A Note on CBDC ..

What are CBDC : Central Bank Digital Currency is electronic cash ; CBDCs are simply a digital version of cash—the physical money issued by central banks. It will be a Reserve Bank digital e-Rupee .

We are already using Digital currency when we make payments or receive money using our bank accounts to make transfers or using Apps such as Paytm , Google Pay , Phone Pe , Amazon Pay or Credit and Debit cards . so what is new about CBDC ? Whereas the above modes of payment are backed by commercial banks the CBDC would be backed by the Central Bank just like the Rupee is by the Reserve Bank . Further unlike crypto currency it will be backed by the government meaning it will be more universally recognised as ‘money’ .

CBDCs can be categorized as wholesale and retail CBDC by usage. Retail CBDC is a digital version of cash and mainly used for payments among individuals and businesses. Retail CBDC can increase access and usability for users, reduce costs for e-commerce and cross-border payments, and help to enhance monetary policy. Wholesale CBDC is a new infrastructure for inter-bank settlements, such as payments between banks and other entities that have direct relationship with the central bank. Wholesale CBDC can improve inter-bank payment settlement, reduce risks and costs of cross-border payment transactions.

The Central Bank does not want us to be dependent on private players for online transactions with the concurrent risk it carries . The main motivation of CBDC are to promote safety, robustness and efficiency of payments, reduce issuing cost and increase transaction convenience. The Central Banks want to have a strong presence in cashless transactions and lessen the risk in the financial system through private payment Apps ; One of the reasons why China stepped in early into digital currency was a reaction to the rise and dominance of the private sector digital platforms like Alipay and Wechat Pay .  

As the world moves away from physical cash which it is rapidly as in China , India and Brazil – when did you last use physical cash to make a payment ? increasingly we are tapping our cards / mobiles or using the QR code in India and PIX in Brazil to make a transaction and the world is swiftly moving to a cashless era ; as this volume keeps increasing the Reserve Bank would find the necessity of stepping in with its digital Rupee & not let private players to dominate .

Another aspect of CBDC would be its use in offline mode . This is important as only then would it serve those in remote areas or with lack of communication net work and also be able to withstand outages as it happened recently in Canada and also when the Caribbean Central Bank’s (ECCB) DCash went offline for weeks. Offline digital payment systems could verify availability of funds and validate transactions without the need to check in with an online ledger. They could use old-tech, non-internet-driven mobile phones or something like a stored-value card. This may pose a thorny challenge for designers .

Some of the benefits of CBDC are :

  • Digital Currency is cheaper than minting coins . As per a report in economic times for every Rs 100 note, the cost works out to be about Rs 15-17 rupee (15-17% on each tender) in its four-year life cycle .
  • Digital currency would be more secure as cash is vulnerable to loss and theft . Electronic hacking could be a risk but that could be managed with new technology .

  • Digital currency would be less susceptible to counterfeiting
  • It will be easier to monitor how digital currency is used making it harder to fund criminal activities such as drug dealing and terrorism.
  • Bring  ‘ off the book ‘ transactions into the economy , curb black money generation and increase tax revenues .
  • Unbanked citizens can be brought into the financial system thus boosting economic development  .
  • Central Bank or the government could use digital wallets to send money directly  – as in the case of the pandemic when money was provided to the needy .
  • A central bank could also impose negative interest rates on digital currency and incentivise spending and investment as a means of stimulating the economy .
  • Innovation in cross-border payments .
  • Adoption of block chain for financial services .

The issue of digital currency would be a gradual process and for years to come the Central banks would continue to issue physical currency as people would want to hang on to cash or may not have smartphones or mobiles . Central banks could either issue the digital currency through their Apps or it could be a part of the commercial bank network or private payment apps linked to the central bank account .

One likely fall out of CBDC could be people not wanting to keep money in banks ( which anyway is not fully insured ) which could cause a run on bank money causing liquidity issues . With commercial banks deprived of cash deposits they would need to borrow from elsewhere raising the cost of lending .Instead the Central banks liabilities would increase ( with the increase in public deposits )  The central banks would then need to lend more to the banks .With the Central bank becoming the all powerful lender and being able to influence as to who gets credit – would the Central banks want to take such an responsibility ?

This could be addressed by putting restrictions on how much money could be held in Digital currency or on its transfers .Further the central banks would not pay interest on digital currency balances unlike the interest paid by commercial banks .so it’s a paradox the Central banks wants to make digital currency successful but not very successful . In a report to the European Parliament Mr Brunnermeier and Jean-Pierre Landau of Sciences Po in Paris suggest that a central bank “will have to ensure that the CBDC is present everywhere but important nowhere”.

Presently according to the Atlantic Council, a think-tank in Washington, 105 countries comprising 95% of global GDP are exploring a CBDC. The Bahamian sand dollar, the East Caribbean d-Cash and Nigeria’s e-naira are already circulating. China’s trial of its digital currency, e-cny, has expanded to more than 260m wallets. With the present system running so well the attractiveness of CBDC would need time to catch up as can be noticed that the average balance in the E-cny accounts is just three yuan ( 47 cents ) .

CBDC & Crypto : The CBDCs shall operate on authorized (private) blockchains, whereas cryptocurrencies operate on permissionless (public) blockchains. The former is centralised, whereas the latter is not.

Anonymity is a benefit for cryptocurrency users. CBDC customers’ identities will be linked to an existing bank account as well as a similar quantity of personal information.

A central bank determines the regulations for CBDC networks. The authority in crypto networks is given to the user base, which makes choices through consensus.

India and CBDC : The RBI has announced its first pilot project to use central bank digital currency (CBDC) in the wholesale market for secondary trade in government securities from November 1. A second pilot project on retail use of the digital rupee will start within a month.

The RBI stance on CBDC is aimed at complementing, rather than replacing, existing forms  of money . To provide an additional payment avenue to users .
The Reserve Bank of India prefers a centrally-controlled, conventional database infrastructures for CBDC instead of DLT (distributed ledger technology)-based infrastructure due to the latter’s limitations.

While both conventional and DLT-based infrastructures store data multiple times and in separate physical locations, the key difference is in how data is updated. In conventional databases, data is stored over multiple physical nodes, controlled by one authoritative central entity, which ensures resilience.

On the other hand, in DLT-based systems, the ledger is usually managed jointly by multiple entities in a decentralised manner and each update needs to be harmonised amongst the nodes of all entities. This consensus mechanism requires additional overhead owing to which DLTs enable lower volumes of transactions, RBI said in its CBDC concept note, issued in October. 

The end of cash may not happen anytime soon but can be seen in the distant horizon and the world’s central banks are getting ready .

Part II – India’s Decade

Over the past three decades, India has outpaced many other global economies, propelling the country into the ranks of just 18 outperforming emerging economies that achieved robust and consistent high growth over that period. India’s real GDP growth has averaged 6.8 percent annually since 1992, with nominal per capita GDP rising 18-fold which stood at $ 2,277 in 2021 .

The GDP growth has been inclusive translating into significant improvement in living standards. In just the decade between 2005–06 and 2015–16, about 270 million people were lifted out of extreme poverty. About 95 percent of households had access to electricity in 2018, up from 72 percent a decade earlier, while almost 100 percent of the population had access to basic sanitation as of July 2019. The share of Indian adults with at least one bank account has more than doubled since 2011, to 80 percent in 2017, driven by Jan-Dhan Yojana, a mass financial inclusion programme .

India’s scale is extraordinary. By 2025, one-fifth of the world’s working age population will be Indian. By 2030 there will be over 850 million internet users in India. By 2035 India’s five largest cities will have economies of comparable size to middle income countries today. It is the only country with the scale to match China .  India’s GDP growth has created a substantial and aspirational consumer-class and since household consumption accounts for 60 per cent of India’s GDP, is an important source of optimism for growth in the Indian economy.

Amongst the components of India’s GDP , Consumption is the main driver accounting for about 60% of GDP followed by Investment at about 26% and Government spending 12% with a negligible negative impact of net exports ( imports have been marginally higher )

Domestic Consumption is expected to grow into a $ 6 trillion opportunity by 2030 – factors which shall help this growth are a 1.4 Billion population which is younger and we shall see the growth in the upper-middle income and high-income segments, which will grow from being one in four households today, to one in two households by 2030. At the same time, India will also lift nearly 25 million households out of poverty, to reduce the share of households below the poverty line to 5%, down from 15% today .

Governments  push on infrastructure development directed towards development of roads , airports and ports and green energy shall boost construction activity and create new opportunities for business that shall in turn spur private investments . Growth in private investment will generate employment which is  essential for income distribution ; increased employment opportunities need to come from the manufacturing and construction sector where as services shall continue their dominant position in job creation .


India is on the cusp of a transformative decade :

