Event ReportsPublished on Sep 20, 2018
Improving connectivity and trade between Indian states and China

Setting aside protracted distrust, military build-ups and diplomatic discord, China and India, two of the world’s oldest civilizations, came together in emphasising the significance of direct interaction. At the Think Tank conference on 'Connectivity, Trade Relations, and Investment Opportunities between China and Eastern India', the intellectual exchange highlighted a para-diplomatic level synergy that could help overcome friction and promote shared benefits with a ‘win-win’ approach.

Organised jointly by Observer Research Foundation, Kolkata and the Consulate General of the People’s Republic of China in Kolkata, the conference probably marked the first instance in eastern India where Think Tank scholars from four Chinese provinces and a number of prominent institutions in India came together to discuss Chinese business prospects in the States of eastern India and issues of people-to-people connectivity.

The conference began with an enriching inaugural session, hosting Sunjoy Joshi, Chairman, Observer Research Foundation, Ma Zhanwu, Consul General, Consulate General of the People’s Republic of China in Kolkata, Ashok Dhar, Director, Observer Research Foundation, Kolkata and Prof. Rakhahari Chatterji, Advisor, Observer Research Foundation.

The inaugural session gave way to four business sessions with fruitful discussions as well as interactions with the audience. Yue Zhaomin, Secretary General of Centre for India Studies, Sichuan Academy of Social Sciences; Dr. Lin Yanming, Research Assistant at the Yunnan Academy of Social Sciences; Chen Jinying, Associate Professor from the Shanghai International Studies University; and Yang Yishuang, Associate Professor from the Yunnan University of Finance and Economics, represented think tanks and academic institutions from China.

Among the  Indian scholars, Dr. C Joshua Thomas, Deputy Director, Indian Council of Social Science Research, North Eastern Regional Centre (ICSSR), Shillong; Dr. Debasish Chaudhuri, Adjunct Fellow, Institute of Chinese Studies, New Delhi; Dr. Avijit Banerjee, Associate Professor and Head of the Department of Chinese Language and Culture (Cheena Bhavana), Visva-Bharati University, Santiniketan; Dr. Anasua Basu Ray Chaudhury, Fellow, Observer Research Foundation, Kolkata; Dr. Nilanjan Ghosh, Senior Fellow, Observer Research Foundation, Kolkata; Harsh Poddar, Executive Director, Aris Capital, Kolkata; Dr. Parthapratim Pal, Professor, IIM Calcutta; Dr. Preeti Kapuria, Associate Fellow,  Observer Research Foundation, Kolkata and Dr. Saon Ray, Senior Fellow, ICRIER, were present.

The deliberations and interactions began with a spirit of securing better ties.

Chinese investment in India has increased considerably. Between 2014 and 2016 in terms of investment in India China jumped from 28th to 14th position and it stood at USD 8 billion in 2017. However, this is a small amount considering the size of India. The States in eastern India are rich in natural resources, and are in need of substantial investment. In order to harness the economic potential of these States, a targeted and appropriate investment strategy is the need of the moment.

As history has it, bilateral relations between the two countries have   gone through a process of trial and error, becoming warmer and colder in phases.  The first business session commenced with the discussion of the extensive finite linkages over time which could never move over and above religious and commercial links. Against this backdrop, the speakers addressing the issue of connecting neighbours were in agreement that it was time to increase people-to-people connectivity between these two Asian giants for deeper understanding between them and greater harmony in the continent. Given that both countries have complementary markets, it is essential that the rules of engagement undergo transition and the focus be on connecting the people of both countries so as to provide increased public support for improved bilateral ties.

Geographical proximity and some cultural similarities between the Yunnan province of China and the eastern and North-eastern States of India make it reasonable to strengthen connectivity between them. A pragmatic approach towards establishing cultural exchanges and cooperation will be necessary. In the broader spectrum, greater interaction between Think Tanks of India and China, a surge in inter-country tourism by availing new routes and facilities and more frequent academic exchanges would act as facilitators.

However for India, and especially the States in the eastern region, to attract further Chinese investments, it is necessary to encourage a more business friendly and pro-active environment. The potential investors need to have greater understanding of local cultural complexities.  Positive media perception of each other impacting public understanding will go a long way in determining the success of people to people connectivity. The session concluded on the note that despite shortage of mutual trust, peaceful accommodation could be possible on pragmatic grounds. Mutual trust is not a precondition for accommodation.  Here diplomacy can play a key role.

The second business session explored the different aspects of Sino-Indian trade, helping the audience to learn more about the bottlenecks and the conveniences therein. This session brought to notice the multifaceted role of trade as an instrument for development, cooperation and connectivity. Questions regarding regional trade such as the efficacy of FTAs for the domestic economy were also discussed along with the dangers of a re-emergent mercantilism. The role played by investments was also stressed, with all its advantages which transcend the economic boundaries and go on to encompass social and cultural interactions, leading to better cooperation and coordination. Concerns were also expressed  on bilateral treaties since they often happened to be cumbersome and confusing, and the need for a universal set of laws for all countries was emphasized. Newer alternatives have to be brought about so that trade deficit can be managed to benefit all parties concerned.  India’s apprehension to join RCEP was also mentioned.

The third session on investment opportunities brought out the efforts of India and China in tapping business opportunities. India has followed the recommendations of the World Bank and tried to implement business reforms highlighted in the 340 point agenda of the Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry’s 2015 report titled, ‘Assessment of State implementation of Economic Reforms’.

China, at the same time, has also shown a keen interest in the five States of Jharkhand, Bihar Chattisgarh, West Bengal and Odisha. Earlier emphasis was on the western States of India, notably, Gujarat and Maharashtra. But with rapid economic growth in these five eastern States, and also a relatively better performance in business reforms implementation, China’s attention has probably shifted. Eastern India presents multiple opportunities for Chinese investors. Such investment could also help tilt the rising current account deficit in India’s favour. India still occupies the lower rung in the global value chain and is thus unable to add much value to its exports. India has mostly been providing intermediate goods to China (also referred to as backward induction). Chinese investment in the eastern states will introduce capital and technology to enable India to export products that are higher up in the value chain.

The fourth and the final business session of the day discussed the nature of energy consumption and how the next two decades might witness a sea change in this sector. Both India and China have a huge pool of untapped natural resources that can be used for generating energy like hydro power, wind and solar energy. This can open a whole new era of clean energy with low carbon footprint for both nations. In this scenario, more research is needed for an in-depth analysis of current circumstances, challenges, and prospect of energy sectors, particularly renewable energy, to bring forth regimes for clean energy production and consumption, and renewable energy in China and India.

The conference concluded on a note of bonhomie and with the hope of fuelling further deliberations in future.

This report was prepared by Sohini Nayak, Research Assistant, ORF Kolkata

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