India’s path to power: Understanding the China challenge

It is often said that countries have no permanent friends or enemies, only permanent interests. Equally, it can be said that while countries have enduring objectives—the protection of their sovereignty and the well-being of their citizens—the strategies for achieving them need periodic rethinking and reformulation. The guiding premise of a recent report is that India’s external and internal environments are now being shaped by tectonic shifts—incipient trends that require thinking afresh and calibrating India’s strategy on a broad front.

By Yamini Aiyar | Sunil Khilnani Prakash Menon | Shivshankar Menon Nitin Pai | Srinath Raghavan | Ajit Ranade | Shyam Saran, 2 Nov 2021

A new world needs new ideas.

This report is an effort to focus our attention on the need for concentrated strategic thought and debate about the hard choices that confront India in the decade ahead.

Some of the authors of this report were involved in a previous exercise—almost a decade ago—that produced Non-Alignment 2.0. While many of the objectives and strategies presented in that document served India well, we believe that the changes in the world in the past few years require revisiting some of the assumptions and analysis in that document.

The core strategic principles outlined there remain relevant to India’s continuing engagement with the world: the need to make independent judgments in international affairs while not being unduly influenced by ideas and policies emanating from elsewhere; the need to develop the capacity for independently securing India’s interests without being excessively dependent on, or restrained by, the capabilities of other powers; and the need to create an equitable international order that not only reflects the shifting balance of aspiration and power but also affords maximum space for India’s development.

Yet, the circumstances under which these objectives of strategic autonomy are being pursued undeniably have changed. The guiding assumption of India’s strategic thinking has been a distinctive conception of power.

The foundational source of India’s influence in the world is the power of its example. This rests on four pillars: domestic economic growth, social inclusion, political democracy, and a broadly liberal constitutional order. If these integral pillars remain strong, there is no stopping India.

At the turn of the 21st century, we took it for granted that India was progressing on all these fronts. The most significant change in the last decade or so is that we cannot take for granted the success of India’s development model.

India still has considerable strengths and often compares well with some of its peers. But the fundamental sources of India’s development and international influence look increasingly precarious. We must confront this changed outlook fully and frankly. Nourishing the foundations of India’s success requires a conscious political effort, and is a strategic imperative of the first order.

In the late 1990s, India’s growth began to take off. This was in part, a result of economic reforms, and in part because of India’s integration into the global economy. In the decade preceding the global financial crisis, India experienced an average annual growth rate of almost seven per cent.

This growth began to provide the building blocks for a more inclusive society. While India’s record on social inclusion remained patchy, head-count poverty ratios dramatically declined in this decade. India started to make great strides in building infrastructure, leveraging technology at scale, and developing the sinews of the state.

Since the global financial crisis, however, the trend growth rate has been considerably lower and there has been a question mark on India’s growth potential. Even on an optimistic reading, it is unclear if economic growth will be socially inclusive.

India is registering progress on several measures: falling fertility rates, decreased infant mortality, greater access to a range of services and goods such as sanitation and water, electricity and mobile phones. And yet, there are serious doubts about social mobility and inclusivity.

Even in the heady days of eight per cent growth, India’s ability to invest in human capital and create enough good jobs was in question.

While high growth had improved the state’s ability to cater to the welfare needs of its citizens, it had not much enhanced the capability of citizens to participate in economic growth via improved well being and quality employment. Over the past decade, this situation has worsened. Economic inequality has increased. Chronic challenges of health and education bulk larger.

In the aftermath of the COVID-19 pandemic, these challenges are likely to exacerbate. These questions about growth and social inclusion are also creating intellectual and policy uncertainty about India’s development model. In particular, how should India conceive of its ties with the global economy? What does self-reliance mean in the third decade of the 21st century? Some of this discussion is warranted by the changing global economic order, by large-scale technological shifts, and by India’s own evolving needs.

Yet, it is important that we do not settle for facile, off-the-shelf solutions.

This document aims at clarifying the underlying global trends and the choices India needs to make in this decade. Even if issues related to growth and inclusion can be fixed, there is greater uncertainty about the state of the other two pillars: political democracy and liberal constitutional order.

The electoral success of the BJP has not only meant a change in the party system and the nature of political power but has also brought about a transformation in India’s constitutional order. There is concern that Indian democracy is moving steadily towards ethnic majoritarianism, polarization and divisiveness.

India’s vibrant electoral democracy appears to be morphing into a no-holds-barred contest for power, fuelled by a notoriously opaque system of election financing. Indian democracy seems less inclusive today than at any point in its history. Then too, India’s democracy is being dis-embedded from its founding constitutional norms.

The majoritarian vision of democracy is increasingly accompanied by an autocratic conception of power. Institutional checks and balances enshrined in the constitution are largely inoperative.

