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India, COVID-19, the United States, and China

Indian and Chinese national flags flutter side by side at the Raisina hills in New Delhi, India, in this file photo

Indian and Chinese national flags flutter side by side at the Raisina hills in New Delhi, India, in this file photo. Image credit: Wang Shida, "Banning Chinese apps bad for India's trade," China Daily July 28, 2020.

The Research Unit for political Economy, based in Mumbai, India, publishes the journal Aspects of India’s Economy and a range of research publications in English, Hindi, and other Indian languages. This article is excerpted from Crisis and Predation: India, Covid-19, and Global Finance, an e-book forthcoming from Monthly Review Press.

On May 5, 2020, in the middle of India’s COVID-related lockdown, tensions began building between Indian and Chinese troops at various points along the Line of Actual Control, the de facto frontier between India and China. Finally, on the night of June 15, the two sides clashed in hand-to-hand combat on the slopes of the Galwan Valley. Twenty Indian troops died, as did an unknown number of their Chinese counterparts. This was the most serious clash between the two armies since the war of 1962.

The clash took place in a region of strategic importance. On the Chinese side of the Galwan Valley lies Aksai Chin, through which a key road connects Tibet and Xinjiang province. On the Indian side, to the west, lies Ladakh. Further west from Ladakh is Pakistan-administered Gilgit-Baltistan, through which runs the China-Pakistan Economic Corridor, a belt of infrastructural projects extending in the south to Pakistan’s port of Gwadar. China-Pakistan Economic Corridor pipelines would give China more secure access to Gulf oil and gas, avoiding U.S. naval patrols in southeast Asia.

China may view recent steps by India—such as the August 2019 decision to carve out Ladakh and make it a centrally administered territory, as well as the buildup of Indian military infrastructure in Ladakh, near the Line of Actual Control—as strategic threats.

Taking India’s side, U.S. Secretary of State Mike Pompeo said the clashes were “initiated by the PLA [People’s Liberation Army]” and “are just the latest examples of the CCP’s [Chinese Communist Party] unacceptable behaviour.… The United States has never been more supportive of India’s security. India, too, is an important partner and a key pillar of President [Donald] Trump’s foreign policy.”1

Within India, the border standoff triggered an uproar. Politicians and sundry celebrities called for a boycott of all Chinese goods; government bodies canceled Chinese contracts; and, on June 29, 2020, India’s Ministry of Electronics and Information Technology banned fifty-nine Chinese apps, some of which, like TikTok, had a large number of users in India. Pompeo welcomed India’s ban, claiming that these apps “can serve as appendages of the CCP’s surveillance state.”2 While hostilities at the Line of Actual Control have ceased for the time being, they have had a more lasting impact on India’s domestic political climate and foreign policy stance.

On the surface, then, it appears as if a deadly physical brawl in the Himalayas somehow snowballed into a struggle in the spheres of commerce and strategic affairs. To look beneath the surface, let us first place these events in their global context.

The Uses of the COVID Crisis

In the period since the emergence of COVID-19, the United States has quite openly decided to use the crisis, at a global scale, as a weapon against its perceived rival, China. As early as January 30, 2020, just days after the confirmation of human-to-human transmission of the virus, the U.S. Commerce Secretary said that the disease, while “very unfortunate,” could prompt companies to reconsider operating inside China. This was not an off-the-cuff remark. The Commerce Department followed up with an e-mail stating: “It is also important to consider the ramifications of doing business with a country that has a long history of covering up real risks to its own people and the rest of the world.”

On April 9, Japan announced that it would subsidize its firms if they moved their production base from China.3 The European Union is preparing a report claiming that “China has continued to run a global disinformation campaign to deflect blame for the outbreak of the pandemic and improve its international image.”4 The French President Emmanuel Macron has questioned China’s handling of the virus outbreak.5 The European Commission chief has asked for an investigation into the origins of the virus.6 And, of course, the U.S. President has pressed U.S. intelligence agencies to find the source of the virus, threatening in his distinctive manner to sue China $10 million for every U.S. COVID-related death.7

This chorus has little to do with the virus, except its use as an opportunity. The process was under way well before COVID-19. The attempt to diversify global manufacturing chains away from China has been under discussion for the past two years, particularly in the wake of the U.S.-China trade conflict.

A Different Type of Globalization

In the period between 1990 and 2008, the globalization of production proceeded at breakneck speed, and an estimated 70 percent of global trade now involves global value chains. However, a special report by the Economist in July 2019 (long before COVID-19) found “a slow unravelling” of these chains. “A survey conducted in April [2019] of 600 MNCs [multinational corporations] around Asia by Baker McKenzie, an American law firm, found that nearly half of them are considering ‘major’ changes to their supply chains, and over a tenth of them a complete overhaul. In many sectors this will mean a re-think of the role that China plays in sourcing.”8

McKinsey Global Institute finds that global value chains in sixteen of seventeen big industries it has studied have become shorter, often moving production closer to the targeted consumer markets. This does not necessarily mean an end to globalization, but a shift in its pattern—for example, shifting production to other low-wage countries: “The [U.S.-China] trade war has also led to a rethink at Apple, which has reportedly asked its biggest suppliers to see how much it would cost to shift 15–30% of its supply base out of China to South-East Asia or India.”9

However, it is not easy for multinational firms to leave China—half the world’s electronics-manufacturing capacity is based there and the country offers advantages in infrastructure, skills, scale, and agility that are not easily matched. Nevertheless, significantly, the Economist report concludes that “Trump’s economic nationalism and attacks on China have won over America’s corporate elite.… There is bound to be an acceleration in the slow unravelling that is already under way of the complex supply chains that linked China to America.”10

Huawei Targeted

In 2019, more trade restrictions have been placed on China than on any other country. In the wake of the pandemic, a number of countries have placed restrictions on Chinese investment in their countries, as if in retaliation for the virus.11 A particular target of restrictions and bans has been the Chinese telecom giant Huawei.

