India: the speedbump in One Belt, One Road

While its neighbours embrace the initiative, India is one of the few nations opposing the China-led Belt and Road push. That is bad news for cross-border dealmakers.

China's One Belt, One Road initiative (Obor), has emerged as a major force for promotion of cross-border investment since it was announced in 2013.

Thailand has drawn up a design for a Bangkok to Kunming high-speed railway; Laos has started constructing a rail line connecting Vientiane to southern China; and not to mention Pakistan, perhaps the largest beneficiary of Obor so far with the China-Pakistan Economic Corridor (Cpec) at its core.

But one big nation is refusing to get on the road with this ambitious project.

In a widely-published statement last month, India's former foreign secretary, Kanwal Sibal, said his country should ignore Obor and speed up its own infrastructure projects to connect with neighbouring countries. He also suggested opposing Cpec, which represents "the vital connectivity between Chinese expansion on the Asian landmass and its plans in the Indian Ocean".

India is one of the few nations in the region that opposes China's efforts to expand its influence using Obor, despite warnings that it will pay a price for staying out of what could be the biggest regional collaboration of the next decade.

For New Delhi, the initiative presents a worrying dilemma. By joining Obor, India would foster a closer relationship with the world's second biggest economy and secure big-ticket investments from Chinese companies, many of which have been on an overseas splurge since 2015.

Some critics also say staying out of Obor will result in isolation in the region.

But embracing Obor might imply that India is sacrificing some of its geopolitical influence in southern and central Asia, potentially surrendering its power to compete with China in future.

Indian officials have also cited Obor as a potential threat to its national security as it encompasses Kashmir, the border region that is a key source of conflict between India and Pakistan. Set alongside China's repeated attempts to mediate in Kashmir, Obor is seen in India as a serious threat to India's national interest.

Meanwhile, Beijing's opposition to India's application to join the Nuclear Suppliers Group, a 48-strong organisation that seeks to control access to nuclear technology, has escalated the rivalry between the countries.

While India has never officially said "no" to Obor, it is certainly working against the initiative at the moment.

In 2015, it ditched China as a partner on its first high-speed rail line in favour of Japan, despite speculation Beijing would charge a third less for the route from Mumbai to Ahmedabad.

Meanwhile the Bangladesh-China-India-Myanmar Economic Corridor has not moved beyond unofficial discussions since talks began in 2013.

“We should study Obor to assess its geopolitical implications for our security and our role in Asia,” Sibal wrote. “Simply because our companies could get a contract or two here and there is no reason to mortgage our foreign policy to China’s dream.”


India's objections to Obor suggest it is unlikely to receive significant Chinese investments at the corporate level in the near future.

Last year, Chinese state-owned power supplier Shanghai Electric Power took a 66.4% stake in Pakistan’s K-Electric for $1.8 billion – a classic example of how the Obor initiative could benefit local companies.

But China has never been a prominent investor in India. According to India’s Department of Industrial Policy and Promotion, China’s cumulative foreign direct investment in India from 2000 to 2016 was just $1.4 billion. That was a fraction of the FDI from other nations: Singapore put in $4.7 billion and Japan $2.8 billion in just the six months from April to September last year, for example.

Indian Prime Minister Narendra Modi's administration is particularly wary about Chinese investment. Last year, China’s Fosun Pharma made a $1.26 billion bid for an 86% stake in India’s Gland Pharma, the biggest single Chinese investment into India and almost equal to its total investment over the past 16 years. Yet the transaction is being held up by Indian authorities, according to local media reports, despite the fact the deal does not seem to pose any national security threat.

That said, China Inc has shown huge interest in Indian technology start-ups. Alibaba, China's largest e-commerce platform, has a 40% stake in Paytm E-commerce, the online marketplace business of Indian third-party payment firm Paytm. Alibaba is also one of the three technology giants that invested $500 million collectively in Snapdeal, a Groupon-like daily deal site in India that has an estimated value of $6.5 billion.

Tencent, China’s largest online social and entertainment company, is a financial backer of Flipkart, a Bangalore-headquartered e-commerce giant that runs online stores, search engines as well as new websites.

But they have stopped at that. There is no sign that this will change in the near future, unless India changes its stance at China’s Belt and Road summit next month.

Time will tell whether India has made a wise choice.

¬ Haymarket Media Limited. All rights reserved.
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