  • Infrastructure is crucial. Lack of robust infrastructure is often recognised as the primary growth constraint ; With the right infrastructure private investment shall significantly increase and also will help attract FDI as it happened in the case of China. To give a boost to infrastructure development the Indian government is increasingly looking to the private sector for forging partnerships via effective models for co-working between public and private sectors . The National infrastructure pipeline is a step in that direction . It was launched with 6835 projects and has now been expanded to cover 9335 projects with a total capital outlay of RS 108 trillions up to 2025 .The national highway network is over 50% longer than it was in 2014 . The number of domestic air passengers has doubled; air-freight volumes are up by 44%. There are more than three times as many mobile-phone base stations, supporting 783m broadband subscribers.  The Government has launched the PM Gati Shakti program which envisages the National Industrial corridor development and would cover the entire country with world class industrial cities seamlessly connected .
  • Single National Market : A huge obstacle to trade between states has been removed by the adoption of a nationwide goods-and-services tax (gst) in place of umpteen local levies. This would surely contribute to efficiencies as consumers get access to the cheapest produce across the country thereby promoting national trade . Receipts from GST reached the equivalent of 8% of monthly GDP in April 22. This is also helping in formalizing the economy .
  • National Digital infrastructure has helped in financial inclusion of all segments of society ; the Jan Dhan Yojana enabled millions to open bank accounts ; Aadhaar has provided Biometric identity to all Indians and successful launching of the National payment system called as UPI has curbed cash transactions and made doing business easy particularly for the small traders .Payments via UPI have risen from the equivalent of 13% of monthly GDP in January 2020 to 50% in April 2022.  Both of the above is making tax evasion harder. This has also contributed to increased efficiency and productivity . Another positive fallout of digitisation has been DBT – the transfer of government subsidies directly to the bank account of beneficiaries .
  • Move in supply chains from China – many multinationals have adopted the China+1 strategy to spread the operational risk in supplies which were affected earlier during the SARS and more recently during the COVID epidemic . Another reason is the increasing cost base in China where labour costs are rising ; Geopolitical reasons are not far behind with the tensions between US and China which is prompting a move away from autocratic regimes . India has been quick to woo these companies with benefits such as the Production Linked Incentive scheme which now covers 14 sectors and for which the Government has committed $ 26 Billion in subsidies over the next 5 years .The taxes for manufacturing companies have been considerably lowered .Samsung from South Korea and Foxconn from Taiwan are taking benefit under the PLI scheme .India along with Vietnam have been the two main beneficiaries of Apples strategic shift of some of its manufacturing from out of China ; the growth in the large consumer class in India will also provide a ready market for companies which prefer to manufacture locally as Apple has witnessed now .
  • As government promotes manufacturing large corporates with strong cash flows are willing to plough back their profits into risky investments . The four ambitious corporate giants comprising of Reliance , Adani , Tatas and JSW plan to invest over $ 250 Billion over the next 5-7 years . This has the risk of concentration of economic power with a few ; McKinsey corporate study states that profits are concentrated within a few large firms. As per their analysis just 20 of the country’s roughly 600 large firms contribute 80 percent of the total profit of large firms. However there are distinct benefits to the economy from large firms , their labour productivity is 11 times higher than that of the overall economy. They are 2.3 times more productive than midsize firms (revenues between $40 million and $500 million), and their profitability is 1.2 times greater. They account for almost 40 percent of total exports and employ 20 percent of the direct formal workforce. They provide jobs with better benefits than other companies do . However India needs to grow the number of large firms , midsize firms and the number of small firms .
  • The growth in the number of firms and their size can happen with the ease  of doing business getting better ; some of the present constraints for business need to get addressed  a) Limited efficiency in import and export process b)Difficulty and time consuming process in obtaining construction permits c) Elaborate compliance process for tax payments d ) Long period for granting of patents e) Low recovery rate for insolvencies f) Lacking in judicial capacity to enforce contracts .
  • Services have been the mainstay of India’s GDP contributing about 55% ; IT & BPO services are continuing to contribute significantly to growth with annual revenues of $ 230 Billion . With the advent of cloud computing the growth trajectory shall continue upwards however India is falling woefully short of skilled manpower.
  • The development of engineering skills , growth in internet and mobile usage and availability of venture funds has created a lot of start ups . A total of 107 start ups have entered the Unicorn club raising more than $ 94 Billion . This would help attract FDI as well as generate employment opportunities .
  • A young demographic with a mean age of 27 translates into more working hands .India’s growth path will be driven by how effectively it harnesses and rewards the efforts of its greatest natural asset – its people. The United Nations projects that India’s urbanisation rate will rise to 42 per cent by 2035, lifting the urban population from 64 million in 1950 to 640 million .India has the second largest population in the world with more than 1.3 billion people. Of India’s 29 states and 7 union territories, 18 are home to more people than Australia. India’s largest state, Uttar Pradesh, is bigger than Brazil, the world’s fifth most populous country. The Indian universities are churning out  thousands of graduates however they are lacking employable skills. People with primary skills such as carpenters , plumbers , cooks , masons will get absorbed in the growing economy however the people with secondary skills who are degree or certificate holders would lack behind as they lack employable skills . This needs to change or India would not be able to get the benefit of its demographic dividend . Here India can take a cue from China and open up its universities and invite the highly qualified diaspora based in advanced economies to teach in Indian universities .
  • It is estimated that India would have 90 Million more workers looking for non farm jobs by 2030 – this would mean creation of 12 million jobs annually .The manufacturing and construction sectors need to grow the most while knowledge and labour intensive services need to maintain their growth momentum – to generate the required employment .India would need to promote manufacturing of Capital goods , electronics , chemicals , auto and auto components , EV’s & Batteries , Pharmaceuticals and Textiles . Under construction India needs to promote Mass Housing & Mass Transport ; Labour intensive sectors such as Retail , Ecommerce , supply chains , logistics and Tourism needs to grow to promote employment .

             How would all of this get funded :

  • India would need about $ 2.4 Trillion up to 2030 assumed at 9% growth . A large portion of this could come from increased domestic savings which need to be directed toward financial assets such as shares , debentures , Insurance and pension and not towards holding of physical assets as land and gold . This will help deepen the capital market which shall result in reduced cost of borrowing and feed the growing appetite of new business development  .
  • Capital which seeks good returns shall get attracted to India and with India emerging as an alternate supply Chain base shall increase the Net Capital inflows into India which could go up to about $ 200 Billion up to 2030 .

Since we started off this discussion comparing India’s development with that of China let us conclude with the unique challenges that India faces :

  1. A Strong leader in Deng Xiaoping was instrumental in China’s phenomenal growth; Would Narendra Modi be India’s Deng ? With his present popularity and the lack of any credible opposition leader Modi’s third term is more or less assured . However Modi has been accused of divisive politics and his popularity is significantly higher amongst the Hindu population which comes at the cost of alienation of other minorities .Can PM Modi truly follow Sabka Saath Saabka Vikaas ? It seems doubtful considering the larger agenda of the BJP of promoting Hindutva ; it would be essential for the leader to take everybody along to unleash the animal spirits .
  2. China was able to direct its resources in a focused manner through competent state institutions . The present dispensation under PM Modi has demonstrated its ability to get projects executed successfully as it did with providing Biometric identify of Aadhar to all Indian an herculean task by itself . Many an initiative which was taken by the UPA government has been successfully executed by the NDA . Further PM Modi is not corrupt and has largely curbed corruption at least at the highest echelons of the government and this would ensure that there is no loss of scarce resources  .
  3. China’s single party state gave it political stability . Would  the Bhartiya Janata Party continue to be the single largest party and thereby provide political stability ? Compulsions of vote bank politics would prompt the BJP to keep playing the Hindutvata card creating divisiveness . Also the ugly fallouts of the dominance of a single party and the absence of any credible opposition has resulted in hubris within the ruling party and muzzling of democracy . This needs to change or it could prove detrimental to development particularly for attracting FDI .
  4. The NDA under PM Modi has delivered well on various welfare programs such as the Ujwala Yojana , Faisal Bima Yojana , Stand Up India , Kissan Samman Nidhi , Awas Yojana , Atal Pension and others which have benefited the poor and needy . While the benefits of development would take its time to trickle down these various schemes are helping taking the most needy along .
  5. For India to attain its development goals the states too need to contribute . We are already witnessing healthy competition between states to attract investment .This augurs well . However political stability at state level is essential and a strong central government needs to desist from toppling duly elected state government by means fair or foul which we have been witnessing .
  6. In the ultimate analysis communist China has delivered and raised the per capita GDP to $ 10,000 but it has come at the cost supressing all dissent and under a surveillance state . India’s is a vibrant democracy , it soon shall have the largest young population in the world and irrespective of political affiliations one hopes the young voter shall choose a party and a leader who can deliver on development ;  and if that leader is the one who takes everyone along we are all winners .

India’s success will have significant implications for its international economic and strategic weight. In 2035, the global economy is likely to be increasingly weighted towards Asia, as India, China and the ASEAN economies catch up to slower-growing advanced economies. Even with an average annual growth rate of only 6 per cent, India’s economy would be more than two times larger than it was in 2017. In PPP terms, India’s share of the global economy will likely increase from 7 per cent in 2016 to around 13 per cent , making it one of the major poles of global economic power and on par with the United States

Part I – China’s Growth and Globalization

‘ The China Story ‘ covered the early period of Indo-China relations in the 1950’s , the annexation of Tibet by China , the border war and then the phenomenal economic growth of China finally culminating with the rise of Xi Jinping and China’s ascendancy into a military power with its hegemonistic ambitions .

The Chief architect of China’s phenomenal and unprecedented growth was certainly Deng Xiaoping ; Under Deng Xiaoping’s pragmatism China adopted the market economy , opened up to the world , was inducted into the WTO and was primarily blessed by globalization . India too has benefited by globalization when 30 years ago, then Prime Minister PV Narasimha Rao and Finance Minister Manmohan Singh threw open the doors to the country’s economy, reversing decades of socialism. However China’s growth was much more rapid whereas India’s was more tepid. so what was it that China did right or rather India did not do and more important having been left behind what is it that India can do now to catch up .

China was able to capitalize on the opportunities thrown open by Globalization primarily due to the leadership of Deng Xiaoping who was pragmatic and is credited with the dictum    ‘  It does not matter if a cat is black or white as long as it catches mice’ by which he turned away from Leninist ideology and embraced market economy . Even during Prime Minister Rajiv Gandhi’s visit to China Deng had reminded Rajiv that India and China together accounted for 1.8 billion people, almost 40 per cent of humanity. “Our sole aim should be to improve the lives of our people …. That China has surely done raising their per capita GDP to $ 10,000 in 2019 .

Under Deng Xiaoping US and China built a de facto alliance and China forged relationship with Japan and the ASEAN countries . China was already ahead in terms of adult literacy as its socialist policies were more equitable and they focussed on primary education . This base has helped China in its early stage manufacturing ; Deng Opened the Chinese Universities which had been discarded in the Cultural revolution , invited Chinese origin Noble laurates and other academicians to return to China to teach and sponsored Chinese students to study in US universities .

They developed SEZ’s in the coastal zones and liberalised land use which helped set up low manufacturing industries to begin with and have now graduated to advanced and more complex manufacturing of high end products and systems including electric vehicles , AI and quantum computing .

The Chinese diaspora across Hongkong , Taiwan , Singapore invested heavily and established joint ventures with multinationals who took advantage of the low cost of labour and availability of excellent infrastructure that made doing business easy . This may have been largely possible due to the single party rule which brooked no dissent and in a way imposed political stability , brought discipline to its economic planning resulting in allocation of resources as per state plans ; competent state institutions too helped . Favourable demographics accompanied by a favourable international economic environment and a strong Han Chinese core also contributed .

Efficiency was the driving force behind globalisation .Companies located production where costs were lowest, while investors deployed capital where returns were highest. Governments aspired to treat firms equally, regardless of their nationality, and to strike trade deals with democracies and autocracies alike. Over two decades this gave rise to dazzlingly sophisticated value chains that account for half of all trade .This benefited both India and China and many more emerging economies – however China was the major beneficiary .

Going ahead will Globalization benefit India as much as it has China ?

May not .  Globalization is on a decline for some time and this process has only accelerated post the pandemic . Much of the advanced economies have realized that dependence on a single country for key resources and raw material could have severe consequences on their economies and peoples livelihoods such as now starkly brought out by the oil crisis that the European Union faces post sanctions on Russia after the invasion of Ukraine . The Covid related severe lockdowns imposed by China have resulted in supply chain issues across the world .

National security implications due to industrial espionage has resulted in companies such as the Chinese telecom giant , Huawei being banned by the US . Autocracies such as China worry that too much of integration could result in western culture seeping in weakening the autocratic regime . Deng himself identified the dilemma: “If you open the window for fresh air, you have to expect some flies to blow in.”

