t willing to engage with India in the near term on either issue, leading to a “dangerous stalemate” that will define the relationship and could deteriorate very quickly. And given China’s internal economic problems, like record youth unemployment and mounting government debt, Saran doesn’t think Beijing will prioritize the relationship with India any time soon.
Watch the full interview: Can the India-Canada relationship be fixed after a suspicious murder?
Catch GZERO World with Ian Bremmer every week at gzeromedia.com/gzeroworld or on US public television. Check local listings.
Ian Explains: Is India a US ally? It's complicated
Whose side is India on? Well, it's complicated. Based on the plushest of red carpets that President Biden rolled out for the Indian Prime Minister Narendra Modi during his White House visit in June, one might think the two were the closest of allies. But India has a long history of what it used to call "strategic non-alignment" and now refers to as "multilateralism."
After enduring a century of British colonial rule, it’s understandable that Indians would bristle at being told to enter the fold of one global alliance or another, especially when one side includes their former colonizer. And Indians feel they shouldn’t have to hide behind anyone. This behemoth of a nation just overpassed China to become to most populous country on earth and its rapidly growing economy could overtake Germany and Japan’s within this decade.
The sustainability of that stance has been severely tested, however, in the wake of Delhi's refusal to explicitly condemn Russia's invasion of Ukraine, and critics argue that it's long past time for India to pick a side.
Watch Ian Explains for the full breakdown, and for more on India, watch GZERO World with Ian Bremmer on US public television and at gzeromedia.com/gzeroworld.
Indian PM Narendra Modi walks after inspecting the honor guard during Independence Day celebrations at the historic Red Fort in Delhi.
Gearing up for a third term, meet Modi 3.0
Narendra Modi, 72, is stronger than ever. Last week, the Indian prime minister claimed the top prize in a three-pronged election by keeping his home state of Gujarat. Nabbing one of India’s richest states a sixth time in a row may propel him into a likely third term.
Although headwinds are starting to pick up, the Indian economy remains the fastest growing in the world. And despite his right-wing BJP party being fueled by dangerously populist and divisive communal politics, Modi remains a darling of the West, a friend of Big Business, and Washington’s biggest regional bet to counter China.
But the Great Indian Political Equation has flaws: a Cold War-era proximity to Russia, a rough neighborhood which continues to get rougher, rising inequality at home, and a stubborn strain of Hindu chauvinism that is keeping India from firing on all social and economic cylinders.
So, two questions pop up. First, is Modi going to evolve beyond his limiting politics? Second, what should the world expect from New Delhi when India becomes the third-largest economy on the planet in 2027, in the middle of Modi’s probable next term?
Modi is the fairytale success story of Indian politics: the lowly tea vendor who became an abstinent political worker, who became a populist chief minister, who became one of the world’s most powerful prime ministers. But it wasn’t a smooth transition.
Two decades ago, when he was running Gujarat, Modi was blacklisted by the US State Department over his involvement in the deadly anti-Muslim pogrom of 2000. That was Modi 1.0: local, communal, and controversial.
But the 13 years of successful governance which saw the state propel economically became his launchpad into his own version 2.0. His alliance with corporate India was already sealed well before he arrived in New Delhi in 2014 as PM. But it was the big moves in international affairs — firming up a bipartisan bond with Washington, joining the right economic clubs and political groups, and boosting India’s economic momentum — that proved his international street cred.
Still Modi was limited. Bogged down by China, irritated by Pakistan, statically tied to Russia by defense ties and a longstanding tradition of non-alignment, he was criticized for not doing enough to bridge India’s massive income inequality gap, as well as possessing a heavy-handed authoritarian streak.
With a third term approaching, a Modi 3.0 is emerging. And some recent moves indicate that the Indian PM is moving away from previously dug-in positions.
In the fall, Modi turned heads when he scolded longtime pal Vladimir Putin about Russia’s invasion of Ukraine. Last week, India cancelled Modi’s annual huddle with Putin over Moscow’s nuclear saber-rattling. Both moves were carefully calibrated by New Delhi to tackle the impression that it is not a reliable partner of the West.
Still, the broad contours of Modi’s foreign policy won’t change in the run-up to the general election in 18 months, estimates Eurasia Group analyst Pramit Chaudhury.
On the one hand, “the slow drift toward the US will continue, though India’s will continue to keep hedging, as it’s not entirely sure about the US commitment to the Indo-Pacific, thanks to America's propensity for isolationism,” he says. On the other, the more private sector-driven, less state-owned, and digitally savvy India that Modi is trying to create makes it naturally compatible with the US economy.
Also, Modi will likely carry on “managing China, not getting any closer, while continuing to purge China’s economic influence within the Indian economy,” Chaudhury assesses. Meanwhile, Pakistan will be dealt with a firm hand, considering India’s old nemesis is dead broke and has no real solution to stop Modi from absorbing disputed Kashmir.
In the Middle East, India aims to leverage hard-earned relationships with the Saudis and the Emiratis to replace Islamabad as their favored South Asian partner — which would be a coup for New Delhi. Finally, the recently acquired G-20 presidency will test Modi’s international mettle on whether his pursuit of a green transition is in line with the West.
But what will an uber-powerful “Maximum Modi” look like at home? For Chaudhury, Modi’s latest tactics indicate that he is moving beyond “Hindutva” – the muscular brand of Hindu-first politics that he depends on – in order to tackle the flaws of his own machine. Since his cult of personality already cuts across India’s communal lines, the PM is beginning to reach out to poor Muslims to join his ranks.
