India, China and the World Order

The India-China stand-off, goes beyond the notions of a bilateral dispute. I tend to concur
with this because of the many political and geo-political undercurrents that carry in its wake,
the potential to influence, if not entirely redefine, both the current world order and the
global economy. But my predicament is that I have my doubts about India’s overall capacity
to dominate any of the possible tectonic shifts.

Amongst the aftermaths of the Second World War, there has emerged the paradigm of
‘political gimmickry’ that allows established world powers to make subtle judgments on the
way lesser countries respond to their major political manoeuvrings. Unfortunately, though,
this gimmickry has sometimes gone beyond their nuanced positioning to one of blatant
intervention. Some examples of the more benign political gimmickry are the formation of
political and economic blocs, the more recent examples being BRICS (Brazil, Russia, India,
China, and South Africa) and QUAD (USA, Japan, Australia, and India). While India features
in both of them, I fear, it will land it between two stools. Let me surmise why?

Historically, India has depended on Russia for military supplies, which still continues to
influence India’s foreign policy relations with the rest of the world in a significant way. More
recently, India has been implementing extended oil trade with Russia and at discounted
prices. In fact, 85% of all oil consumed by India comes through imports. Abandoning
Russian oil will most likely adversely affect India’s production economics. In a hurry,
therefore, it is unlikely that India will succumb to Western pressure for alienating with
Russia. On the other hand, the revenue Russia achieves through trade with India is currently
critical in leveraging its war against Ukraine.

One feather in India’s cap vis-à-vis the Indo-Soviet endearing relations has been ‘rupee-
rouble’ currency exchange mechanism. However, more recently, “Western sanctions on
Russia have deterred the Indian banking system from doing business with Russia.
Although India has not supported the West’s Russia sanctions regime, Indian banks are
heavily reliant on SWIFT and Western financial infrastructure and seek to avoid potential
sanctions.” Secondly, and more importantly, the Chinese Yuan’s growing influence over the
Russian rouble, has kept India worrying. As part of its new-found strategic relationship with
China (courtesy BRICS), Russia has been pushing for the Yuan as its go-to currency for
settling international trade payments, including those with India. “Being China’s territorial
and hegemonic adversary, India refused to settle payments in Yuan to avoid exposing its
volatile currency market to a highly regulated Chinese currency.” But the Sino-Soviet
equation is tilted China’s way and, in coming years, China’s economic and military
capabilities are likely to rise relative to Moscow’s. It is also rumoured that a huge number of
Russian IT professionals have left their country. The likely fallout of this will mean Russia
will be forced to turn to China for semiconductors, 5G, and more. How would this imbalance
affect India?

Let us now delve a bit into the myth or reality of the ‘political gimmickry’ paradigm. We start
with QUAD. What QUAD attempts to achieve is a free, open, prosperous and inclusive Indo-
Pacific region, with maritime security and cyber security as prominent concerns. The motive
behind the QUAD is to keep the strategic sea routes in the Indo-Pacific free of any military or
political influence. It is basically seen as a strategic grouping to reduce Chinese domination.
As far as India is concerned, if Chinese hostilities rise on the borders, India can take the
support of the other QUAD nations to counter the communist nation. Interestingly, “QUAD’s
origins can be traced back to the evolution of Exercise Malabar and the 2004 Tsunami
when India conducted relief and rescue operations for itself and neighbouring countries
and was later joined by the US, Japan and Australia. Therefore, China issued formal
diplomatic protests to the members of the QUAD.” Whether the other members will actually
bail out India in the event of a war with China, remains an open question?

Next to feature here is BRICS. The BRICS members represent over 42% of the world’s
population and account for nearly a quarter of global gross domestic product (GDP) and 18%
of trade. The grouping is hailed by some as a counterweight to Western economic and
political forums and institutions like the G7 and the World Bank. “Among its notable
achievements has been the establishment of the New Development Bank or the BRICS bank,
a multilateral development bank with $50 billion (€45.6 billion) in subscribed capital to
fund infrastructure and climate-related projects in developing countries.” But, by and large,
it has failed to generate the needed momentum. Its limited success can be explained by the
often diverging and competing interests of its members, especially those of China and India,
which share a disputed border and have seen ties deteriorate in recent years.

At its August 2023 summit in Johannesburg, South Africa, BRICS has formally invited Saudi
Arabia and Iran amongst others to join the bloc. While the former awaits a tacit go-ahead
signal from Joe Biden, it definitively seeks to balance its relationship with the United States
alongside emerging powers like China. On the other hand, Iran, with its already poor
relations with many Western countries, has taken the opportunity of its BRICS invitation.
“Iran has supported BRICS’s efforts to move away from dependence on the US
dollar. American domination of the global financial system has been particularly troubling
for Iran, as its economy has struggled under the weight of US sanctions.”

With the political gimmickry paradigm, together with the ground realities, having been put
in perspective, I think Mr. Narendra Modi might want to take a deep breath before leading
his largest democracy in the world to the altar of regional hegemony.