Sanctions are being increasingly used as a foreign policy tool as China faced after the Tiananmen Square crackdown and more recently Russia is facing . In the recent past America has placed sanctions on Cuba, El Salvador, Jordan, Kenya, Romania and Yemen; This has also hampered international trade . The Biden administration in October announced sweeping new limits on the sale of semiconductor technology to China, a step aimed at crippling Beijing’s access to critical technologies that are needed for everything from supercomputing to guiding weapons.

Recent policy announcements and trade deals shed some light on the probable direction of globalisation as the world’s most powerful democracies and autocracies turn away from each other. Countries are signing smaller, regional trade deals instead; democracies are banding together, as are autocracies; and many countries are also seeking greater self-reliance.

In 2020 China signed an agreement with 14 other Asian countries . In that year the ASEAN group of South-East Asian countries became China’s biggest trading partner, replacing the EU. In Africa, meanwhile, most countries have ratified the African Continental Free Trade Area.

Large countries in particular, meanwhile, are also turning inward. A big focus of President Joe Biden’s administration, for instance, is “supply-chain resilience”, which in part involves efforts to encourage domestic production. This new kind of globalisation is about security, not efficiency: it prioritises doing business with people you can rely on, in countries your government is friendly with. It could descend into protectionism, big government and worsening inflation.

Globalization would have waned but its here to stay ; The power rivalry that is playing out between America and China is also existential where each is challenging the others political system with China calling it a failure of democracy ; however this would only help band the world democracies together against the authoritarian regimes . India can score here and benefit from this development . As China becomes more assertive the countries in Asia ( Australia included ) that rely on a rule based order shall band together ; the decreasing American influence in the world order shall also prompt the emergence of these new trading blocks .

The China Story

By sheer coincidence happened to read three books about China in close proximity. The common thread running through them apart from of course China was the fact that all three authors are ex foreign secretaries of India. Whereas the first one – The Fractured Himalaya by Nirupama Rao was essentially focused on the period from 1945 up to 1962 , the second one though not focused on China it did cover it sufficiently as it was about India and Asian Geopolitics written by Shiv Shankar Menon . The third one written by Shyam Saran was completely focused on China and covered Chinese history  and the evolution of the Marxist Leninist state under the three leaders beginning with Mao ze dong, Deng Xiaoping and the current President Xi Jinping . The below is a review from all the three books ..

China has always intrigued me and may be most of you for the phenomenal economic progress it achieved in four decades when not far back in 1978 both of our nations were at par on GDP terms ; Whereas India too has rapidly progressed and enlarged its GDP post the 1991 reforms there is still much catching up to do – so what is it that China did differently – is it their political system ( the Marxist Leninist state ) and single party rule or was it their alignment with US in the 1970’s followed by benefits of globalization , which helped them deliver and uplift their masses raising the per capita income to above USD 10,000 ?

Over the last couple of years we have been reading about the border clashes with China and the Chinese intrusions and are curious to know more about our northern borders , about Tibet and about the 1962 China war and the humiliation we suffered with over 1300 of our soldiers lost sheerly because we were under prepared . Then apart from reading about Mao’s disastrous cultural revolution we read about Deng Xiaoping and his most successful reforms which transformed China;

Since the Indo China war in 1962 the border had been largely quite for a long period and then in 2017 Doklam standoff happened . What went wrong in 1962 and then why the peace and now what has changed and why is China adopting the same belligerent approach to India as it has been doing in the south China sea . What are the geo political implications for India having a neighbor ruled by a single party with a President who has become the           “ Chairman of Everything “ ?

Apart from the 19 trillion dollar economy, we also hear about China’s thrust into high tech industries such as Artificial Intelligence ,  robotics , quantum computing , electric vehicles and others . How far has China progressed ? Would China dominate these industries and what will that mean to the rest of the world and to us particularly in India ? Along with its economic might China has also invested heavily in modernizing its armed forces and since the 2008 financial crisis has started asserting its position in the global order – what are the implications for India with such a powerful northern neighbor who has closely aligned with Pakistan ?

To begin with it would be important to understand China’s history in brief :

The Xia dynasty ( 2070 – 1600 BCE )is China’s first and corresponds to the Indus valley civilization in the Indian sub continent which was followed by the Shang dynasty ( 1600- 1046 BCE) of which there is both documentary and archeological evidence .Bronze began to be cast in this period .The Chinese system of writing – consisting of ideograms – began to develop in this era .

The Zhou dynasty ( 1046 – 256 BCE )followed which was a period when the Chinese philosophers Confucius and Laozi were active .This period also corresponds when Buddhism and Jainism emerged as new religions in India .

A centralized and unified empire was established by the Qin who established the Qin dynasty . They were followed by the Han dynasty (206 BC to 220 CE)which is also the name given to the largest ethnic group in China the Han .The Han built large sections of the great wall of China to keep out the steppe tribes from the north and east. It was during this period that Buddhism came to China and the first Buddhist temple was established .

The period after the collapse of the Han in 220 CE saw fragmentation caused by internecine warfare and was followed by the Tang Dynasty ( 608 – 907 CE ) and it was during this period that their capital Changan was ransacked by the Tibetan King Strongtsen . This period was followed by extreme instability and internecine warfare which lasted up to the end of the Song dynasty in 1279 CE.

From 1271 the descendants of Genghis Khan established the Yuan Dynasty which was a non-Han Mongol dynasty. The Yuan’s were followed by the Ming dynasty ( 1368 – 1644 )which is known for Zheng He’s voyages in to the Indian ocean , the Gulf and East Africa . The Ming’s were followed by the Qing dynasty which ruled from 1644 up to 1912 it was a non-Han , Manchu dynasty . Its early phase corresponds to the Mughal dynasty in India up to the formal establishment of the British empire in India in 1858 .

The Opium Trade : During the Qin era in the 1800’s there was a large market for Chinese silk , porcelain and tea in Europe and Britain who paid for the imports in silver . Due to this Britain suffered a chronic trade deficit with China and this is where sale of opium provided an answer. The East India Company promoted and liberalized the sale of opium and even though its import was banned by the emperor it found its way through clandestine means . The Opium grown in Malwa and Rajasthan was smuggled initially through the Portuguese port of Daman and Diu and later through Bombay to Macao a Portuguese enclave and smuggled into China. The intermediaries who became rich from opium trade with China were the Parsis and the Marwaris. Jamshedji Jeejeebhoy was one of the better known amongst them and through his philanthropy were set up the Sir J J School of Arts and the J J Hospital – a legacy of his opium derived munificence !

The emergence of Bombay as India’s major commercial hub and port is directly related to its role in the opium trade . Amar Farooqi a historian who studied the subject concluded – the destiny of Bombay as a great commercial Centre was born of its becoming an accomplice in drugging of countless Chinese with opium.

Hundred Years of Humiliation :When the Chinese tried to impose the ban on opium and confiscated the contraband it led to the first Opium war in which the empire suffered a humiliating defeat in 1839-42 at the hands of the British imperial forces .This was followed by the imposition of ‘unequal treaties’ on China by the Western powers , Russia and Japan . one outcome of which was China ceded the island of Hong Kong to Britain; The First opium war was followed by the Second opium war of 1856-60 with British and French forces . This opened up mainland China to further depravations .Tsarist Russia too threatened to open the northern front and extracted its share of the spoils .With the defeat of the Qing forces in the Sino Japanese war of 1894-95 resulted in the recognition of the independence of Korea apart from extracting huge indemnities .Subsequently the Chinese suffered further humiliation with the rout of Qing by the Eight Nation Alliance consisting of US , Britain , France , Germany , Italy , Austria- Hungary , Russia and Japan . From this point onwards the decline and demise of China’s longest ruling dynasty was imminent. China’s encounter with the west and with its more immediate neighbors Russia and Japan , was traumatic and lies embedded in the prism through which China looks at the world around it .China uses this narrative of humiliation as an instrument in nation-building and in elevating the CCP ( Chinese Communist Party ) into the role of a national savior.

Civil war and victory of the Communists :After the abdication of the last emperor began a period of warlordism in China with the country split in to various fragments ruled by regional strongmen .China was again unified under the Guomindang ( KMT) General Chiang Kai-Shek in 1927 . The communist party of China CPC was established in 1921 and they collaborated with the KMT until a split occurred in 1927 .When second world war broke out China under Chiang Kai-shek became an ally of the US and Britain in the war against Japan .The Sino Japanese war of 1936-45 unleashed a fresh round of horrific violence at the hands of the Japanese .

After the second world war the civil war between Chinese Communist forces under Mao Zedong and KMT forces under Chiang Kai-shek raged for four years and ended with the defeat of the KMT in 1949 who retreated to the island of Taiwan . On 1st October 1949 Mao proclaimed the People’s republic of China     ( PRC )  and declared from the ramparts of Tiananmen Square ‘ China had stood up’ .

The Middle Kingdom :One singular unique feature of Chinese civilization is the use of Chinese ideograms and characters which survive with few changes since they first appeared in the Shang dynasty .The Chinese language has no alphabets and each character is a word in itself .There are several dialects across China of the Chinese language however the written language is the same .

The narrative created by the Chinese leadership since independence is about the  dominance of the middle kingdom in the world economy since millennia which in 1820 contributed about 38.7% of the world’s GDP ; A contiguity of this middle kingdom through the centuries is tried to be projected , however this belies the fact that China was ruled by various dynasties some of them being foreign powers such as the Mongols and the Manchus and there were periods when there was internecine warfare with fragmented regions controlled by regional chieftains . The narrative tries to establish the dominant position which China always had and that it has always been a Super power a position which it is now only trying to regain .  Thus Chinese predilection for expansionism has always been there and the Tibetan issue needs to be understood from this perspective . Even Chiang Kai-Shek’s attitude towards India was patronizing – ‘ Independence of India was welcome but of course it was understood that China as the recognized great power in the east after the war expected India to know her place ‘. Another instance of how the history is manipulated by China can be seen by how now Chiang Kai sheikh is recognized as a patriot and nationalist who for a long time was much reviled figure in Communist China .

India & China – two oldest civilizations separated by the Himalayas and the vast Ocean : It needs to be understood that India and China for centuries have been strangers to one another . During the first millennium the people of the two countries came into contact with each other through the caravan trade route through central Asia , the trade route through Nepal and Tibet and maritime trade between peninsular India and the east coast of China . The spread of Buddhism to China led Buddhist monks and pilgrims to make the long journey to India and also Indian monks travelling to China . Although this interaction was limited to a few that too declined as Buddhism waned in India . Geography too has played a role with the two countries separated by a cold desert of Tibet rimmed by the mighty Himalayas and equally by the vast ocean spaces that lay between India’s coastal cities and China’s east coast .Thus it was only in 1950 when China occupied Tibet that India and China truly became neighbors but had very little people to people understanding . In fact the Chinese from their recent history of the 19th century had a negative perspective about India influenced by the Indian soldiers who fought on behalf of the British in the opium wars . 