Though it’s unclear how the old-school BJP apparatchiks will respond to this kindness, perhaps behind this rare show of inclusivity lies a cold rationale: to split the opposition, influence upcoming state elections, and bridge the massive inequality gap.
Remember: India has no term limits. Jawaharlal Nehru, the country’s first PM, ruled for 16 years. While Modi has professed to retire to a Himalayan ashram after his next term, his years in power have only strengthened his support.
Sure, India is richer and more powerful under him, but at great cost to its most sacred, progressive values. With no clear successors aligned, and the economic stakes involved, the biggest question in South Asia remains: what’s Modi actually thinking?The Graphic Truth: The age of Modi
India, now the fastest-growing major economy on the planet, is expected to become the world’s third-largest by 2027. But this wasn’t always the case. After independence in 1948, India’s closed markets and notoriously red-taped “License Raj” kept growth and foreign investment at bay until financial reforms were passed in 1991. From thereon, growth has accelerated. Despite a change of hands between the two major parties — the Congress and the BJP — financial and market reforms have continued consistently without any significant rollbacks. Today, PM Narendra Modi continues previously planned policies of privatization and digitization, with an emphasis on export incentives, to keep driving the Indian economy moving forward. The lesson? Consistency is key. We explore the big milestones and hiccups in the last 30 years of Indian economic growth.
India's Prime Minister Narendra Modi attends a bilateral meeting during the G-20 summit in Bali, Indonesia.
India is rising fast, but Modi must drive with care
India’s decade is here. According to two recent back-to-back reports by Morgan Stanley and S&P, the world’s second-most populous country is set to become the planet’s third-largest economy by as early as 2027.
Already the fastest-growing major economy in the world, India’s GDP is expected to double from its current $3.5 trillion by 2031. That means that all else being equal, India will be economically neck-and-neck with Japan and Germany by the middle of the next US presidential term.
What’s driving India’s growth? A decade-long effort premised on making aggressive inroads into digitization, pro-manufacturing incentives, and a focus on exports. This has been buoyed by riding the wave of global offshoring and gearing up for an energy transition, which has placed Narendra Modi's administration and its backers in corporate India in an enviable position.
But how will Indians be affected? India’s booming GDP will likely change the destiny of many of its billion-plus consumers. New initiatives are already changing the way Indians borrow, consume, and access healthcare. As Indians overtake the Chinese as the world’s largest population — perhaps as early as next year — they will likely have more disposable income too. The country’s income inequality gap will likely decrease, with consumption expected to more than double from $2 trillion to $4.9 trillion by 2030.
Critically, real income per capita will grow significantly by an average of 5.3%, with Indian households set to become the greatest spenders among the G-20 countries.
Being Indian won’t just mean being better off than your neighbors — it will also mean being (more) global. As international outsourcing spending triples to $500 billion by the end of the decade, the number of Indians employed in jobs outside India will triple to more than 11 million. All of India’s 660,000 villages are set to be electrified by 2030 as well.
The nature of the Indian worker will change, too. Given that its global exports could also double by the end of the decade, the nation of farmers will transition to more Indians working in industrial jobs as the manufacturing’s share of GDP in India could increase from 15.6% currently to 21% by the end of the decade.
Meanwhile, India’s growth also has ramifications for many of its neighbors. The likes of Bangladesh, Nepal, and Sri Lanka are all beginning to lag — yet are increasingly dependent on New Delhi for credit and growth, sectors where India is openly competing with China as the region’s lender.
India might also step into China’s boots as the factory of the world. As zero-COVID, economic decoupling, and Xi Jinping’s aggressive foreign and domestic policies continue to force global investors to look for other options, India is standing by with fresh corporate tax cuts, attractive investment incentives, and new infrastructure to attract capital in manufacturing.
But there’s a flip side. While India’s surge is also expected to increase its standing on the global stage, its economics and its politics will likely run it into direct competition with China.
“As the strategic competition with China heats up, we are going to see India play a critical role in global supply chains that are significantly less dependent on China as the world’s factory,” said Uzair Younus, director of the Pakistan Initiative at the Atlantic Council. “As additional investments materialize in other manufacturing sectors, we are likely to see a sustained and substantial increase in 'Made in India' products sold in global markets.”
But while multinational corporations’ interest in investing in India is at an all-time high — indeed, India's current moment is being compared to the growth surge that China was going through from 2007-2012 – there are complications.
India resides in a rough neighborhood. As its troops remain bogged down by China in the Himalayas, its perpetual tensions with Pakistan keep the region’s political climate unstable.
After more than a year of normalization, the Indian and Pakistani militaries have started to threaten each other openly after India’s hardline defense minister promised to reclaim territory claimed by Pakistan despite an ongoing ceasefire.
This destabilizing hypernationalist streak of the Indian government runs all the way up to the top. On the one hand, PM Narendra Modi can be credited for India’s attractive manufacturing policies, his effective public-private partnerships with corporate India, as well as his trade diplomacy that is more focused on bilateral than multilateral deals. Counterproductively, the Hindutva politics of his ruling BJP party often trigger communal and civil tensions, which can have local as well broader regional and economic impacts too.
Right-wing fundamentalism is a part of Modi’s bid to retain the strength he has in parliament. However, his enemies aren’t just Muslims, whom he targets to buck up his base. Strong trade unions and organized farmers who have strongly opposed his pro-corporate policies equally threaten his alliance with Big Business.
Going forward, if he wants his country to progress, Modi will have to move with caution to curb his party’s worst and extremist tendencies. Bulldozing around at home and across the subcontinent with an ideologue’s zeal will likely disrupt his utopian vision of this being “one world, one family, and one earth.”
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