Lessons for the neighborhood in India’s economic progress amid China’s intentions

India’s economic growth among all of the South Asian countries has been unparalleled. Not only are all economic indicators predicting the natural upward progression in India’s economic trajectory, the resilient nature of India’s economy is also growing all the while global economic powerhouses face recession. 

Moreover, the evidence to India’s economic success lies in its troubling neighbor, Pakistan’s admittance of wanting to secure greater trade ties with India. Pakistan’s economy has been in shambles for the past few years. From deep-rooted corruption to poor infrastructure capacity coupled with ever-increasing Chinese debt, the government in the country has more or less remained unstable for the major part of the decade. Indicating the need to restore economic ties with India, then only seems the obvious path a newly selected government would take to bring back its own economy on track.

Within India’s neighborhood, economic distress has been a common theme if not a stagnating feature. Economic turmoil leading to political revolt has been the general trajectory among prominent states in the region including Pakistan, Sri Lanka and Nepal. On the other hand, the only stabilizing force in the region that has stayed far more resilient to global as well as regional challenges has been India.

The country’s economic success is also mostly led by the government’s investment into human capital. By prioritizing education and skill development, India has managed to make itself the hub for skill development. South Asian countries can do very well by prioritizing their investments in the education sector as well as in vocational training in order to enhance their workforce's productivity and competitiveness. Secondly, by emphasizing on infrastructure development, India's growth story has nevertheless underscored the significance of robust infrastructure development, including transportation networks and digital connectivity. However, the neighborhood on its part, has rather relied on an unstable partner in the form of China to fulfil these facets of economic development.

Reliance on China for economic development detrimental for South Asia

In the past few decades, South Asian countries have heavily relied upon China for its economic developmental ambitions. This has not only backfired upon the neighborhood, but has invariably led to detrimental consequences.

Among the more pressing issues has been the trade asymmetry in between China and South Asian countries. Smaller countries in the region have often found themselves running heavy trade deficits with Beijing, leading to trade imbalances and serious economic vulnerabilities. 

The influx of Chinese investment has also raised questions about the long-term implications of Chinese investments in South Asian economies. Chinese loans and investments have been understood globally to have come with incurred costs, including high interest rates and opaque terms, at times even causing political disturbances as in the case of Sri Lanka and Pakistan where governments were toppled. This has not only raised concerns about the nature and conditions of such agreements but has also led to worries about China’s debt-trap diplomacy. With over billions in debt, countries in South Asia have found themselves struggling to pay off debts and high interests leading to extreme political repercussions. 

It is also important to note that China’s interest in the South Asian region has also been based out of its foreign policy objective of initiating the BRI projects. This has hence led them becoming the largest governmental creditor in the world, steered by its state-owned banks majorly lending to developing countries in far greater amounts than the IMF itself. The Chinese method of encircling economically vulnerable nations however is not only limited to their disbursement of high interested loans but also the failure of such projects to perform as per the promised capacity. The high investment projects constructed through high-interest loans have failed to generate yields that were expected to pay off the loans and their subsequent interests. As in the Sri Lankan experience, the expensive Mattala Rajapaksa International Airport in southern Sri Lanka has been operating at a loss since it began its operation leading to it being deemed the world’s most-emptiest international airport. These white elephant developmental projects, as it came to be known, have riddled South Asian nations with excessive debts, thereby leading them to cough up strategic national assets in return.

Thus, it is high time that developing countries around the world and not only nations from the south Asian region realize that such high-interested loans, opaque terms and conditions, economically volatile and financially unstable partnerships with Chinese state-owned firms do not favor their autonomy in the long run.

India as an economic stabilizer in South Asia

India on the other hand has been nothing less than a stabilizing force in the South Asian region. While all countries in the region face economic recession, India has seen consistent growth led by policies that have been rooted in the development of the public instead of securing high-interest rated loans. Countries in the neighborhood must thus essentially realize that reliance on China for economic development has been a failed endeavor. By committing themselves to Chinese investments, South Asian nations have committed a strategic blunder for which the realization is slowly but steadily arising within domestic political circles. Pakistan as an example, by far stands as the most prominent example of this case. 

By drawing lessons from India's economic journey, South Asian countries still have a small window to re-orient their economic trajectories. By following upon India’s economic path, the neighborhood will not only secure itself development but will also have proven to its domestic populations that its objective of comprehensive development is not a lost cause yet. Having said so, it is vitally essential for India’s neighborhood to tailor its domestic and economic strategies in a manner that is unique to its own challenges and opportunities through Indian support for a resilient economy.