India Recognizes China : India recognized PRC in December 1949 making haste against the advice of Sardar Patel and other foreign office officials who were skeptical about the communists . Some of them felt India should align with the US as a counter weight to the China – Soviet axis . Nehru’s assessment of the situation was different as he did not regard China as a natural ally of the soviets and he felt that aligning with the US would come at the cost of US extracting a price of yielding more on Kashmir . Nehru also wanted to tread an independent path for the newly independent nation and not been seen as being influenced by any other country in its decision making .

Tibet :

Tibet and China have had a complex and contested relationship. In the Seventh Century Tibet had become a powerful empire under its greatest King Srongtsen Gampo who had threatened Tang (the Chinese emperor) attacking and occupying large territories in western China. In the peace terms imposed a Chinese Princess Wencheng was given in marriage to the Tibetan King – who is credited with introducing Buddhism to Tibet. The record of a treaty concluded in 783 CE can be found on a pillar in front of the Potala Palace in Lhasa. This treaty clearly conveys that it was an treaty between equals rather than alliance between an overlord and a vassal. In subsequent years Tibet was largely ruled by the Manchus and the Mongols until 1757 when Qing forces defeated the Mongols. From this point onwards however Tibet was made a tributary state of the Qing empire and the Mongol connection ended . It needs to be noted that the Qing rulers still allowed political autonomy and rule by the Dalai Lama over Tibet.

Historically Tibet’s culture and religion were shaped by influences from India across the Himalayas .For Indians Tibet was the holy land for devout Hindus and Buddhists , the seat of pilgrimage to holy places such as Mount Kailash the abode of Shiva and Lake Mansarovar .

When the Qing  dynasty collapsed after the 1911 republican revolution the thirteenth Dalai Lama declared the independence of Tibet in 1912 . Britain took the opportunity to exert pressure on China which led to the Shimla conference of 1914 attended by China , Tibet and Britain for defining the zones of Tibetan paramountcy and Chinese influence .China rejected the outcome of the conference and the final convention was only signed by the Tibetan and British representatives . The Shimla conference of 1914 is remembered for the genesis of the McMahon line – the defining of the Indo-Tibetan border .

Until 1950 when the communist forces occupied Tibet it had functioned as an independent country with its own passport , currency and postal system . It concluded agreements and treaties with foreign countries as a sovereign entity. The Tibetans were unwilling to accept Chinese sovereignty and any acceptance of Chinese suzerainty was made conditional for a formal recognition of Tibetan autonomy and a fixed boundary . British India never contested Chinese Suzerainty over Tibet but only with the understanding that Tibet is regarded as autonomous .The British foreign office interest was to protect India’s land frontier against any eventuality ( Russian ingress )with the addition of Tibet as a buffer state just like Afghanistan and Nepal .

Post Indian independence the British view was that Tibet was now an Indian problem and that India had to lead the way in maintaining diplomatic relations with Tibet and about its autonomy . The US too did not have a stated policy about Tibet and its independence .  Soon after Indian independence Tibet in a letter addressed to Prime Minster Nehru in 1947 laid claim to Sikkim , Bhutan , Darjeeling , Ladakh up to the boundary with Assam . While the Indian Government rejected the claim it subsequently gave the Chinese a basis on which to claim the whole of the current state of Arunachal Pradesh  These exaggerated territorial claims by the Tibetan government may have also dampened any Indian enthusiasm to support the cause of Tibetan independence .  India was unwilling to arm Tibet and also did not have the wherewithal to do so considering the newly independent state which was economically weak .  The Chinese gave the task of liberating Tibet to Deng Xiaoping whom we know better as the chief architect of Chinas growth . When the PLA occupied Tibet in 1950 apart from an Indian protest & resentment there was not much India or the other nations were willing to do for Tibetan autonomy . It was El Salvador which formally requested that the action of China against Tibet be put up on the agenda of UN Assembly … however there were no takers and neither did India or the US or Britain supported it .India had failed to recognize the critical importance of Tibet to India’s security interest .. a quick look at the map would have shown that the headwaters of many of the major rivers of the Indian subcontinent – the Indus , the Sutlej and the Brahmaputra – were all located in Tibet .

Sardar Patel , Nehru and China Policy : However Nehru’s China policy did not have unanimous support from his cabinet . Leading the opposition was Sardar Vallabhbhai Patel who had deep reservations about Nehru’s willing suspension of disbelief about communist China’s strategy & intentions in the region .In Patel’s view China was a thoroughly unscrupulous , unreliable and determined power practically at our doors  .For him the Chinese were communist with imperial ambitions . Patel was prescient about the threat from China and the Chinese attitude towards a nascent India and its democracy .On the other hand , Nehru’s sympathy for China was a part of his core ideology concerning a Pan-Asia . He felt India need not change her general policy towards China ( in the wake of Tibetan occupation ) because it is based on certain principles as well as our judgement of the world situation . Patel had a far more grounded approach to China and to India’s relations with her giant neighbor .

Nehru did not anticipate military operations against India by China which was a myopic view where he thought that geographically Tibet will not be a route to do so . For him as a result of the wrong and foolish invasion of Tibet by China India would have to become more frontier conscious and to take all reasonable steps to guard the mountain passes which lead to our country .What needed to be guarded against was infiltration and intrusion of small groups for which strengthening of frontier posts was necessary . Communications to Assam and adjoining borders would need improvement and air-fields erected .  

Feudalism dies hard :In the early fifties there was much bon homie between India and China when a cultural delegation led by Vijaya Laxmi Pandit went to China . She found Mao a man of few words but to the point , quiet , precise with a great sense of humor . During their meeting Mao offered her a cigarette which she declined prompting him to ask if women in India did not smoke . Ambassador Panikkar answered that women in India did and so did Mrs Pandit but it was customary to refrain from doing so in front of elders and those ‘ who one respects’ .Mao’s reply was immediate : ‘ Ah feudalism dies hard – please smoke to give me company , Madam we are in China .

Unresolved Borders :In the early fifties with the Chinese ‘ Liberation of Tibet’ both India and China began to leverage historical claims to operationalize sovereignties in the frontier zones .Tawang is an illustration of a frontier monastery town which sits on the fault lines and of which China has not given up its claims . Its a sovereign Indian territory mentioned as part of the Indian state of Assam under Part B of the 6th Schedule of the constitution of India in 1950 . With the Tibetan developments India ensured that its administrative presence was established in Tawang .It was in line with the decision that all areas up to the McMahon line should be secured and protected .

The lack of Chinese protest about the Indian move on Tawang was seen as quite acquiescence ; However the advice to the Chinese central government from the Chinese representative in Lhasa was to proclaim all old treaties as invalid . China’s policy then was not to include the border issue in the agenda for talks with India because the conditions were not ripe for settlement of the borders . This was a deliberate Chinese strategy a delaying strategy , choosing to conceal rather than reveal its actual position .China was only buying time using India’s good offices to open doors internationally for the Chinese government . The negotiations between India and China on relations between India and Tibet opened in Beijing in December 1953. Nehru’s attitude was that there was no room for controversy over the McMahon Line . Our maps show that McMahon line is our boundary and that we will not allow any one to come across that boundary .The problem lay in the fact that, except for Sikkim the border had not been demarcated – jointly with China on the ground ; the boundary in the western and middle sectors had not been defined in detail by treaty and only as Nehru stated by custom , usage and tradition . However the biggest folly was to exclude the subject of frontier in the negotiations done in late 1953 and instead focused only on representation in Lhasa , the maintenance of certain institutions and the trade agencies and the pilgrimage to  Kailash and Mana Sarovar .

As per S.Gopal the biographer of Nehru – The chance of securing a clear and explicit recognition of India’s frontier at a time when India had something to offer in return had been lost . The Indians seemed to operate on the principle of qui tacet consentit , constructing that Chinese silence on the border issues meant their consent to the border as seen by India . one needs to note that the American decision to arm Pakistan in 1953 could have also prompted the Indo China agreement ( on Tibet ) to keep the cold war away from our doorstep .

Sino Indian Agreement on Tibet : On 29th April 1954 the Agreement between Republic of India and the Peoples Republic of China on Trade & Intercourse between the Tibet Region of China  and India was signed in Beijing ..the agreement was based on what came to be known as Five Principles of Peaceful coexistence or the Panchsheel . Unfortunately no mention was made in the agreement of previous treaties and trade regulation between Britain , Tibet and China including the Shimla convention of 1914 which was the key to deciding the validity of the McMahon line . However the Indian Prime Minister concluded that the border with Tibet and by a larger extrapolation with China had been finalized as a result of the agreement with the Chinese on Tibet . The Indians had inferred that the silence from the Chinese meant acquiescence .

The agreement was considered a ‘ master stroke of Chinese diplomacy’ and Zhou Enlai as perhaps the most notable diplomatic conjurer since Bismarck ‘ . China had not conceded anything while gaining everything . In many ways for India the Tibet Agreement of 1954 with China as history has shown was an unequal settlement . The country that was most closely tied with Tibet through history , religion , written language , trade chose to downgrade these linkages on the assumption that a stable , assured relationship with China was worth much more . It was a strategic error . In 1954 when the agreement for trade and intercourse between India and the Tibet region of China was being finalized the Indian officials view was that there should be some quid pro quo for India’s recognition of Tibet as a ‘region of China’ . However Sardar Panikkar the then former ambassador of India to China advised Nehru that the border issue should not be raised as the border shown in our maps were clear enough and several statements had been made in Parliament . Nehru settled for this advice. In the wake of the signing of the Tibet Agreement Nehru took the decision to have new maps of the frontier with China issued which showed this frontier as definite and firm and not open to discussion . It was also decided that the Mcmahon line should no longer be referred to by its British name but should simply be the frontier of India with Tibet in the eastern sector of the border .

Mao Zedong and Zhou Enlai : In October 1954 Nehru visited China where he was warmly received and had several discussions with both Zhou Enlai and Moa Zedong . In particular his long conversations with Mao offer a fascinating insight into the contrasting personalities of these two leaders . Scholars such as Andrew Kennedy have focused on the strikingly ambitious courses in foreign policy that both charted for their respective countries .  Despite the poor material possessed by either nation in the early 1950’s both Nehru and Mao were imbued with deep convictions about ability of one’s state to accomplish specific military and diplomatic tasks . Having come to power after achieving victory in armed combat with his opponents ( nationalist Chinese ) Mao had a sense of ‘martial efficacy’ that enabled him to challenge the United states in Korea and Vietnam but his weak sense of ‘moral efficacy’ resulted in greater caution in the diplomatic sphere . In the case of Nehru a strong sense of moral efficacy borne out of the non violent nature of the Gandhian freedom movement in which he played a key part enabled him to take bold decisions in the diplomatic arena as in approaching the United Nations on Kashmir in 1948 and his ambitious , visionary approach to nuclear disarmament . His weaker sense of martial efficacy resulted in his being far less assertive in the military realm .