Huawei, China’s largest private capitalist corporation, is widely considered to have the best and cheapest 5G technology, which would in the normal course be installed throughout the world. Precisely for this reason, U.S. pressure on Huawei is intense. In December 2018, Canada arrested Meng Wanzhou, the chief financial officer of Huawei, on an extradition request from the United States. In May 2020, the United States required foreign semiconductor manufacturers exporting to Huawei to seek permission from the United States if any U.S. equipment or software were involved in the manufacture.

As a result, the United Kingdom finally scrapped its decision to involve Huawei in setting up its 5G networks, resulting in up to two years’ delay and an additional cost of £2 billion. UK telecom firms have been given until 2027 to rip out existing Huawei gear from their networks. The remaining members of the Five Eyes (the communications surveillance alliance comprising the United States, United Kingdom, Canada, Australia, and New Zealand) have de facto bans on Huawei. France too has imposed a de facto ban on Huawei, which will result in the phasing out of the Chinese firm’s equipment by 2028 at the latest.12 Germany is stepping down its purchases from Huawei, but has not yet banned them.

The initial justification for these measures was so-called security concerns—the possibility of China using Huawei 5G equipment to spy on Western powers. But U.S. sanctions forced the hand of several countries and actual commercial concerns are impossible to separate from the strategic motives. The drive to capture or retain markets and sources of raw material, and to deny them to one’s rivals, is a staple of imperialist strategy.

The UK Prime Minister Boris Johnson has now approached the United States to form a “D-10” club of “democracies,” consisting of the Group of 7 (the United States, United Kingdom, Germany, France, Japan, Italy, and Canada, with observer status for the European Union) plus Australia, South Korea, and India. The addition of the last three indicates that the grouping is focused on China. The Times (London) reports that the first activity of this grouping would be to wrest markets from its rival: “One option would be to see the club channel investment to technology companies based within its member states. Nokia and Ericsson are the only European suppliers of 5G infrastructure and experts say they cannot provide 5G kit as quickly or cheaply as Huawei.”13

The Economist predicts that “the Huawei fallout could lead to the bifurcation of global markets into two incompatible 5G camps.… In this scenario, Sweden’s Ericsson, Finland’s Nokia and South Korea’s Samsung would supply a pricier network comprised of kit made outside of China.”14

Table 1. Breakdown of Countries on Allowing Huawei to Operate

Position Countries
Open to Huawei China; Malaysia
Permitted, but not in sensitive parts of the network Netherlands
Unlikely to consider restrictions Latin America; Central America; Africa; Russia
Considering Restrictions Belgium; Norway; Germany; Czech Republic; Italy
Soft Restrictions Poland; Taiwan; South Korea
Hard Restrictions United States; Britain; France; Israel; Japan; Australia; New Zealand
Undecided Afghanistan; Bangladesh; Denmark; Greece; Indonesia; Iran; Ireland; Kazakhstan; Myanmar; Pakistan; Philippines; Saudi Arabia; Tajikistan; Turkmenistan; Uzbekistan; Vietnam

Source: Updated based on the map “For or Against Huawei,” The Economist, July 13, 2019.

Retaining Global Supremacy

For the United States, there is also the broader objective of retaining global supremacy, on which rests the supremacy of the dollar as international currency. As Kenneth Rogoff, former chief economist of the International Monetary Fund, puts it, U.S. “military dominance…has been one of the linchpins of the dollar.”15 “NATO [the North Atlantic Treaty Organization] sets its sights on China,” reads a recent Economist headline, reporting that the NATO Secretary General Jens Stoltenberg wants closer collaboration with Australia, Japan, New Zealand, and South Korea in order to tackle China’s rise.16 A detailed report in the same journal explains that this reorientation will address the problem: “How can the transatlantic alliance hold together as America becomes less focused on Europe and more immersed in Asia?”17 According to a recent study,

The United States has led NATO to focus on China. Last August, NATO Secretary General Jens Stoltenberg stated that “China is coming closer” to Europe in the Arctic, Africa, investment in critical infrastructure, cyberspace, and investments in modern military capabilities. NATO’s London Declaration, following the December 2019 Leaders’ Meeting, was the first NATO declaration to mention China: “We recognize that China’s growing influence and international policies present both opportunities and challenges that we need to address together as an Alliance.” NATO is conducting an ongoing study, or “analysis exercise,” related to China that is, according to allied sources, looking into six main issues: cybersecurity; military deployments and Chinese military strategy; Afghanistan; Russia-China relations; Chinese investments in European critical infrastructure and strategic industries; and the impact of China on the rule-based global order.18

In March 2019, the European Commission termed China an “economic competitor” and “systemic rival.”19

The United States and its allies apply pressure on a number of fronts simultaneously, both economic and political. The latest instance is that the United States, United Kingdom, Australia, and Canada have expressed concern over China’s imposition of a national security law in Hong Kong (among the personages expressing concern for democracy in Hong Kong, without any sense of irony, was its last colonial governor).

India Positions Itself Against China

It is in this context that India has taken a number of steps in relation to China. As mentioned, Boris Johnson wants India to be part of a group of ten “democracies” ranged, for all practical purposes, against China. Instances of this—such as checks on Chinese investment, the attempt to draw investment away from China, and the promotion of projects/sectors with specific anti-China protection—show how India’s economic stances and policies are becoming more closely entwined with its geopolitical stance.

Targeting China over COVID-19

India joined U.S.-EU-Australian efforts to target China over COVID-19. This began with the Australian foreign minister demanding a “transparent” global inquiry into the origins of the pandemic, including China’s handling of the initial outbreak in Wuhan. U.S. Secretary of Health and Human Services Alex Azar, without naming China, said: “In an apparent attempt to conceal this outbreak, at least one member state made a mockery of their transparency obligations, with tremendous costs for the entire world.”20 India supported an EU-drafted resolution at the World Health Assembly—the World Health Organization’s decision-making body—asking for a probe of the organization’s response to the coronavirus pandemic, as well as identification of “the zoonotic source” of the coronavirus. Under pressure, China conceded the demand.