The parliament barely performs its deliberative functions; the judiciary is increasingly coy about protecting individual rights and freedoms; independent agencies bend to the whim of the executive, and the powers of the states in the federal polity are draining towards the central government. India risks bearing out the old adage that the forms of a free government can all too easily be combined with the ends of arbitrary government.

The cumulative consequences of these developments could be grim.

The combination of low growth, limited inclusion, ethnic majoritarianism and political centralization will enmesh India in internal conflicts that would, at once sap its resources, and also undermine its international aspirations. At this crossroads, India has a choice. It can ignore the writing on the wall as so many scribblings from a bygone age. Or, it can take a sober and more analytical look at the deep, historical sources of prosperity, power and influence.

In any event, we must understand that what can hold India back in the coming decade is India itself. Meanwhile, the world around us is changing at a remarkable speed. The two greatest powers, the United States and China are locked in a structural rivalry that will persist beyond this decade.

It is tempting but profoundly misleading to see this as another Cold War. For one thing, China looms larger in the global economy than the autarkic Soviet Union ever did and the US-China economic relationship remains deep.

For another, unlike the Cold War, the competition between the United States and China goes beyond geopolitics and military security, to encompass a host of arenas: global trade, investment and finance; manufacturing and supply chains; technological innovation and standards; global governance; and fundamental political values.

In any event, we must understand that what can hold India back in the coming decade is India itself. Meanwhile, the world around us is changing at a remarkable speed. The two greatest powers, the United States and China are locked in a structural rivalry that will persist beyond this decade. It is tempting but profoundly misleading to see this as another Cold War.

For one thing, China looms larger in the global economy than the autarkic Soviet Union ever did and the US-China economic relationship remains deep. For another, unlike the Cold War, the competition between the United States and China goes beyond geopolitics and military security, to encompass a host of arenas: global trade, investment and finance; manufacturing and supply chains; technological innovation and standards; global governance; and fundamental political values.

Finally, and perhaps most importantly, we are not in a bipolar international order, where the role, interests and concerns of other significant powers are subordinated to the competition between the two great powers. Nor are we as yet in a classic multipolar order. Understanding the nature of this interregnum as well as the challenges and opportunities it holds will be crucial for India.

Globalization too is undergoing far-reaching changes. If the global financial crisis arrested the momentum of financial engineering and cross-border financial flows, the eventual response to the crisis in the West led to a surge in global liquidity and a restless search for better yields in world markets.

It also cast into stark relief the extraordinary and growing inequality in the developed world, so thus triggering a political backlash against globalization. There was an upsurge in narrow nationalism and parochial sentiments across the world and India has not been an exception.

This trend was accelerated by technological changes such as in robotics and cloud computing, 3-D printing and artificial intelligence, which made manufacturing less dependent on cheap labour in the developing world and on-shoring a viable option in some industries.

The upshot of it all was that the major developed economies sought to move away from global economic arrangements to regional ones of varying size and ambition. One dimension of globalization that has actually deepened over the past decade is the cross-border flow of information and the rapid expansion of the use of digital platforms that span across national and regional borders as a consequence of the pandemic.

Yet, as the major powers come to recognize the centrality of data and its analysis for their security and prosperity, the world wide web looks set to fragment. Globalization has been central to India’s growth in the past and, whatever the pull of insularity, it is imperative to get the correct measure of the fundamental reconfiguration that it is currently undergoing. These trends in geopolitics, globalization and technology predate the pandemic.

Yet, in the post-pandemic world, these will not only persist but accelerate—alongside others that will be unleashed in the wake of COVID-19. The pandemic itself is a sombre warning of the ecological crises that lurk in the Anthropocene. Given the scale of the challenge that climate change poses for India, returning to business as usual is not an option.

The latest 6th report of the Inter-governmental Panel on Climate Change has underscored the scale of the global climate emergency that confronts us but whose impact will be much more adverse for tropical countries like India. In the post-pandemic context, India will have to rethink some fundamental aspects of its development model.

Paradoxically, the current trough in our growth story may provide an opportune moment for such reflection. The pandemic has also underscored the importance of international cooperation if only by its absence, is gearing up for the epochal challenges ahead.

This report analyses these interlocking challenges and suggests a broad reorientation of India’s external and internal policies over the next decade. The pursuit of strategic autonomy under these conditions will be ever more challenging. But we believe that it is ever more necessary. If India exercises sober political and strategic judgement, it can emerge more prosperous and influential in the years ahead.

In this pursuit, however, India should not lose sight of its historic strengths – in fact, it must capitalize on them. It is claimed that India now needs a new international identity—one that affirms itself as a unitary civilization and a state that is determined to draw on what it believes to be its own indigenous cultural and intellectual resources to cast off the lingering effects of the long encounter with colonialism.