During his visit Nehru states that in his talks with Premier Zhou he referred to Chinese maps which still showed portions of Burma and India as if they were part of Chinese territory . He said Zhou had replied that these maps were old ones and that China had not done any surveying to draw new maps . Nehru said he repeated that as far as India was concerned there was no doubt about our boundaries and I was not worried about them .

As for the two personalities of Mao and Zhou the Dalai Lama in a conversation with Nirupama Rao referred to Zhou Enlai as an ‘attractive’ personality but ‘much too polite’ in contrast to Mao who he termed as ‘straightforward’ and a person with whom trust could be developed . With Zhou and his excessive politeness in his view it was difficult to develop trust . The veteran observer of China Simon Leys describes Zhou as ‘ the kind of man who could stick a knife in your back and do it with such disarming grace that you would still feel compelled to thank him for the deed . During the fifties and also in the sixties there is no doubt that Zhou’s voice carried great weight in Chinese leadership councils on foreign affairs and the conduct of foreign policy . He was considered the Party expert on foreign affairs , a shrewd and pragmatic practitioner of the ‘ diplomacy of the possible’ and he and Mao cooperated well – one making plans inside and the other negotiating outside .

Hindi Chini bhai bhai : The relationship with India in the 1950’s before the differences on the border transformed these ties was defined as a partnership for promoting peaceful coexistence between countries with different political and social systems .Internally Beijing’s approach on relations with India in this period was to avoid raising territorial issues and just focus on securing India’s goodwill not only for maintaining smooth bilateral relations but also for ‘ consolidating Beijing’s legitimacy in the international scene . Another point to note is that the 1950’s opened up a new era of real time contact between Indians and Chinese one that was different from the past because it was not confined to scholars of history , philosophy , religion or literature .

The year 1954 in many ways marked an ascending slope in India China relations to a high point achieved in 1956 at the zenith of ‘Hindi Chini bhai bhai’ .However relations began a downward spiral from 1957-58 onwards bilateral differences over the boundary and later Tibet subsumed any sense of global understanding that the two countries must have shared in the post Panchasheel period of interaction .

In September 1957 Vice President of India S Radhakrishnan visited China .Soon after his arrival he was taken to meet Chairman Mao Zedong and Natwar Singh ( Indian diplomat ) writes how Radhakrishnan patted Mao on his left cheek after shaking hands . Mao was momentarily taken aback to which the Vice President is believed to have said ‘ Mr Chairman don’t be alarmed I did the same thing to Stalin and the Pope ‘.

The use of an American Ally : Pakistan recognized Peoples Republic of China in January 1950 a few days after India did . It was supportive of the Chinese invasion of Tibet ; During Pakistani Premier Suhrawardy’s visit to China Zhou reportedly told him – if Pakistan could contribute to improving Sino-American relations he would be very pleased ‘. It was a remark with its eye on the future and the role that Pakistan would play in the eventual normalization of Sino-American relations .The investment in this relations ( between China and Pakistan ) were being made from the early fifties onwards and they would prove their utility before long .

The Bandung Conference :Indonesia hosted the Bandung conference of Asian and African states in 1955. Of particular mention here is the sabotage of the Air India constellation plane the ‘Kashmir Princess’ carrying some members of the Chinese delegation ; It was widely believed that the act was carried out by the Taiwanese intelligence and their target was the Chinese premier Zhou Enlai . It was also believed that the Chinese communist authorities knew that the flight was targeted which led to the Chinese leader not travelling on the ill-fated flight . Beijing was keen to exploit the propaganda value of the Taiwanese involvement in the plot to destroy the plane and with this ulterior motive Zhou Enlai and his cohorts did not cancel the flight and save the lives of the passengers !

However in the Bandung conference Zhou Enlai attracted the most attention both in the public and in the conference . When asked about Tibet in one of the committees he said it would be thoroughly impracticable to establish a communist regime in Tibet and the Chinese government had no such wish ..Tibet was an autonomous region of China and they had no desire whatsoever to interfere with its customs or ways of life .

UN Security Council : From 1950 onwards Nehru had been an advocate of the entry of China – PRC into the United Nations security council . Nehru’s advocacy at the same time for a negotiated settlement ( of Korean problem ) also saw him urge both Stalin and Dean Acheson the then US Secretary of state to allow admission of China into the security council so that it could work with the Soviet Union and United States for a negotiated settlement of the Korean problem .

The Vijaya Laxmi Pandit papers at the Nehru Memorial Library in Delhi speak of an offer by the US in August 1950 to assist India’s entry to the security council . Reporting to the Prime Minister about a conversation she had with the U.S Secretary of State John Foster Dulles she refers Dulles talking of the possibility of finding a way to amend the Charter by which China could be deprived of her permanent seat in U.N after which there would be no objection to India’s admission . He hinted that America might be happy to see India as a permanent member and I interrupted to say that in view of our relationship with China we had no desire whatsoever to be a party to this move . Nehru was driven in his approach to the issue by the conviction that unseating China to allow India’s entry would be bad from every point of view . It would be a clear affront to China and it would mean some kind of break between us and China .

A similar move was made by the Soviet leadership in 1955 for India’s entry as the sixth member of the Security Council . Again Nehru felt that the issue of China’s entry should first be resolved before India’s case be taken up . Nehru did not deny that India was certainly entitled to a permanent seat in the security council as a great power but we are not going at the cost of China . Even if Nehru had agreed either with the Americans or the Soviets it is highly doubtful how India could have secured an UN seat in a Bipolar world .

An Unsettled Border :From 1956 onwards incorrect delineations from the Indian point of view of the border that were increasingly seen on Chinese maps & on the ground Chinese activism was increasingly in evidence . Activities included Chinese usage of the caravan route from Xinjiang into Tibet across Aksai Chin ( which was clearly on the Indian side of the border as marked on Indian maps ) .

In fact from 1954 immediately after conclusion of the Indo Tibet trade agreement a hitherto quiescent border was to show signs of stirring in a foreshadowing of bigger troubles to come . During the visit of Zhou Enlai in December 1956 and January 1957 the matter of McMahon line came up for discussions between the two Prime Ministers . Zhou denied any prior knowledge of this line upon which Nehru referred to the history of the Shimla conference which had decided the McMahon line and the Chinese government had not raised any objection to it .Zhou mentioned to Nehru that he would consult with the Tibetan government as they had wanted the line to be rejected .Zhou concluded by saying that although the question was undecided there was no better way then to recognize this line .Nehru referred to the border being high and mountainous and sparsely populated . If both sides could agree he said on ‘some principle namely the principle of previous normal practice or the principle of watershed we can also settle this small points ( about two miles here and two miles there ) .

In 1957 soon after the visit of Vice President Radhakrishnan to China the news broke out of a new highway constructed by China linking Xinjiang and Tibet through the Aksai Chin plateau in the northeast Ladakh claimed by India as part of Jammu and Kashmir . The fact that India had some knowledge of the construction of the road from 1950 onwards and despite the decision taken by Nehru to show the external boundary of India as firmly defined was not actually followed up with actual occupation of the area . May be it was the inhospitable terrain involved which made the occupation difficult – however not doing so would have repercussions with significant consequences .

The Dalai Lama Seeks refuge in India :Insensitivity to Tibetan culture and history by the Chinese widened the rift between the Chinese and Tibetans . The Tibetan resistance movement was growing and it was spontaneous as per Gyalo Thondup the brother of the Dalai Lama who had some involvement with the CIA . Meanwhile the Chinese leadership was prepared for a protracted war in Tibet . The Chinese had greatly improved their logistics and connectivity position in Tibet with the construction of the all weather highways and an airport . On 16 March 1959 with the Chinese making preparations to destroy the palace a decision was taken by the Dalai Lama’s closest advisers and on 17th March he left Tibet in disguise along with his mother , brother and sister and his personal assistants . As news of the wonton destruction of the ancient monasteries and the Potala and of thousands being killed came through the Dalai Lama firmed up his plans to seek refuge in India .

On 3rd April 1959 the Prime Minister Nehru informed Parliament that the Dalai Lama had crossed into India . The Dalai Lama and his party of about eighty persons headed to the monastery town of Tawang . The same day the Prime Minster addressed a message to the Dalai Lama welcoming him to India . In a press conference on 5th April the Prime Minister acknowledged that the Tibetan autonomy had disappeared and the 17 point program ( between China and Tibet ) had broken down. In June 1959 the Dalai Lama staying in Mussoorie made a detailed statement . He said the harassment and persecution of the Tibetan population in the hands of the Chinese rulers was increasing ; it was his duty to tell the world the truth about Tibet . In the press conference the Dalai Lama said ‘ wherever I am accompanied by our government the Tibetan people recognize us as the government of Tibet ‘ .

The Soviets felt the Chinese were right in suppressing the Tibetan revolt . In a conversation with Mao, Khrushchev told Mao ‘ As for the Dalai Lama’s departure from Tibet , had we been in your place we would not have given him the chance to leave . It would have been better if he was in the grave ‘.

Bhai Bhai estranged :The flight of the Dalai Lama in March followed by the deterioration of the border situation involving Indian casualties in clashes with the Chinese in both the eastern and western sectors transformed the friendly relations between India and China .

Nehru saw India’s rich history , cultural values ,her geographical size and plural democracy , the advocacy of peace and non violence together with the five principles of Panchsheel as the authenticity and credibility of India’s naturally ordained leadership in world affairs . Mao and Chinese Communist party also envisaged a central and similarly ordained role for China on the international stage with the goal to promote global revolution. These differing world views were antithetical to each other with a collision waiting to happen – Tibet and an unsettled frontier ignited the fire .

After the 1954 Agreement with China on Tibet the Prime Minister had unilaterally decided that this India defined boundary of close to 4000 KM would be shown as a definite and firm line on all published Indian maps . There could be no ambiguity Nehru felt about this border . Peace on these borders could be maintained in his view by pursuing a policy of friendship with China . It was delusional diplomacy .

For the Chinese border problems and differences left over from history needed to be resolved through negotiations and unlike India at the time they were prepared to take the line that a boundary dispute did exist . The Chinese view was that India ‘demanded’ that the British policy of ‘aggression against China’ should now be recognized as the foundation for the settlement of the Sino-Indian boundary question .

