Kanti Bajpai, Lee Kuan Yew School of Public Policy

Can Xi Jinping and Narendra Modi establish an economic partnership?

Kanti Bajpai is Vice Dean and Wilmar Professor of Asian Studies at the Lee Kuan Yew School of Public Policy.

Kanti Bajpai

China’s President Xi Jinping is reportedly bringing up to $100 billion in investment offers to be used in industrial parks and infrastructure (railways, highways, ports, power, river dredging) as well as automobiles, food processing, and textiles. India’s Prime Minister Narendra Modi has to find a political way of accepting this gift horse and not look it in the mouth.

The infrastructure investments are the key. India is desperately short of quality infrastructure. Indian industry is simply not capable of taking on the challenge, and the less said about public sector companies the better. No country has more funds, expertise, and political will than China in delivering infrastructure.

An India-China partnership is an economic marriage made in heaven, but there are hurdles.

First of all, there is Indian public opinion and the Indian media that still mistrusts and resents China. Second, there is a national security community that argues that China will use its economic levers against India eventually. For 60 years, Indians worried that the West would enslave India; now they worry that China will do so. Third, there is a tangle of rules and regulations — economic, environmental, and political — that gets in the way of foreign investment. Modi wants the “red carpet” he is rolling out for investors to trump the “red tape,” but that is not going to be easy, even for him. Fourth, there are state governments, who have a way of defeating the central government’s policies and initiatives. Fifth, resistance will come from segments of the public and private sector and the business associations who fear Chinese enterprise.

But two other issues will challenge Modi: the trade deficit and lack of progress on the border negotiations. The deficit is mostly India’s fault, but China needs to make a gesture. As for the border negotiations, this is mostly China dragging its feet, but India has to show more courage in preparing its public for a deal.

Xi comes bearing gifts; will Modi accept? Modi projects an image of briskness and rationality. Let’s see if he can clear the hurdles to Chinese investments and stand by his predecessors’ conviction (going back to Rajiv Gandhi in 1988) that economic engagement can be bracketed from strategic challenges and eventually help soften the strategic divide.

Next: Kerry Brown, University of Sydney