South Asia is becoming an economic battleground between China and India as Beijing continues to seek to counter New Delhi’s regional influence by pumping billions of dollars into development projects in countries encircling India under its “String of Pearls” strategy.
China, which began its massive US$1 trillion-plus Belt and Road Initiative in 2013, is well ahead of India both in duration and funding. In addition to its infrastructure plans spread across Asia and even into Africa, it is attempting to leverage its economic heft to woo smaller nations in India’s backyard from Maldives and Sri Lanka to Bangladesh, Bhutan and Nepal.
India has started late but is accelerating its own outreach to allies to retain its regional position of power, from the US$300-million Salma Dam, also known as the Afghan-India Friendship Dam in Afghanistan to the Rooppur nuclear power plant being built in Bangladesh to railway links with Nepal and Bangladesh and railway projects within Myanmar.
In Afghanistan, India is also assisting with the Shahtoot dam in the Kabul river basin, a project to supply drinking water to the Afghan capital city. The railway link between Nepal’s Janakpur and Jaynagar in India’s eastern state of Bihar is also expected to be operational by year end. India also recently supplied 18 locomotives to Myanmar as part of a US$679-million assistance package.
Micro development projects worth US$1 million or less in Afghanistan are also in the works. These include construction of schools, hospitals, women’s vocational training centres and redevelopment of war-ravaged regions contested by the Taliban, a source from the Home Ministry told me.
Bangladesh has been the largest beneficiary of India’s lines of credit, receiving US$7.86 billion to bolster connectivity and infrastructure projects such as ports, railway lines and roads. Work on the transmission and distribution network for the Rooppur nuclear power plant, being built in northwest Bangladesh jointly by India and Russia, is also continuing apace.
As an indication of the extent to which Beijing’s commitment to the region dwarfs India’s, according to the American Enterprise Institute, between 2012 and 2018, China invested US$8.06 billion in Myanmar, US$43 billion in Bangladesh, US$20 billion in Sri Lanka, US$5.45 billion in Nepal and US$420 million in Afghanistan.
Overall, Beijing has extended credit worth over US$100 billion in South Asia, a large slice of which is going to Pakistan and Bangladesh. In Pakistan, China has pledged to spend another US$62 billion in upgrading infrastructure to secure a trading route to the Gwadar port on Pakistan’s south coast. Under the China-Pakistan Economic Corridor, Chinese money is being funnelled into building 21 power plants, a port and international airport at Gwadar, motorways and railway lines. As Asia Sentinel has reported, that huge investment, at market rates, has almost beggared Pakistan, as similar investments have almost beggared Sri Lanka and put the two countries in political as well as economic thrall to Beijing.
In Bangladesh, The Shanghai and Shenzhen stock exchanges have jointly bought 25 percent stake of the Dhaka Stock Exchange for US$119 million — in the process outbidding India’s National Stock Exchange.
New Delhi has been watching China’s exponentially growing investments in its neighborhood with alarm. Much of this largesse is directed at countries whose leaders don’t see eye to eye with the Indian government. A special case is Pakistan, whose new incumbent PM Imran Khan has been making token gestures of friendship towards India while chumming up to Xi Jinping.
“China has deep pockets with which it is buying friends to chip away at India’s influence in the region and secure its own political interests abroad. But it is also well-known fact that China’s `friendship’ extracts a heavy price from the benefactor in terms of economic woes,” said political analyst Shiv Vishwanathan.
Wary of its affluent regional rival’s attempts to lure away India’s friends, Modi has lately been making renewed efforts to secure ties in the neighbourhood. Last month, he attended the swearing-in ceremony of the new Maldivian President Ibrahim Mohamed Solih. India-Maldives ties had been cold under former President Abdulla Yameen, who made no secret of his inclination towards China over India.
Yameen signed a slew of dubious deals and contracts with Beijing that compromised national interests but was eventually thrown out of power after alienating much of his electorate with arbitrary and threatening dictatorial powers. Delhi and Male are now working towards greater cooperation and synergy under a new political dispensation.
Though China’s growing footprint in South Asia is a relatively recent phenomenon, analysts believe the fact that it was able to garner such an impressive response from India’s neighbors exposes Delhi’s lackadaisical diplomacy as well as its inability to offer substantial development assistance to its smaller neighbours.
“New Delhi’s response has been tawdry in identifying, initiating, and implementing strategies that can inhibit China’s zealous expansion,” said Vishwanathan.
Even so, there’s no denying that Beijing’s efforts to win friends through its ‘chequebook diplomacy’ is increasingly titling international opinion against it. China has come under flak for ensnaring smaller and vulnerable nations into a debt trap pushing them towards economic ruination.
Unlike China, most observers believe India offers demand-driven and need-based assistance that isn’t based on the economic value of projects to Delhi. Modi’s outreach to surrounding countries under his ‘neighborhood first’ policy, while containing Chinese influence, has helped build synergies with Asian neighbours and strengthen economic ties with them.
“The overarching principle of our partnership with our neighbors is that it is organic and not coercive. There’s been no case of any of our projects pushing the recipient into debt or financial bankruptcy. India believes in building grassroots democracy and sustainable relationships, not debt traps to ensnare unsuspecting and vulnerable nations,” a senior functionary of the ruling right-wing Bhartiya Janata Party said in an interview.
Be that as it may, policy experts feel India falls woefully short of formulating a coherent plan of action to keep China in check. Providing an alternative to Chinese-led connectivity initiatives to protect its strategic goals and remain a dominant power in South Asia and the Indian Ocean region would be a good start, they add.
Neeta Lal is a Delhi-based editor and journalist and a longtime contributor to Asia Sentinel.