Nehru sought to refute these allegations that independent India was trying to reap fruits of British aggression against China. He emphasized that the boundaries of India had been settled for centuries by history , geography , custom and tradition . While India favored the maintenance of status quo it was the Chinese government which had repeatedly violated it through the construction of the Aksai Chin Highway and through numerous other transgressions into India’s border areas .

On 7th September 1959 Prime Minister Nehru released the first white paper detailing all the correspondence with the Chinese government since 1954 . Although it was done in the interest of full transparency by the life long democrat as subsequent events showed it completely did away with any scope for flexibility or give and take in India’s approach towards China on the question of their shared boundary .

Two serious armed clashes took place between the Indian and Chinese personnel in Longju in the eastern sector in August 1959 and the second at the Kongka pass in October . The clashes at Longja was the first time that the troops on both sides exchanged fire .The clashes in Kongka in Ladakh killed five Indian policemen and resulted in capture of ten Indian policemen . To rub salt into Indian wounds the captured personnel were released by the Chinese on 14th November 1959 – Nehru’s birthday – together with the bodies of those killed .

The India- China border conflict arose primarily because of two concepts , the Chinese one of strategic borders and India’s of historical borders .The Chinese were prepared to use diplomatic and if necessary military methods in pursuit of their concept the Indian approach from 1950 onwards was primarily declaratory and ineffectively military .Indian claims were based on tradition and geography , custom and usage the Chinese one was based on laying claims to territories based on imperialist Chinese dynasties . In order to secure a defensible border Tibet was militarily occupied and connectivity and infrastructural links established in these remote regions . China preferred to advance their interests with ambiguity and stealth before their claims were revealed . In India’s case the neglect to physically secure her claims in the Aksai Chin has come with far reaching implications .

Zhou Enlai Visits India : Zhou Enlai came to India in 1960 along with a large delegation ; The talks between the two Prime Ministers ended in deadlock . Key members of Nehru’s cabinet individually met the Chinese Premier which included Home Minister Pant , Finance Minister Morarji Desai , Foreign Minister Swaran Singh and Defense Minister Menon . The Chinese had come prepared for negotiations however with a hardening of attitude towards the border issue .

The Chinese wanted a barter stating that India cede control to the Chinese in the western sector in Ladakh which had been under their effective control ( although clandestinely ) and in return they would recognize Indian claims in the eastern sector . For the Indians a barter of territory was a non-starter what with the public opinion against Nehru’s China policy and the ‘ deceit’ by the Chinese in the ‘kongka Pass’ armed conflict .Further in March 1960 the Supreme Court had ruled in the Berubari case that ‘ executive did not have the authority to cede or accept territory without seeking an amendment to the constitution’.

As per Secretary General in the MEA N R Pillai a deal was offered by Zhou Enlai in 1960 wherein it was proposed that India accept the line of actual control in the west up to which China had occupation and in return China would accept the McMahon line in the east . However the entire Indian cabinet was in opposition to a barter deal ..

For the Indians to accept that the border with China had not been delimited across its length was tantamount to accepting that there was a ‘dispute’ with China on the issue . The Indian position was that the border was already determined by treaty , tradition , custom and usage . Secondly to accept the existence of the actual line of control would have implied that India tacitly acknowledge the gains made by China in her encroachments across India’s defined boundary on maps in the western sector deep into Ladakhi territory

Forward Policy : India launched the forward policy in 1959 which could also be termed as the intensive and continuous surveillance policy . The Chinese were seen making inroads in what India regarded as sovereign territory . With the Chinese steadily pushing eastwards and extending their occupation of these areas the decision was taken to push forward Indian posts in order to remove the vacuum that the Chinese seemed intent on occupying .

The fatal flaw inherent in Indian policy responses , especially in the top echelons of the leadership was the belief that the Chinese would abstain from a full and frontal attack on Indian positions . The Indian Defense Minister Krishna Menon had publicly stated as far back as 1956 that India had no reason to think that China was either expansionist or belligerent . The compulsions of national economic development had constrained the growth in and development of military strength by India ; That no military conflict with China was anticipated seemed borne by the fact that the Indian defense budget declined between 1957-60 from US $ 539.11 million to US $ 481.81 Million

.Nehru and the Delhi establishment believed that the Chinese were facing a difficult position internally – on the economic front as a result of food shortages and famine and also as a result of the failure of the Great Leap forward as well as withdrawal of Soviet experts and military harassment by the Taiwanese .

The Chinese press called India’s forward policy as ‘ Can Shi ‘ wherein ‘Can’ is the Chinese ideograph for silkworm which fits the image of ‘nibbling’ away with the literal translation of Can Shi being food for the silk worm which would destroy a leaf or whole plant by gradually consuming it . For them it was a policy of nibbling away Chinese territory .

Worsening of Relationship : Opinion has been expressed that the Chinese decision to go to war with India was occasioned primarily by their suspicion and misgivings about India’s Tibet policy from its inception in 1950-51 when the Chinese forces entered Tibet . In the mind of Chinese leaders like Mao Zedong India was a legatee of the British imperialist policy that sought to make Tibet a buffer zone where Indian influence would spread that it was a co-conspirator with Tibetan rebels supporting the Dalai Lama . From 1959 onwards the Chinese animus towards India on the Tibet issue was on clear display . Once India’s forward policy was deployed from late 1961 onwards the Chinese read this as additional provocation by the Indian’s to seize what the Chinese saw as sovereign territory . China was increasingly assessing India’s foreign relations as rightist and reactionary , dependent on ‘ monopoly capitalism’ and tied to America . India was serving as a ‘ hatchet man ‘ for America and was also making use of the soviet Union . The Soviets for their part were using India to support Soviet- American talks , disarmament to pressure China and cooperating with India’s anti China stance .

With the worsening state of relationship between India and China on 6th August 1962 Nehru placed the latest white paper on the dispute before Parliament . Members of opposition political parties including the Jana Sangh and Swatantra parties felt there was no ground for peaceful negotiation . They were of the view that ‘ under no circumstances any talk on border dispute with China be made till Chinese forces had withdrawn from the Indian territory which has been recognized by law and history ‘.

Particularly after the Kongka Pass incident of October 1959 public opinion in India became a strong pressure point on the Indian government leading to a distinct element of unwillingness to yield to the border question . A shifting claim line in Ladakh by the Chinese led to the ‘forward policy’ of non violent military pressure . This unwillingness to negotiate ( public and parliamentary pressure) prevented any give and take to resolve the issue . On the other hand the Chinese approach was to seek Indian acceptance of China’s military occupation of Aksai Chin and eastern Ladakh and then achieve a barter arrangement involving the western and eastern sectors of the boundary .

The Sino Soviet Relationship :The relations between China and Soviet Union were increasingly challenged by factors relating to Soviet US relations . Moscow’s approach was running with the hares and hunting with the hounds . In 1960 they had sent a verbal missive to Chinese National Peoples Congress that one cannot possibly seriously think that a state like India which was militarily and economically much weaker than China could commit aggression against it. From the Soviet point of view the Chinese handling of the situation was an ‘ expression of narrow nationalist attitude ‘ .On the other hand the Soviets published maps in 1962 of the Sino- Indian border showing both the Aksai Chin and NEFA as parts of China . Again in 1962 India and Soviet Union did sign an arms deal and an agreement for the delivery of MIG 21 aircraft . However in October Khrushchev told the Chinese Ambassador in Moscow that the Soviet Union sided with China on the Sino-Indian boundary question and that his government would consider suspending the sale of MIG aircraft .

The 1962 War :Through out September and October 1962 the Chinese did not hide their preparations for war in a direct signal to the Indians . Equipment , weapons and construction material were moved to border areas . On 18th October a meeting of the Politburo Standing Committee was convened by Mao to discuss the border dispute with India . Mao Zedong , Zhou Enlai , Liu Shaoqi , Deng Xiaoping were present along with other military generals . After a presentation Zhou Enlai recommended a ‘ defensive counter attack’ against India and this recommendation received unanimous approval from those present . The decision was to attack with overwhelming force . Mao who was standing beside a large map made a gesture of embrace and said ‘ We will penetrate inside , not fight’. Pointing to the Indian posts he said loudly ‘ Sweep them off ‘.

While they made war preparations the Chinese extracted promises of neutrality from both USA and Soviet Union. The US when confronted by the Chinese that China expected a US supported Taiwanese invasion John Cabot the US Ambassador to Warsaw under instructions mentioned that ‘ US government had no such intentions of supporting Taiwan under the existing circumstances . This secured its eastern flank .On the other hand with the Soviets when China informed the Soviet Ambassador that India was planning a large scale attack on China they got an assurance from Khrushchev that if India attacked China the Soviet Union would stand with China .

China had used super power preoccupation with the Cuban missile crisis to time the war . On 8th October 1962 China attacked isolated Indian posts in both the eastern and western sector that had been established as per the forward policy to prevent further incusrsions . In the easterns sector the Chinese were held at Walong near the Myanmar tri-junction . Near Tawang , besides the eastern tri-junction with Bhutan the Chinese PLA inflicted traumatic rout of Indian forces . In the western sector the fighting was fierce at Rezang La , near Chushul in Jammu and Kashmir state .Chinese troops cleared all Indian posts on what they considered their side of the Line of Actual Control in the Chip Chap river valley , Galwan river valley and Pangong lake areas .

As equipment shortages were glaringly revealed Nehru told Krishna Menon on 29th October : ‘ I do not know how I will explain to Parliament why we have been found lacking in equipment . It is not much good to shift about the blame . The fact remains that we have been found lacking and there is an impression that we have approached these things in a somewhat amateurish way ‘ .

On 20th October Soviet leader Khrushchev asked Nehru to accept Chinese conditions for a border settlement and urged him not to introduce the question in the United Nations since the USSR would have to support the  Chinese . In his reply Nehru informed that India could not accept any claim that is contrary to history , treaties and its own tradition more specially so when this is occupied by aggression . On 21st October the United States government expressed shock over the Chinese aggression against India and expressed their sympathy for India . On 26th October a state if emergency was declared in India while Nehru pledged that India would fight the Chinese until final victory is achieved . On 31st October Krishna Menon tendered his resignation as Defense Minister . It was an acceptance of the lack of preparedness of the army under his leadership .

Almost the end of Non Alignment : The United States was quick to support India .On 27th October America endorsed the McMahon line – it was an initiative taken by the American Ambassador Galbraith in Delhi . On the same day Indian Ambassador in Washington B K Nehru met US President John Kennedy to deliver a letter from Nehru asking for sympathy and support from his administration . The President assured of full sympathy and support of his government in ways which might be helpful – within our capabilities . Nehru asked the US for help in arms , equipment and defense support . C-130 Hercules Aircraft carried out drops of ammunition and supplies as well as essential clothing to Indian soldiers on the battlefront . American aircraft regularly landed in Delhi and also carried out photo missions over the Indo- Tibetan border . The US also worked to restrain Pakistan against taking any political or military action that would require India to divert forces from the China border . Nehru conceded after the war that ‘ There is no non alignment vis a vis China ‘ .