Such claims are doubly misplaced. For one thing, the conception of Indian civilization that informs this quest is deeply tinctured with colonialist readings of the Indian past. For another, the Indian nationalist movement not only had a much more sophisticated grasp of the resources offered by India’s past but also the confidence to aver that India must be the site of an alternative universality.

It is for us to realize that powerful inheritance, through the choices we make in the years ahead. Rather than offering a pale imitation of China’s claims to being a civilizational state, traumatized by colonialism, India should affirm the strength and resilience of its historic national identity.

Indian nationalism sought not to flatten out diversity, but to find an enduring national strength through the creative articulation of myriad local identities as sites of deeply connected differences. It was also confidently internationalist.

The ambition to stand for an alternative universality stemmed not from an airy idealism, but a clear-eyed reading of Indian history over the longue durée, and from a profound understanding of the importance of legitimacy as well as power.

Hence, too, the emphasis on the hard-won power of India’s example. That example could speak more powerfully to the world than the strenuous avowals of an authoritarian model of development. But, first, India will have to stand true to its own foundational values.

India faces difficult strategic choices in the post-pandemic world. Yet, the world matters ever more to India, as does India to the world. New Delhi has previously been adroit in the face of change.

If nonalignment was a strategy to harness both sides of a bipolar Cold War world to India’s advantage, then the embrace of globalisation and transformed relationships with the United States and China were its answer to the post-Cold War unipolar moment. The confused international order that followed the global financial crisis saw an omnidirectional Indian foreign policy.

But this is no longer as effective in the current conjuncture, which is marked by rapid geopolitical shifts, by evident Chinese assertiveness and ambition, by the United States’ diminished international engagement and unwillingness to provide global public goods, by the weaponisation of economic interdependence, and by the diffusion, though asymmetrical, of economic and technological power.

In consequence, hotspots and disputes are alive again, most of them near India: from the East China Sea to Taiwan, the South China Sea to the India-China border, Yemen and Syria to Afghanistan and Ukraine. India will have no choice but to engage with this uncertain and more volatile world. The manner of its engagement is the key challenge for India’s policymakers.

Where should India position itself in this world between orders?


In stark contrast to India-US ties, India-China relations have seen growing distance and friction since around 2012. As China has acquired power, it has responded negatively to India’s rise, to India’s increasing closeness to the United States, and to India’s independent view of the BRI.

China has increased its presence and interference in the subcontinent and the Indian Ocean, and has stepped up its commitment to Pakistan’s security, and even strengthened its hold on portions of Jammu & Kashmir.

A Taliban ruled Afghanistan supported and sustained by Pakistan and China will heighten India’s vulnerability to crossborder terrorism and threaten Jammu and Kashmir with greater instability.

Amidst multiple signs of an increasingly strained relationship, the scale and scope of border incidents have risen steadily since 2013. In the spring of 2020, the Chinese People’s Liberation Army (PLA) occupied fresh territory on the Indian side of the Line of Actual Control and prevented Indian troops from patrolling where they have for several years, resulting in the deaths of soldiers on the border for the first time in 45 years.

India now has a live border with China—militarized and disputed—undoing the work of several years. India’s China policy must now be reset to the reality of a live border and of antagonistic political relations. This has naturally resulted in an attempt by India both to lessen its economic dependence on China in critical sectors, while also attempting to find external balancers that can check unacceptable Chinese behaviour.

China operates on the basis of its perception of relative power. The self-strengthening in India and the balancing politics in Asia that this requires will neither be easy nor smooth. So long as India sees a China-dominated Asian security and economic order as inimical to its interests, we must expect continued points of friction in the relationship which can at best only be managed.

This task is independent of China’s internal trajectory and the course of China-US relations, both of which are outside India’s control but which will considerably shape the future international order in which India will be exercising its options. The China challenge is likely to be the most significant issue in India’s external security policies in the coming decade. It is primarily a continental challenge in Asia, requiring responses beyond an Indo-Pacific strategy or a Quad of any size and composition.

The China challenge makes working with regional Asian powers like Iran, Turkey and Russia are ever more important. If crafting a continental geopolitical strategy implies setting aside some of our erstwhile concerns—say, Turkey’s relations with Pakistan—then we must be prepared to do so. It will also be imperative to remain closely engaged with Iran despite its perceived shift towards China. This is a critical relationship for India and today even more so in the wake of the latest developments in Afghanistan.

It must not be influenced by the interests of third parties. At the same time, India must not allow an obsession with China to distract it from the main goal of its national strategy: the transformation of India. We will have to live with China as a powerful neighbour with whom we share our periphery; as an economic actor of considerable heft who will influence India’s external environment politically, economically and infrastructurally.

In the decade ahead, as China persists with its increasingly assertive and nationalist course and as India seeks to counterbalance partners and capabilities, there is no feasible alternative to a combination of engagement and competition with China