On the face of it, who could object to such a probe, with the apparent aim of improving the response to the spread of disease? However, when the United States and its allies press for such sweeping, open-ended exercises, their motives have nothing to do with the purported subject matter and everything to do with strategic military aims with regard to the investigated country. Such were the aims of the unending search for weapons of mass destruction in Iraq, and the investigation of Iran’s nuclear program.

Check on Chinese Investment in India

In April 2020, India announced that any foreign direct investment from a country with which it shares land borders would now require government approval. Since Nepal, Bangladesh, Pakistan, Bhutan, and Burma have not been investing in India, the regulation was targeted solely at China. Earlier, foreign direct investment approval had been automatic except in select strategic sectors. The government clarified that this change was in order to curb “opportunistic takeovers/acquisitions of Indian companies due to the current COVID-19 pandemic.”21

The online journal Swarajya, which generally voices the Rashtriya Swayamsevak Sangh [Hindu supremacist] viewpoint, clarified that, “as the global slowdown pushes share prices of companies down, China is looking to go on a shopping spree in the season of an induced artificial sale.… It is in the best interests of India to learn from its counterparts in Europe who have been late to realise the economic, social, and political magnitude of Chinese investments in the region.”22

Since this bar effectively applies only to China, it is clear that opportunistic takeovers/acquisitions of Indian companies by other countries, such as the United States, Japan, or the European Union, have the government’s approval. There is in fact a pandemic of such opportunistic takeovers of Indian enterprises by (non-Chinese) foreign investors in the wake of India’s corporate debt crisis.

Wooing Global Investors Away from China

While portraying Chinese investment in India as a form of “opportunistic takeover,” the Indian government has been single-mindedly focused on luring global investors away from China. On April 28, 2020, the prime minister told chief ministers to get their states ready for this task and, on May 1, he held a meeting with top ministerial colleagues “to capture a part of the supply chain that is expected to move out of China as global corporations look to diversify their production base in the aftermath of COVID-19.”23

According to transport minister Nitin Gadkari, China’s weakened global position is a “blessing in disguise” for India to attract more investment. Bloomberg reports that India is readying a pool of land twice the size of Luxembourg to offer companies that want to move manufacturing out of China, and has contacted one thousand U.S. multinationals.24 A paper prepared for the Ministry of Commerce and Industry quivers with anticipation: “Such diversification and shifting of Japanese firms away from China is estimated to create a $730 billion economic opportunity for developing geographies like ASEAN and India. The ongoing COVID-19 crisis presents a golden opportunity for India and Japan to further boost their already successful relationship.”25 (Pursuing “golden opportunities,” evidently, is different from being “opportunist.”)

For foreign investors planning to invest in industrial production, the availability of cheap or free land, state-of-the-art infrastructure, and a healthy, educated workforce—forms of state subsidies to private capital—are major considerations. They have long enjoyed these in China. Cheap or free land may be provided by the Indian government (by ripping it out of the hands of the peasantry), but, given the abysmal state of India’s infrastructure and the woeful physical and educational status of its workforce, the Indian rulers’ breathless pursuit of a flood of foreign investment may fall far short of their dreams. (Although significant foreign direct investment has entered in the last few months, it has been “brownfield” investment—that is, the takeover of existing assets, not the creation of fresh ones.)

Nevertheless, this objective is being pursued in all earnest, not only by India, but at the level of the leading imperialist powers as well. David Arase, resident professor of international politics at the Johns Hopkins University Nanjing University Center for Chinese and American Studies, explains: “There is obvious scope for U.S.-Japan cooperation if leaders decide to coordinate their supply chain adjustment efforts with Indo-Pacific policy agendas. For example, India is regarded by both the U.S. and Japan as a key strategic and economic Indo-Pacific partner that could benefit from better economic connectivity with the advanced West.”26

Pompeo stated that the Trump administration was “trying to mesh the supply chains that both countries [India and the United States] have access to.” According to a State Department official, they have “been working on [reducing the reliance of their supply chains in China] over the last few years but [they] are now turbo-charging that initiative.”27

The United States is pushing to create an alliance of “trusted partners,” dubbed the “Economic Prosperity Network,” one [State Department] official said. It would include companies and civil society groups operating under the same set of standards on everything from digital business, energy and infrastructure to research, trade, education and commerce, he said.

The U.S. government is working with Australia, India, Japan, New Zealand, South Korea and Vietnam to “move the global economy forward,” Secretary of State Mike Pompeo said April 29.

These discussions include “how we restructure…supply chains to prevent something like this from ever happening again,” Pompeo said.28

Economic Prosperity Network reminds one of the Greater East Asia Co-Prosperity Sphere, the term Japan used for the countries it occupied between 1931 and 1945.

Trade Barriers on Chinese Goods

Under the banner of “Atmanirbhar Bharat” (self-reliant India), the government now plans to impose higher trade barriers such as licensing requirements or stricter quality checks on 100 products, and additional import duties on around 160 to 200 products.29 Although the measure purportedly does not target any country, the government has selected commodities such as “wrist watches, wall clocks, ampoules, glass rods and tubes, hair cream, hair shampoos, face powder, eye and lip make up preparations, printing ink, paints and varnishes, and some tobacco items” after a process of collecting information regarding imports from China.30

Many more instances could be added to the list of Indian consumer goods and other low technology industries that have been unable to face competition from China. These labor-intensive industries needed protection from cheap imports, Chinese or otherwise, long ago. Some of them have been almost wiped out and it may now take more than tariff protection to revive them. The government’s new stance may garner support from small and medium industries in India, which have been bearing the brunt of this competition. Indeed, the Narendra Modi government has always been alive to such political calculations.

However, small and medium industries in India today face a grim future due to the collapse of domestic demand. In the absence of a systematic plan for strengthening domestic industry and infrastructure, building a range of domestic capabilities (appropriate know-how, skilled labor, marketing networks, development and use of local resources), and linked crucially to a widely dispersed increase in domestic demand, such measures will bring about no generalized improvement in the actual situation of small and medium industries. These trade barriers might only result in the effective reduction in the purchasing power of Indian consumers by making a range of manufactured consumer goods more expensive.