With a deteriorating situation Nehru asked the US for a ‘ minimum of 12 squadrons or supersonic all weather fighters and also radar cover . The Prime Minister wanted that US Airforce personnel ‘ man these fighters and radar installations’ while Indian personnel were being trained . These fighters and transport planes would be used to protect Indian cities and installations from Chinese air attacks and also if it was possible that the US planes manned by US personnel ‘ assist the Indian Airforce in air battles with the Chinese air force over Indian areas where action by the IAF against the Chinese communication lines supplies and troop concentration may lead to counter air action by the Chinese ‘ .

The response from Washington , on the eve of the Chinese ceasefire contained in a telegram from secretary of state Dean Rusk to Ambassador Galbraith was that the message from Nehru ‘ in effect proposes not only military alliance between India and the United States but complete commitment by us in a fighting war ‘ and that it was ‘ a proposal which cannot be reconciled with any further pretense of non- alignment ‘ . Even as Nehru expressed his readiness to discuss India’s requirement with a group of American officials the unilateral cease fire announced by China on  20 November altered the situation .

The Cease Fire :On declaring ceasefire the Chinese began withdrawal in the eastern sector from the occupied areas to the north of the McMahon line . In the western sector the Chinese had aimed at and largely succeeded in reaching their 1960 claim line and ensured that there was no threat to the Aksai Chin highway . The final casualty figures in the war released in 1965 by the Indian government were 1383 dead , 1696 missing and 3968 taken prisoners by the Chinese . The vast majority of the casualties were in NEFA . The rout suffered by India had effectively dethroned the country’s position as a leader of the non aligned world and destroyed Nehru’s image as an influential world statesman . Whereas the victory over India consolidated Mao’s position .

Why we lost – In 1963 India’s defense minister Y B Chavan made a statement in the Lok Sabha about the results of the enquiry to investigate reverses in the operations against the Chinese . The enquiry in question was the Henderson Brooks – Bhagat Report which has still not officially been released by the government . The findings were :

Indian troops had no requisite knowledge of the Chinese tactics and ways of war , their weapons , equipment and capabilities .

  • Training in leadership was a problem
  • Equipment shortages was an issue
  • There were logistical difficulties in reaching equipment to forward areas
  • Shortage of vehicles or old vehicles which broke down
  • Troops were not acclimatized to fight at high altitudes
  • Collection of intelligence was not satisfactory and reporting vague

As regards the key point regarding the higher direction of operations – Chavan had this to say – Even the largest and best equipped of armies need to be given proper policy guidance and major directives by the Government implying that it had not been forthcoming .

China Pakistan Relationship

This relationship grew out of the embers of the failed India China one . In Mao’s calculation Pakistan occupied a very strategic position , linking west Asia and south east Asia and Pakistan’s location between China and West Asia , Europe and Africa made it China’s doorway towards the world and opening the door could help ‘ break the economic embargo imposed by imperialism . Developing ties with Pakistan a Muslim country could also help China develop contacts with the Muslim nations was Mao’s view .

After improvement in Indo – US relations under Eisenhower and Kennedy administrations increased Pakistan’s isolation and its unease . The Soviet Union was also cultivating deeper relations with India . The solution was for Pakistan to turn its attention to China and make it the strategic counter weight to India .

In December 1961 Pakistan voted in favor of seating China in the United Nations and in March 1962 China agreed to negotiate the border question with Pakistan .In October 1962 ( during Indo- China’s war )  the Pakistani foreign secretary told China’s ambassador Ding Guoyu that India deserved to be taught a lesson by China and that Pakistan hoped that China will severely punish India and drag India down through a long term struggle .

In March 1963 Zulfiqar Ali Bhutto the Foreign Minister of Pakistan signed the finished agreement with his counter part Chen Yi in Beijing . The Times of India called it a shady agreement that had been announced two hours after the Indian delegation in Pakistan for talks on Kashmir had called on President Ayub. Of the 3400 square miles in dispute Pakistan had 1350 square miles and China 2050 . Pakistan conceded Tagdumbash and Shaksgam to China in return  for Oprang valley . India alleged that Pakistan had ceded not less than 2000 sq miles of territory that was India’s in Kashmir to China . The agreement smacked of opportunism on part of both Pakistan and China taking advantage  of India’s vulnerabilities after the disastrous outcome of the events of 1962 with China . China had become a factor in the eventual settlement of the Kashmir dispute . Ultimately the hostility to India was and has been a meeting point between Pakistan and China . From 1963 onwards China dropped its position of neutrality on the Kashmir issue and sided with Pakistan which continues even to this day .

A synopsis of how the border situation evolved , the Chinese approach and the probable lost opportunities of when the border issue could have been resolved :

After being victorious over the Guomindang the Communists came to power which was a single party state with Mao the sole leader – why did this not ring alarm bells in Delhi ? India granted recognition to PRC in 1949 – did Nehru make  haste against the advice of Sardar Patel and other foreign office officials who were skeptical about the communists ? Was India right in trusting the communists ? Nehru wanted to follow an independent foreign policy and he believed in Pan Asia in which both India and China were the emerging dominant powers . He also saw the need for friendship and mutual understanding between the two nations . What options did India really have ? We may have not achieved much by delaying recognition of China but later on with the Chinese occupation of Tibetan we could have surely gone to the United Nations to protect Tibetan autonomy . But that could have pushed us into the American camp , abandoning Non Alignment ( we came on the verge on doing so had the war continued longer) . It would have also entailed that the Chinese would have been hostile to us from before and would have aligned with Pakistan earlier .

In 1953 when negotiations began between India and China on India’s relationship with Tibet India did not include the subject of demarcating the border and instead focused only on representation in Lhasa , the maintenance of certain institutions and the trade agencies and the pilgrimage to  Kailash and Mana Sarovar ;This was a big folly .  China’s policy then was not to include the border issue in the agenda for talks with India because the conditions were not ripe for settlement of the borders . This was a deliberate Chinese strategy a delaying strategy , choosing to conceal rather than reveal its actual position .China was only buying time using India’s good offices to open doors internationally for the Chinese government .

 Jawaharlal Nehru and the Indian establishment were clear about what constituted India’s border and had made it public too in its maps then why did we not enforce its acceptance in the course of negotiations ? Were the Indian’s not able to read the Chinese reluctance ( the time was not yet ripe ) to discuss the border as being tactful and cunning ? . The Indians had inferred that the silence from the Chinese meant acquiescence . After the 1954 Agreement with China on Tibet the Prime Minister had unilaterally decided that this India defined boundary of close to 4000 KM would be shown as a definite and firm line on all published Indian maps . There could be no ambiguity Nehru felt about this border . Peace on these borders could be maintained in his view by pursuing a policy of friendship with China . It was delusional diplomacy .

Chinese double speak was evident ..

once in 1955 while speaking at Bandung Chou Enlai – When asked about Tibet in one of the committees he said it would be thoroughly impracticable to establish a communist regime in Tibet and the Chinese government had no such wish ..Tibet was an autonomous region of China and they had no desire whatsoever to interfere with its customs or ways of life .

And again during the visit of Zhou Enlai in December 1956 and January 1957 the matter of McMahon line came up for discussions between the two Prime Ministers . Zhou denied any prior knowledge of this line upon which Nehru referred to the history of the Shimla conference which had decided the McMahon line and the Chinese government had not raised any objection to it .Zhou mentioned to Nehru that he would consult with the Tibetan government as they had wanted the line to be rejected .Zhou concluded by saying that although the question was undecided there was no better way then to recognize this line .

In 1957 soon after the visit of Vice President Radhakrishnan to China the news broke out of a new highway constructed by China linking Xinjiang and Tibet through the Aksai Chin plateau in the northeast Ladakh claimed by India as part of Jammu and Kashmir . The fact that India had some knowledge of the construction of the road from 1950 onwards and despite the decision taken by Nehru to show the external boundary of India as firmly defined was not actually followed up with actual occupation of the area . May be it was the inhospitable terrain involved which made the occupation difficult – however not doing so would have repercussions with significant consequences .

The India- China border conflict arose primarily because of two concepts , the Chinese one of strategic borders and India’s of historical borders .The Chinese were prepared to use diplomatic and if necessary military methods in pursuit of their concept the Indian approach from 1950 onwards was primarily declaratory and ineffectively military .Indian claims were based on tradition and geography , custom and usage the Chinese one was based on laying claims to territories based on imperialist Chinese dynasties . In order to secure a defensible border Tibet was militarily occupied and connectivity and infrastructural links established in these remote regions . China preferred to advance their interests with ambiguity and stealth before their claims were revealed . In India’s case the neglect to physically secure her claims in the Aksai Chin has come with far reaching implications .

After the armed clashed in August on 7th September 1959 Prime Minister Nehru released the first white paper detailing all the correspondence with the Chinese government since 1954 . Although it was done in the interest of full transparency by the life long democrat as subsequent events showed it completely did away with any scope for flexibility or give and take in India’s approach towards China on the question of their shared boundary .

Again an opportunity to settle the border issue was lost when in 1960 Chou Enlai came to India along with a large delegation . The Chinese had come prepared for negotiations however with a hardening of attitude towards the border issue . The Chinese wanted a barter stating that India cede control to the Chinese in the western sector in Ladakh which had been under their effective control ( although clandestinely ) and in return they would recognize Indian claims in the eastern sector . For the Indians a barter of territory was a non-starter what with the public opinion against Nehru’s China policy and the ‘ deceit’ by the Chinese in the ‘kongka Pass’ armed conflict .Further in March 1960 the Supreme Court had ruled in the Berubari case that ‘ executive did not have the authority to cede or accept territory without seeking an amendment to the constitution’ . This unwillingness to negotiate ( public and parliamentary pressure) prevented any give and take to resolve the issue . On the other hand the Chinese approach was to seek Indian acceptance of China’s military occupation of Aksai Chin and eastern Ladakh and then achieve a barter arrangement involving the western and eastern sectors of the boundary .

India launched the ‘ Forward Policy’ of ‘ firm boundaries’ without accompanying it with a policy that included dialogue and accommodation. Having done so the fatal flaw inherent in Indian responses , especially in the top echelons of the leadership was the belief that the Chinese would abstain from a full and frontal attack on Indian positions . The Indian Defense Minister Krishna Menon had publicly stated as far back as 1956 that India had no reason to think that China was either expansionist or belligerent . The compulsions of national economic development had constrained the growth in and development of military strength by India ; That no military conflict with China was anticipated seemed borne by the fact that the Indian defense budget declined between 1957-60 from US $ 539.11 million to US $ 481.81 Million

Post 1962 :The 1965 war with Pakistan revealed the growing nexus between Pakistan and China . China accused India in September of 1965 of violating the Sikkim China border and also of maintaining military installations on the Tibetan side ..these were Chinese efforts to pressure India . No actual clashes took place on the Indo-China border nor were there any sign of military preparation . The Indo-China borer was largely peaceful for several years after 1965 .

