In The New Great Game On The Global Stage, India Has To Play A Difficult Balancing Act

Jayanta Roy Chowdhury

As India rises to try find its place in the sun, it will perhaps need to pursue a policy of balancing its relations with the West, its preferred trading and military partner on the one hand, and its largest neighbour and Asian rival, China, on the other, to ensure its surge is not checkmated by either. 

The Secretariat takes a close look at India's relations with the US, Western nations, and China in the second and concluding part of a two-part series, the first of which appraised India's neighbourhood relations. 

In some senses, this new balance sought to be struck between the West led by the US and the East needs to be more like the balance that Turkey’s Ismet Inonu struck during World War II, which was not one of neutrality, but a carefully calibrated stance of supporting the Allies even as it stayed away from the war.

The West has been India’s partner of choice since the beginning of the 1990s when the South Asian giant came up with its own version of ‘Perestroika’ and opened up its decades-old socialist-style economy to competition and foreign capital.

Foreign investment, and military technology flowed in. And in time India also became the political partner the West wished to prop up in the 21st century as a counterpoise to China.

This happened after Washington realised that 'Chimerica' , a term that historian Niall Ferguson and economist Moritz Schularick had coined to describe the symbiotic relationship between the US and China, was but a front for Beijing's rise to a position of strength, challenging the American hegemony of the world.

India sought a security cover as it anxiously watched the ascendancy of China and the fall of the Soviet Union and was consequently more than keen to embrace the West and especially the US. Till the 1990s, Moscow had been New Delhi’s close ally and foil to Beijing, which had worsted the Indian Army in a short but bloody border war in 1962. However, the crumbling of the Soviet Union had created a void in India’s security architecture.

United States: India’s Preferred Partner

During the 2000s, both the India-US military alliance and the civil-nuclear deal were signed, opening up Western military technology to the country’s defence forces and acceptance of New Delhi as a nuclear power by the world.

Trade and investment boomed and the 'bromance' between New Delhi and Washington seemed too good to be true. Between 2000 and 2024, US companies including the likes of Google, Microsoft, Apple, Amazon, ExxonMobil, and General Electric, invested a record US $65.91 billion in India.

Two-way trade stood at over US$ 126 billion in calendar year 2023, with India exporting goods worth US$85.69 billion, a 23-fold increase since CY2000, according to US Government data. Imports increased four-fold during this period to US$ 40.37 billion.

However, a year after New Delhi signed the defence deal with Washington in 2005, the Chinese as if on cue for the first time claimed that the entire state of Arunachal Pradesh in India’s northeast was an integral part of its territory.

In 2013 they followed this up with an incursion into Indian territory in Ladakh, followed by a stand-off at Doklam at the tri-junction of Bhutan, India, and China in 2017, and clashes in Ladakh’s Galwan in 2020.

The Great Game : India, US And China

With three of the world’s biggest choke points  – the straits of Malacca, Hormuz straits and the  Red Sea-Suez Canal –   situated at two  ends of the Indian Ocean and over a hundred  thousands of ships transiting through them  every year, carrying two-thirds of the world’s  hydro-carbon traffic and half of the global  container traffic, the Indian Ocean has always  been a strategic zone.

From the second half of the twentieth century, the US with its fifth fleet headquartered at Bahrain and a secretive base in Diego Garcia from where it can control both the Straits of Hormuz and access to the Red Sea, has dominated the Indian Ocean and its trade routes.

India situated in the middle of Asia with both the Arabian Sea and the Bay of Bengal on its two sides became a player in the maritime great game over the Indian Ocean by the 1990s when it realised that its fast-expanding global trade could be threatened unless it has mastery over the waters. 

Soon afterward China whose trade as a percentage of GDP rose to 64 per cent by 2006 began looking out for bases bordering the Ocean. 

Kyaukpyu in Myanmar’s Arakans, Hambantota in Sri Lanka, and Djibouti on the Horn of Africa controlling the entry into the Red Sea were rapidly transformed into Chinese-built bases that could double up for military operations if the need arose.

Indian strategic thinkers' fear of encirclement by an enemy, which was already in contest over its borders in Ladakh and the northeast started looking like a reality show.