Apart from this, the bulk of imports from China are not low-tech consumer goods, but medium- to high-tech ones, the entry of which the Indian government is not immediately planning to block, for lack of a substitute.

New Policy Stance in Practice: The Case of Adani’s Solar Power Project

However, the anti-China policy stance might yield profitable opportunities for favored Indian corporate groups and Western/Japanese multinationals. The latter have in recent years faced stiff competition in India from Chinese firms in high-tech sectors such as telecom equipment, power equipment, and high-speed trains. The Chinese firms’ prices are much lower and their quality is said to be comparable, in some cases (such as 5G telecom equipment) even superior.

Take the solar power-related manufacturing sector, where China is overwhelmingly dominant, producing 80 percent of solar cells worldwide and 72 percent of the modules. It enjoys huge economies of scale, with prices dropping substantially every year. India’s local photovoltaic manufacturing sector has failed to compete with China, not only on price, but also on quality, and it is almost entirely dependent on China for solar cells. Nor is it alone. While the United States’s higher prices are said to be partly compensated by quality, the leading German firm simply wound up its own production in 2013.31

The Indian government is now planning to provide import protection for solar-related manufacturing firms based in India, with additional customs duties on solar modules and cells, a guaranteed flow of subsidized power, and financial subsidies (cheap credit and “viability gap funding”—a fancy name for a subsidy given to corporate firms). “Made-in-India solar panels may not be the most competitive. What may work in India’s favor, however, is the strategic shift in the priorities of companies and countries post COVID-19: comparative costs have ceased to be the only criterion for deciding on equipment supply.”32

This is unlikely to mean self-reliance, however, in the form of Indian firms developing their technological capability to manufacture modules, cells, and other equipment cheaply and well. Rather, it is likely to mean inviting non-Chinese foreign firms to invest here, protecting them from Chinese imports, and providing them subsidies: “India’s push could be led by government-owned companies like Bharat Heavy Electricals, which invited international players last month to leverage its ‘facilities and capabilities’—16 manufacturing locations, a substantial landbank, and 34,000 employees—to set up base in India.”33

On June 9, 2020, the Solar Energy Corporation of India awarded the Adani group (one of the corporate groups most closely linked to the present regime) the world’s largest solar energy tender: to build eight gigawatts of photovoltaic power plant along with a domestic solar panel manufacturing unit at an investment of 450 billion. Adani share prices have doubled since the start of the year.

Such projects are financially impossible for even the officially favored Adani group to execute on its own. Labeled one of India’s top ten over-indebted groups in 2012, its debt has since doubled, reaching 1.28 trillion by 2019. In the last two years, the group has preferred to borrow offshore, with foreign borrowings now accounting for 30 percent of its debt. Foreign currency bonds in particular doubled from 14 percent of total debt to 25 percent between March 2016 and March 2019.34 Any sharp depreciation of the rupee should spell trouble for the group, but it leads a charmed existence, seemingly certain that its bets will be winning ones.

The group’s growth has been closely linked to government favors and contracts, particularly with the Gujarat government until 2014, and since then the central government. “The group’s listed companies saw their value rise by some 85 percent soon after Modi’s inauguration, compared to a roughly 15-percent increase for the Sensex over the same period. Within a year of Modi’s term at the centre, the companies’ market value had risen by over Rs 50,000 crore [500 billion].”35 The Adani group entered solar power in 2013 with a forty megawatt project in Gujarat and has bet heavily on solar power since then. Winning the latest solar tender is thus not a surprise: “SECI enjoys the full support of its 100 percent owner, the government of India,” said Adani Green’s spokesperson.36

As in the rest of the government’s “self-reliance” schemes, this exercise may provide profit-making opportunities to (non-Chinese) multinationals, while ensuring that favored corporate groups thrive. Boasting that his group is the only Indian business house with a series of 50:50 ventures with international players such as Total and Wilmar, Adani revealed that he is in discussion with potential equity and strategic partners for solar equipment manufacturing.37

The scheme is directly linked to shutting out China: Adani claims that, with his solar projects, “the 90 per cent import of Chinese equipment will fall to 50 per cent, and ultimately zero. In 3–5 years, it will be negligible.”38

In February 2020, Adani hived off several gigawatts of operational solar assets into a new company, with French energy major Total taking a 50 percent stake in the new venture for $510 million—part of the rush of global oil and gas giants into the “renewable” energy market.39 The Indian government has set a far-fetched target of one hundred gigawatts (one hundred thousand megawatts) of solar power by 2022, but capacity at the end of 2019 was only thirty-six gigawatts. There are big bucks to be made in the sector in the coming years. Adani said Total was “very much interested” in expanding its partnership with Adani Green, as are other foreign investors. The firm’s spokesperson said that Adani Green “is always looking for ways to further reduce its costs of capital and to work with other energy majors and traditional investors as a path to facilitating the company’s continued rapid growth.”40

New Policy Stance in Practice: Reliance’s 5G

Recent developments in India’s telecom sector, too, reflect how the economic policies of India’s rulers are now more closely intertwined with their geopolitical stance. They also reveal a closer interlocking of the interests of top Indian corporate firms and foreign capital.

Reliance Industries Ltd, headed by Asia’s richest man, Mukesh Ambani, is India’s largest company. In the three years since starting operations, its telecom subsidiary Reliance Jio, armed with cash and favorable regulatory relaxations, won four hundred million customers and became India’s dominant telecom firm.

When Trump visited India in February 2020, Ambani declared at a business roundtable that Jio’s 5G network would not have a single Chinese component. Pompeo later tweeted praise for “clean” telecom firms like Jio, which refused to do business with “tools of the CCP surveillance state, like Huawei.”

Between April and July, Jio received a tsunami of foreign (principally U.S.) investments. U.S. tech giants Facebook, Qualcomm, Intel, and Google, as well as six U.S. private equity firms and three Gulf sovereign wealth funds invested over $20 billion for a 33 percent stake; Facebook and Google won seats on the board of directors. Microsoft is reportedly considering joining the party with a $2 billion investment. This is, then, an unprecedented alliance.

Nevertheless, knowledgeable observers were mystified when Ambani claimed at his shareholders’ meeting in July that Jio was setting up its “own” 5G network, with “100 percent homegrown technologies and solutions.” Reliance has stayed away from technology development in its wide range of enterprises. Its 4G system was set up entirely by Samsung. Reliance is not known to hold any patents in 5G technology, which is a hugely capital-intensive and long-drawn affair, dominated by three firms worldwide—Huawei, Ericsson, and Nokia.

One possibility is that “patches based on software solutions as well as open source hardware could be built in order to give a ‘5G-like’ network performance, at least in limited markets or geographies.”41 Such “open platform” options, where telecom operators opt to buy hardware and software from different vendors, are still far from fully developed. Nevertheless, in its drive to counter Chinese firms, the U.S. government has moved aggressively to take leadership of the groupings that promote such an open structure.

Whatever the exact contours of Jio’s 5G system, it marks an explicit exclusion of Chinese firms and, correspondingly, closer ties with firms of the United States and allied countries. Reliance’s principal achievement in telecom has been to capture the market, using its financial and political clout. It is now selling shares of this captured entity to foreign investors, in line with the mercantile tendency that has long marked Indian big capital. These foreign firms, which faced some regulatory hurdles in India, will now be hand-held by a firm with fabled connections to the rulers.

Curiously, this comes clothed in the rhetoric of nationalism and self-reliance. In January 2019, Ambani had called for an end to “data colonization”: “data is the new oil.… India’s data must be controlled and owned by Indian people—and not by corporates, especially global corporations.” By the end of the year, the Indian government introduced a bill that, among other things, would check the transfer of personal data out of the country. The Indian government has banned Chinese apps on the charge that they were stealing data.

The irony is that the business models of Alphabet (parent of Google) and Facebook depend precisely on mining the data of users. As pointed out by John Bellamy Foster and Robert McChesney, “the major means of wealth generation on the Internet and through proprietary platforms such as apps is the surveillance of the population.”42

Furthermore, major U.S. Internet firms such as Google, Facebook, Microsoft, and Yahoo provide the U.S. government agencies direct access to their users’ data, thus forming what has been called a “government-corporate surveillance complex.”43 In turn, “the U.S. government is little short of a private army for the Internet giants as they pursue their global ambitions.”44

Facebook and Google have long been mopping up the data of Indian users. But their entry as important investors of India’s dominant telecom firm, with directors on the board, in fact marks a further advance in what Ambani had called the “data colonization” of India. This encroachment on India’s sovereignty, however, has gone overlooked.

The new triple alliance may have a large impact on a number of sectors of the economy, such as retail trade, online education, health care, and banking. In some of these, Reliance is already present. Nor is that all. The political implications have passed without notice. Both Google and Facebook have enormous scope for mass manipulation. Facebook actively markets its services in political persuasion and has partnered with India’s current ruling party at the time of elections. For its part, Google has manipulated its search algorithms in order to blacklist certain websites for their political views.45

The implications of recent investments in India’s telecom sector are thus not merely financial. Notably, Ambani is not only the owner of India’s dominant telecom company, but also of Network 18, the country’s largest media conglomerate, spanning news and entertainment in fifteen Indian languages. The entry of Facebook and Google into Jio thus represents an ominous strategic, economic, political, and even cultural consolidation of forces.

Some Caveats

The geopolitical drive against China, led by the United States and drawing in India, advances and intertwines with certain economic interests. It does not signify either that multinationals will withdraw from China overnight, nor that India can discontinue its imports from China, nor that India will be the recipient of all the investment that exits China. (Nor does it signify that, even if India were to receive a flood of foreign direct investment, it would constitute a positive development—but that question needs to be dealt with separately.)

For Western multinationals, China’s infrastructure, clustering of firms, scale of production, subsidies, educated workforce, agility in carrying out production changes and delivering on time are in many cases too advantageous to give up quickly. Though China’s labor costs have risen, they remain a fraction of those in the United States or even Mexico. Firms from the United States and other developed countries have sunk large investments into China. All this means that a shift from China may take time and may vary from sector to sector.

Nevertheless, holding out to India the prospect of large investments shifting away from China helps orient India more closely to U.S. foreign policy, whether or not much investment finally materializes.

For India, too, an immediate break with trade with China does not appear practical. China was India’s largest trading partner from 2013 to 2018. Though the United States appears to have since taken over that position, China remains a very large trade partner. Unlike the United States, which imports more from India than it exports, China runs a large trade surplus with India. To quote Biswajit Dhar and K. S. Chalapati Rao, “India-China trade can be summarised as India supplying raw material and intermediates to China, while importing capital goods and critical intermediates for its pharmaceutical industry, the two-wheeler industry, and for synthetic yarn, among other goods.”46 The extent of dependence on China in several sectors is alarming, such as in active pharmaceutical ingredients. The celebrated Indian pharmaceutical industry restricts itself to making profitable formulations from imported active pharmaceutical ingredients. As such, an interruption in Chinese imports would imperil public health as well as India’s exports. Chinese capitalist investments in India are concentrated in the prominent tech sector, in firms such as Ola, Paytm, Zomato, Flipkart, and Byju’s. Reportedly, two-thirds of “unicorns”—start-ups valued at $1 billion or more—have Chinese investment.47

As such, it would appear that it is much harder for India to disentangle itself from China than for the latter to do without India. Nevertheless, India is clearly taking steps that will set it on a collision course with China.

India Against China: The “Indo-Pacific” Catchphrase

This can be seen most clearly on the level of strategy. In recent years, India has unmistakably become a member of a coalition of powers targeting China. The catchphrase of Indian diplomacy in recent years has been “Indo-Pacific,” signifying that India views its strategic interests as extending to at least the South China Sea.