The US, on the other hand, started realising that it is locked in a competition with China on a global scale and especially in the Asia-Pacific region. Joint exercises with the US and other Indian Ocean littoral powers – Australia, Indonesia, and Singapore – followed.

At stake was not just geo-strategy but these nations’ trading lifeline. China’s contentious move to declare 90 per cent of the vital South China Sea through which India’s ships sail to Korea, Japan, the US east coast, and Russia, added a new edge to the rivalry between these nations.

On the other hand, as India emerged from the shadow of an import-substituting economic regime it had adopted since the 1950s, its trade with China also flowered. Much of what India bought, including vital raw materials for its pharmacies, textile mills, electric vehicles, and engineering factories besides cheap consumer electronics, came from China’s industrial centres of Shanghai, Guangzhou, Shenzhen, Ningbo, and others.

India and China had a two-way trade worth a little over US$118 billion in 2023-24, with imports standing at a huge US $101.75 billion, nearly six times India’s exports of a mere US$16.66 billion.

However, Chinese investments in India have been far more limited. Not because the Chinese do not wish to put their money into the Indian marketplace, but because Indian policymakers have always viewed Chinese investment with suspicion.

China’s investment here peaked in 2014-15 at US$495 million after Prime Minister Narednra Modi came to power. A new chapter in Indo-China relations seemed to start with China’s strongman Xi Jinping phoning up the new prime minister to congratulate him. The two swung on a swing as they discussed global politics when Xi visited India later that year. 

Since then Galwan and checks on investments played spoilsport between the two. In April 2020, it was discovered that People’s Bank of China had increased its stake in India’s largest housing finance company HDFC, that now stands merged with HDFC bank, to 1.01 per cent.

The shockwaves that the news sent, saw more restrictions being imposed on Chinese investments. Since then, some 58 FDI proposals from China have been rejected and 14 put on hold. As a result, China’s investment in India shrank to a measly US$10.52 billion in 2022-23.

How far the relations have come unstuck since then comes across from the fact that Xi skipped the G20 meeting in New Delhi last year and has pointedly refrained from sending any congratulatory message to Modi after he won his third term as Prime Minister.

Perhaps showing its annoyance, India for the first time responded to a message of greetings from Taiwan’s President  Lai Chine-te on Modi’s victory, despite not recognising the island as a separate country. 

The Precarious Balance of Power

Managing these contradictions of partnering with the West, confronting or containing a militarily aggressive neighbour like China, and yet doing business with it has created a formidable challenge for India, which its policymakers now need to confront and resolve.

From a bi-polar world at the end of the second world war, where the erstwhile Soviet Union and the US dominated the global stage and India chose a non-aligned path, to a unipolar world after the collapse of the USSR and now a multipolar world, global power equations have changed drastically.

At one end of the spectrum is the US, which has as its allies the European Union, UK, Japan and Australia while on the other end, stands a new China-Russia entente. The space for India to be friends with all and enemies to none is fast shrinking.

The US, which considers India to be a natural ally in its pivot towards Asia and its military, economic and technological competition with China, frets over the reality that New Delhi could always prefer to be neutral while playing the two sides against each other.

Its frustrations with getting India and Japan, two members of the QUAD or quadrilateral security dialogue that the US had forged to commit its four members -- Japan, Australia, India and the US -- to bigger roles in the defense of the Indo-Pacific, possibly goaded it into forging another defense arrangement between the US, the UK and Australia -- AUKUS -- to take on China's emerging might. 

The formation of the AUKUS represents a dilemma for India too. Should it share or pass on the burden of containing China? Can it risk the ire of great power on its border and depend on the friendship of a geographically distant power that does not have a great record of supporting allies militarily in their hour of need? 

The time has possibly come for India to do a reality check and come to terms with the fact that it has a long road to traverse to reach global power status and needs to bring a balance in its relations with both its friends in the West and its 'frenemy' to the North. 

Remembering how Ismet Pasha of Turkey struck alliances with Great Britain and covertly collaborated with it and yet did not join in the World War II till the very end, when the allies were at Berlin's doorsteps, would do our policymakers a world of good as they formulate strategies for the future.