Thus, India’s prime minister informed his Japanese counterpart in November 2019 that “India’s relationship with Japan is a key component of its vision for peace, prosperity and stability in the Indo-Pacific region.” During the visit of India’s defense and external affairs ministers to Washington in January 2020, the two sides “reaffirmed their commitment to support ‘a free, open and inclusive Indo-Pacific region.’” On June 4, 2020, the prime minister held a virtual summit with the prime minister of Australia and issued a “Shared Vision for Maritime Cooperation in the Indo-Pacific.”

It is make-believe to claim that India’s security interests stretch up to the Pacific Ocean. It is, rather, the Indian rulers’ dreams of great-power status that stretch far beyond India’s borders, and far beyond India’s material—that is, military and economic—base. The scale of these ambitions is reflected in the writings of the widely published strategic commentator and former member of India’s National Security Advisory Board C. Raja Mohan, who views India as the heir of the British Raj:

The Raj was the principal provider of security in the region stretching from Aden to Malacca and Southern Africa to South China Sea. If the Royal Navy established total dominance over the waters of the Indian Ocean and its approaches, the Indian Army was the sword arm of the Raj in ensuring stability in the vast littoral.…

Independent India’s opposition to intervention of other powers in its periphery, security assistance to smaller neighbours, and the claim of a security perimeter running from Aden to Malacca are rooted in the definition of territorial India’s defence imperatives under the Raj.… Like the Raj, India is emerging as one of the important military powers in Asia and the Indian Ocean and there appears to be new political will in Delhi to see itself as a regional security provider.48

It is of course not India, but the United States, that is heir to the Raj as the hegemon of the region. Nevertheless, it suits the United States that the Indian rulers nurse such notions, since they need India as a junior partner. The current use of Indo-Pacific in discussion of diplomatic and strategic affairs in fact originates in the U.S. State Department. Then-U.S. Secretary of State Hillary Clinton

first used the term “Indo-Pacific” in 2010 to reflect closer naval cooperation with India; “we are expanding our work with the Indian navy in the Pacific, because we understand how important the Indo-Pacific basin is.” Whereas U.S. relations with Australia had previously been described and conducted within an “Asia-Pacific” framework, Clinton extended this with “Indo-Pacific” references; “we are also expanding our alliance with Australia from a Pacific partnership to an Indo-Pacific one.”49

Japan coined the expression Free and Open Indo-Pacific in 2016, and Trump embraced the framework in 2017.50 In 2018, a U.S. State Department official spelled out the reasons for using the term Indo-Pacific:

It’s significant that we use this term. Before, people used the term Asia Pacific…but we’ve adopted this phrase.… It is in our interest, the U.S. interest, as well as the interests of the region, that India play an increasingly weighty role in the region.… It is a nation that can bookend and anchor the free and open order in the Indo-Pacific region, and it’s our policy to ensure that India does play that role.51

In May 2018, the U.S. Defense Secretary announced that the U.S. Pacific Command had been renamed the Indo-Pacific Command, “in recognition of the increased connectivity of the Indian and Pacific Oceans.”

Why the U.S. Promotes India’s Great-Power Ambitions52

Shortly after Clinton introduced the Indo-Pacific concept, it was retailed in India by retired top bureaucrats and military men such as former navy chiefs Arun Prakash and Sureesh Mehta, and the influential former Foreign Secretary Shyam Saran (later special envoy for Indo-U.S. civil nuclear issues and chairman of the National Security Advisory Board). Within a few years, it became ubiquitous, with the prime minister, external affairs minister, and foreign secretary adopting it.

The U.S. motivation in promoting the Indo-Pacific concept is, in contrast with India’s, clear and grounded in reality. A report commissioned by the U.S. Department of Defense in October 2002, titled The Indo-U.S. Military Relationship: Expectations and Perceptions, noted that “American military officers are candid in their plans to eventually seek access to Indian bases and military infrastructure. India’s strategic location in the center of Asia, astride the frequently traveled SLOCs [Sea Lanes of Communication] linking the Middle East and East Asia, makes India particularly attractive to the U.S. military.”53

A 2005 U.S. War College study, which draws on discussions its author had with representatives of different military services at the U.S. Pacific Command, states bluntly:

We need tangible Indian support because our strategic interests and objectives are global, while the military and other means at our disposal to pursue them are not keeping pace.… American force posture remains dangerously thin in the arc—many thousand miles long—between Diego Garcia in the Indian Ocean and Okinawa and Guam in the Pacific.54

The Indian public, however, is unaware that their country may be made the linchpin of a broader U.S.-sponsored military alliance for Asia: “during 2003, if not since then, American and Indian officials discussed a possible ‘Asian NATO’ although the content of these discussions and of India’s significance for them has not been made public.”55

Integrating India into the U.S. Strategic Order

The process of integrating India with U.S. strategic planning was well under way during the United Progressive Alliance government (2004–14), but has proceeded much faster under the Modi government. In 2016, India signed the Logistics Exchange Memorandum of Agreement with the United States, which allows each country to use the other country’s specified military installations for certain purposes. (A similar deal was concluded in June 2020, during the virtual summit between Modi and the Australian prime minister.) India has signed other agreements with the United States for secure encrypted communication between the two armed forces and transfer of technology, and is turning increasingly to the United States for military equipment. U.S. arms sales to India rose by more than five times from 2013 to 2017, compared to the previous five years.56

The integration of the two militaries is fairly advanced; the two sides have conducted the largest number of joint military exercises between the United States and a non-NATO member. In November 2019, India and the United States held their first joint triservice military exercise (a joint land, air, and sea exercise) in coastal Andhra Pradesh. The United States and Indian navies jointly track Chinese submarines in the Asia-Pacific region. According to one analyst, “the U.S. now accords India almost the same status that it gives NATO member states.”57

India is also tasked with building ties with a number of countries in the region, including Indonesia, Vietnam, Myanmar, Singapore, and the Philippines. There is little attempt now to conceal the fact that these efforts are targeted at China. Australia may participate in the annual Malabar Exercises in 2020, along with the United States, Japan, and India.58 The Indian navy recently sailed with the U.S., Japanese, and Philippine navies through disputed waters in the South China Sea.59 India and Indonesia have concluded an agreement to develop and manage the Sabang port, located close to the strategic Malacca Straits, through which shipping passes to China.60

At the political level, India, the United States, Japan, and Australia are the four members of the Quadrilateral Security Dialogue, or Quad for short. At the inception of this process in 2007, China protested that it was a nascent anti-China alliance, and India put it on the back burner. However, since 2017, the Quad has been revived, and in September 2019 the foreign ministers of all four member countries met in New York—a significant escalation. In January 2020, India held a “2+2” meeting with the United States—that is, India’s external affairs and defense ministers met their U.S. counterparts, a format the United States reserves for its close allies.61

Against India’s Interests

However, none of this makes sense from the angle of India’s own security. On the contrary, it entangles India in distant adventures and threatens to thrust India into wars that serve U.S., not Indian, interests. If India were to pursue its true national interest, it would see through the U.S. intentions of labeling it a “great power,” and immediately disengage from these warlike alliances.

Such a clear-headed view of India’s national interest would endanger the entire “Indo-Pacific” enterprise of the United States. Only when India sees itself as a great power, a “counterpoise to China in the region,” will it want to promote a broad anti-China alliance. And so the United States must promote this claim of the Indian rulers. As the U.S. War College study points out,

crucial to making this system work is India’s being convinced of its “manifest destiny” and for it to act forcefully. It will require in the main that New Delhi think geostrategically and give up its diffidence when it comes to advancing the country’s vital national interests and its almost knee-jerk bias to appease friends and foes alike. The corrective lies in the Indian government expressly defining its strategic interests and focus and, at a minimum, proceeding expeditiously towards obtaining a nuclear force with a proven and tested thermonuclear and an ICBM [intercontinental ballistic missile] reach. Nothing less will persuade the putative Asian allies that India can be an effective counterpoise to China in the region, or compel respect for India in Washington.62

In line with this aim, the United States now terms India a leading global power. The U.S. National Security Strategy of 2017 states: “We welcome India’s emergence as a leading global power and stronger strategic and defense partner.”

Realizing the Goal of “an India Closer to the West”

Seen in this light, the growing hostility between India and China since the emergence of COVID-19, culminating in the clashes between the two armies at the Line of Actual Control, serves the needs of the U.S. grand strategy for the region. With remarkable candor, the New York Times greets the recent border clashes with enthusiasm, as the final step in India’s journey toward an anti-China alliance with the West:

For years, the United States and its allies have tried to persuade India to become a closer military and economic partner in confronting China’s ambitions, painting it as a chance for the world’s largest democracy to counterbalance the largest autocracy. This week, the idea of such a confrontation became more real as Indian and Chinese soldiers clashed.…

With China facing new scrutiny and criticism over the coronavirus pandemic, Indian officials have recently seemed emboldened, taking steps that made Western diplomats feel that their goal of an India closer to the West was starting to be realized. And some believe the friction with China will push India even further in that direction.

One Western diplomat felt that the coronavirus crisis had made India more eager to build stronger relationships to help it deal with China, and that diplomacy with India was going more smoothly than ever before. “Everyone is more willing, privately, to talk about what to do with China in a post-COVID world,” the diplomat said.

Mr. Gokhale, the former Indian foreign secretary, said that countries could no longer ignore Beijing’s transgressions and must choose between the United States and China. “In the post-COVID age,” he wrote, “enjoying the best of both worlds may no longer be an option.”63

Truly, COVID-19 has become a useful peg on which to hang agendas that have nothing to do with the health of the people.

Notes

  1. Pompeo: China’s Behaviour Was Unacceptable in Its Border Clash with India,” DD News, July 23, 2020.
  2. Sriram Lakshman, “S. Secretary of State Pompeo Welcomes India’s Chinese App Ban,” Hindu, July 2, 2020.
  3. Mercy Kuo, interview with David Arase, “Japan Prods Firms to Leave China, Affecting Ties with Beijing and Washington,” Diplomat, May 8, 2020.
  4. “As China Pushes Back on Virus, Europe Wakes to ‘Wolf Warrior’ Diplomacy,” Reuters, May 14, 2020.
  5. “Coronavirus: Macron Questions China’s Handling of Outbreak,” BBC, April 17, 2020.
  6. Silvia Amaro, “EU Chief Backs Investigation into Coronavirus Origin and Says China Should Be Involved,” CNBC, May 1, 2020.
  7. Steven Erlanger, “Global Backlash Builds Against China Over Coronavirus,” New York Times, May 3, 2020.
  8. “Special Report: Global Supply Chains,” Economist, July 13, 2019, 4.
  9. “Special Report: Global Supply Chains,” 5.
  10. “Special Report: Global Supply Chains,” 11.
  11. Nikita Kwatra, “Why Falling for Anti-China Mood Could Hurt Trade,” Mint, June 4, 2020.
  12. Natasha Lomas, “UK U-Turns on Huawei and 5G, Giving Operators Until 2027 to Rip Out Existing Kit,” TechCrunch, July 14, 2020.
  13. Lucy Fisher, “Downing Street Plans New 5G Club of Democracies,” Times, May 29, 2020.
  14. “Special Report: Global Supply Chains,” 11.
  15. Kenneth Rogoff, “America Will Need $1,000 Billion Bail-Out,” Financial Times, September 17, 2008.
  16. NATO Sets Its Sights on China,” Economist, June 9, 2020
  17. “How NATO Is Shaping Up at 70,” Economist, March 19, 2019.
  18. Andres Ortega Klein, “The U.S.-China Race and the Fate of Transatlantic Relations, Part II: Bridging Differing Geopolitical Views,” Center for Strategic and International Studies, April 23, 2020.
  19. EU-China—A Strategic Outlook (Brussels: European Commission, 2019).
  20. Shubhajit Roy, “WHO Nod for Coronavirus Probe, China Backs Down,” Indian Express, May 19, 2020.
  21. Sunanda Sen, “New FDI Norms in Time of COVID—Good Economics or Geopolitics?,” Wire, May 2, 2020, emphasis added.
  22. Tushar Gupta, “Restricting Chinese FDI into India: How China Uses Financial Crisis to Further Its Expansionist Agenda,” Swarajya, June 18, 2020.
  23. “COVID-19: PM Modi Signals Push to Attract Firms That Exit China to India,” Times of India, May 1, 2020.
  24. Nikhil Inamdar, “Coronavirus: Can India Replace China as World’s Factory?,” BBC, May 18, 2020.
  25. “Invest in India: Govt Pitches For Japanese Companies As They Move Out Of China,” IANS, May 14, 2020.
  26. Kuo, interview with Arase, “Japan Prods Firms to Leave China, Affecting Ties with Beijing and Washington.”
  27. “Trump Administration Pushing to Rip Global Supply Chains from China: Officials,” Reuters, May 4, 2020.
  28. “Trump Administration Pushing to Rip Global Supply Chains from China: Officials,” Reuters, May 4, 2020.
  29. “India Plans Higher Trade Barriers, Raised Import Duties on 300 Foreign Products: Report,” Reuters, June 18, 2020.
  30. “Amid Border Tension, PMO Seeks Product-Wise Details from India Inc to Curb China Imports,” News18, June 21, 2020.
  31. Christoph K. Klunker, “Let China Pay for India’s Solar Push,” Mint, August 9, 2018.
  32. Vandana Gombar, “Taking on China in Solar Manufacturing,” Business Standard, June 9, 2020.
  33. Gombar, “Taking on China in Solar Manufacturing.”
  34. Aman Kapadia and Forum Bhatt, “Adani Group’s Growing Debt Pile Is Changing Colour,” Bloomberg Quint, November 5, 2019.
  35. Nileena MS, “The Massive Indebtedness of the Adani Group and Its Convenient Relations with Government Enterprises,” Caravan, March 15, 2018.
  36. John Parnell, “India’s Adani Wins World’s Largest Solar Tender,” Green Tech Media, June 10, 2020.
  37. “Solar Equipment Imports from China Will Fall to Zero in 3–5 Years, Says Gautam Adani,” ET Now Digital, June 10, 2020.
  38. “Solar Equipment Imports from China Will Fall to Zero in 3–5 Years, Says Gautam Adani.”
  39. John Parnell, “Total and Shell Give Green Lights to Big Power Investments in India and Australia,” Green Tech Media, February 6, 2020.
  40. Parnell, “Total and Shell Give Green Lights to Big Power Investments in India and Australia.”
  41. Sridhar, “Reliance’s 5G Claim: Reality Check,” Frontline, August 14, 2020. Prabir Purkayastha points out that the U.S. firm Qualcomm, one of the recent investors in Jio, is also a significant developer of 5G technology and may play a role in Reliance’s 5G-lite “solution.” Prabir Purkayastha, “From Atmanirbhar to Reliance India,” Newsclick, July 27, 2020.
  42. John Bellamy Foster and Robert W. McChesney, “Surveillance Capitalism: Monopoly-Finance Capital, the Military-Industrial Complex, and the Digital Age,” Monthly Review 66, no. 3 (July–August 2014).
  43. Foster and McChesney, “Surveillance Capitalism.” The phrase was coined by Beatrice Edwards of the Government Accountability Project.
  44. Foster and McChesney, “Surveillance Capitalism.”
  45. Kirsten Grind, Sam Schechner, Robert McMillan, and John West, “How Google Interferes with Its Search Algorithms and Changes Your Results,” Wall Street Journal, November 15, 2019; Andre Damon, “Wall Street Journal Investigation Confirms Google Operates Censorship Blacklist,” World Socialist Web Site.
  46. Biswajit Dhar and K. S. Chalapati Rao, “India’s Economic Dependence on China,” India Forum, August 7, 2020.
  47. Zia Haq, “From Infrastructure to Hi-Tech: Mapping China’s Large Trade Footprint in India,” Hindustan Times, June 19, 2020.
  48. Raja Mohan, “India as a Security Provider: Reconsidering the Raj Legacy” (working paper, Institute of South Asian Studies, National University of Singapore, March 2012), emphasis added.
  49. David Scott, “The Indo-Pacific in U.S. Strategy: Responding to Power Shifts,” Rising Powers Quarterly 3, no. 2 (2018).
  50. Scott, “The Indo-Pacific in U.S. Strategy.”
  51. Alex Wong, “The Indo-Pacific Strategy” (speech, East Asian and Pacific Affairs Bureau, State Department, April 2018), quoted in Scott, “The Indo-Pacific in U.S. Strategy.”
  52. The following draws on our earlier study, Global Power, Client State: India’s Place in the U.S. Strategic Order, 2005. The relevant passage can be found in “Why the US Promotes India’s Great-Power Ambitions,” Research Unit for Political Economy 41 (2005).
  53. Juli A. MacDonald, Indo-U.S. Military Relationship: Expectations and Perceptions (Falls Church, VA: Information Assurance Technology Analysis Center, 2002), 91.
  54. Stephen J. Blank, Natural Allies? Regional Security in Asia and Prospects for Indo-American Strategic Cooperation (Carlisle, PA: Strategic Studies Institute, U.S. Army War College, 2005), 13.
  55. Blank, Natural Allies?, 1.
  56. John Cherian, “U.S. and India: Strengthening Ties,” Frontline, January 17, 2020.
  57. Cherian, “U.S. and India.”
  58. Sandeep Unnithan, “Modi-Morrison Summit: How Beijing’s Belligerence Makes the ‘Quad’ More Attractive for New Delhi,” daily O, June 15, 2020.
  59. Ankit Panda, “U.S. Navy Ship Replenishes Indian Navy Ship in South China Sea,” Diplomat, November 6, 2019.
  60. Saurabh Todi, “India Gets Serious About the Indo-Pacific,” Diplomat, December 18, 2019.
  61. Todi, “India Gets Serious About the Indo-Pacific.”
  62. Blank, Natural Allies?, 79.
  63. Maria Abi-Habib, “Will India Side with the West Against China? A Test Is at Hand,” New York Times, June 19, 2020.
2020, Volume 72, Issue 04 (September 2020)
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