In 1969 Indira Gandhi publicly expressed a willingness to talk to China without any pre-conditions and hoped the boundary dispute could be settled . However Beijing was in the throes of cultural revolution and rebuffed her statements as ‘hypocritical’ ; but on 1st May 1970 on the Tiananmen Rostrum Mao Zedong smiled at Brajesh Mishra – the Indian Charge d’affairs and said – ‘ we cannot keep quarrelling like this . We must try and be friends again . .. we will be friends again some day’ . However skepticism prevailed on the Indian side and the advice to Mishra from P N Haksar and G Parthasarthy was probe further and keep the ball rolling . One is not sure if Mao’s gesture was genuine but it could be said an opportunity was left unexplored , perhaps missed .   

Belying Indian concerns of resumption of arm sales to Pakistan in September 1970 the United States told India it would make a ‘one time exception’ and sale arms to Pakistan .When Indira Gandhi told secretary of State William Roger of India’s concern of China-Pakistan collision , Roger said ‘ You have no concern about China’ . The arms supplies to Pakistan were an incentive to facilitate secret communication with China and to bring about a rapprochement between China and USA. When Kissinger was secretly in Beijing in 1971 Zhou Enlai told him that Pakistan would not provoke India militarily because it was too weak but that if they ( Indians) are bent on provoking such a situation then we cannot sit idly by’ . When speaking to Pakistanis on the other hand Zhou was telling them as late as November that they should try for a political settlement internally and made no commitments to Pakistan’s territorial integrity merely promising them the military supplies they sought .

On returning to Washington Henry Kissinger told Indian Ambassador L K Jha that if war broke out and if China was involved on the Pakistani side we would be unable to help you against China . Thus the US China rapprochement was happening at the expense of India . When war broke out with Pakistan Kissinger tried hard to get China to intervene or at least threaten India militarily . He spelled it out to Huang the Chinese representative at the UN –  saying that if China attacked India the United States shall ensure that Russia did not enter the fray . Indira Gandhi wrote to Zhou Enlai in December saying that India sought friendship with China and describing the Indian position . However China did not intervene in the1971 conflict may be because it had its own civil-military issues and as Zhou put it that military intervention would be futile . what we see here is as the Sino-US alliance grew the Chinese interest in settling the border issue waned at least in terms of priority .

Mrs Indira Gandhi was more open minded to China then her close advisers . In 1971 after the signing of the Indo-soviet peace treaty she wrote to PN Haksar if we should not indicate to Mishra that a Indo soviet treaty does not preclude such a treaty with China ; however her advisers were reluctant to pursue that course . After Kissinger’s visit she wrote to Chou Enlai expressing willingness to have a dialogue at any level on bilateral issues .. however there was no Chinese response . By then the China – US alliance had moved further .

In 1975-76 the Indira Gandhi government negotiated the return of ambassadors to Delhi and Beijing . In February 1979 Atal Bihari Vajpayee , the then foreign Minister visited China and the process of normalcy in relations after the 1962 war began . Decisions to reopen trade , restart pilgrimage to Kailash and Manasarovar and resume discussions on boundary settlement were taken . 

Deng’s Reforms & China’s Phenomenal growth : In 1978 Deng became the first Chinese leader to visit Japan after more than 2000 years of contact . A high point of Japan-China economic cooperation followed Deng’s visit and Japan undertook the first wave of infrastructure building in China in the early eighties . Deng was pragmatic and his policies were result oriented rather than ideological ; he is credited with the dictum ‘  It does not matter if a cat is black or white as long as it catches mice’ Deng took on the responsibility for education and science and technology .He opened up China’s universities , welcomed overseas Chinese academics and scientists including several Chinese- American Nobel laureates . Chinese students were allowed to join academic institutions in the western world to acquire advanced knowledge with the Chinese government financing a large number of students .China send a number of fact finding and study missions to the US Japan and western Europe to learn from their advanced technology and management systems and adopt them for China .The most successful economic reforms involved the setting up of SEZ’s in the southern coastal provinces of Guangdong and Fujian . Most of the investors were overseas Chinese located in Taiwan , Singapore , Hong Kong and Macau popularly known as ‘ Greater China’ . Initially these SEZ’s were involved in low end labor intensive manufacturing but soon graduated into higher value added manufacturing soon integrating into regional and global supply chains .

This was the period when the Japan-US-China alliance grew to counter the soviet union . Thus the US opening up to China during the Nixon Presidency and after Deng coming to power pursuing economic liberation policies catapulted the Chinese economy with consistent double digit GDP growth . Under Deng Xiaoping’s leadership China concentrated on building the economy , using markets and foreign trade and taking advantage of access to world forums to transform itself – all made possible by the US-China opening in 1971 .Under Deng Xiaoping China and United States built a de facto alliance . What Kissinger and Nixon by opening up to China had done was to create a peer competitor to the united states itself .. something which it has come to rue today .

Another fall out of this US opening up to China was its Asian allies following suit .. such as Japan and ASEAN . This opened further opportunities to China in growing its economy . With influential American companies coming into China helped China get the Most favored Nation ( MFN) status from the US and they lobbied for China to be admitted to the WTO . President Clinton had justified US support for China’s membership of the WTO on the grounds that increasing prosperity and access to the internet would inevitably lead the country towards liberal democracy .Yet China has been able to establish strict control over its digital economy using the very tools to create a surveillance state .

For India the US-China alliance was a limiting factor by backing a hostile Pakistan .During this period Indira Gandhi was behind three significant external initiatives : 1. The nuclear explosion of 1974 that was when the “Buddha smiled” the coded message send to inform the PM that the tests were successful 2. The integration of Sikkim into the Indian republic 3. Resumption of ambassador level relations with China .

In 1978 Deng also reached out to the Dalai Lama indicating they were willing to discuss all issues other than Tibetan independence . The negotiations between the Chinese and Tibetans dragged on in the eighties with the Chinese wanting the Dalai Lama to return and to stop his activities aimed at splitting Tibet ; for the Tibetans it was about freedom and autonomy and better conditions in Tibet . However by 1989 the Chinese were calling the Dalai as a ‘wolf in monks clothing’ and the talks fizzled out .

The eighties was the phase when there were differences between the top Chinese leadership of how much of freedom to be granted and relaxing controls while they all agreed on the economic reforms and emulating the western market models . This led to the demand from students for more freedom and democracy and which resulted in the killings in Tiananmen square. This also brought the US – China de facto alliance to an end . China’s sense of vulnerability increased as the Berlin wall came down which eventually led to the fall of the East European governments and also that of the Soviet Union . This led to further tightening of internal ideological and security controls in China .  Deng sought political centralization and economic decentralization . He also stressed on military modernization , having realized that the PLA was his strength and savior . Deng’s measure included succession planning and term limits at the top of the communist party , patriotic education of the youth and party members , a much tighter internal security regime and renewed stress on military modernization .

South China Sea : China’s expansive claims in the south China sea are from the maps drawn by the Kuomintang regime in 1947 . They include all the waters and the islands in the sea running alongside the Philippines , Indonesia , Brunei , Malaysia and Vietnamese coasts to the mainland .The area covers 1.4 Million square miles . These claims have contradicted those of ASEAN and Taiwan and have been declared illegal by the UN convention on law of the sea tribunal . In effect China first built capability and then started asserting control over one of the worlds most strategic seaways . A strategy quite similar to what China did on India’s boundary by first building the infrastructure and the capability before opening up for border negotiations . The strategic importance of the south China sea can be understood from the fact that one third of the world’s shipping carrying about US$ 3 trillion worth of trade passes through the South China sea each year and the area is also the site of major oil and gas deposits .Overtime China has built up and enlarged several islands , putting military facilities , runways and fighter aircraft on them .

Today the South China sea is in practice a Chinese lake . What China as asserted by using the South China sea is that distant United States is not a reliable partner for others with claims in the area nor are international institutions and international law of any benefit . Perceptions of China as a bully and as an aspiring hegemon have led to significant increase in defense cooperation among China’s neighbors such as Japan , Vietnam , Australia , Indonesia , Singapore and India . India has been drilling for oil on Vietnamese concessions in waters disputed by China and a large portion of India’s foreign trade now flows eastwards .. thus the Chinese Claims on the South China sea have created another irritant in the India-China relations .

Taiwan Strait Crisis : In 1996 China began intensive shelling and missile firings around the waters of Taiwan before the first ever presidential election on the island of Taiwan which Lee Teng -hui was contesting .China saw him as a potential leader of an independent Taiwan .when President Clinton ordered two aircraft carriers to the waters east of Taiwan China could do very little as an response , had no military options and called off the firings . China suffered an acute loss of face in this crisis and after this experience began consolidating its claims on the South China and East China seas . This accelerated a wholesome strategic shift in China’s military efforts . A focus on advanced technology rather than massed manpower , an effort to dominate the skies with a modern air force and the development of long range bomber groups was undertaken .

China on World Stage : In 2010 China overtook Japan as the second largest economy in the world . China was able to weather better the 2008 financial crisis by pushing forward a giant financial stimulus program equal to that of the United states with an economy one third its size . For China surpassing Japan’s economy in size was the most significant landmark in Asian history since Japan’s defeat of China in the first Sino-Japanese war . From now on China only had eyes on the great game of global politics pitting China against its sole peer the United States.

India , China and Asia have been fundamentally transformed by globalization .Manufacturing and trade moved from advanced industrialized countries . In 1950 the G-7 share in world GDP ( PPP basis ) was 51% and emerging markets was 36% . By 2012 those proportions have been reversed . By 2018 China was the world’s largest manufacturing and trading nation , the third largest military power and well on course to become the world’s largest economy in total output if not in per capita income . China has the second greatest military budget in the world and has modernized and the  one party state has survived and outlasted all prophets of doom . Externally China has put its hard power to several uses : To expand its security perimeter ,consolidate the Eurasian landmass , transition to becoming a maritime power.

China is remaking the PLA following the model of the American armed forces through extensive reforms and modernization , giving PLA the capability to project power beyond territorial and coastal defense of the country’s borders.

China continues to invest heavily in developing new high tech weapons . It is steadily adding to its nuclear weapons and would significantly narrow the gap between US and Russia . It has persuaded the IMF to accept the RMB as one of the reserve currencies along with US dollar , British Pound , Japanese Yen and euro .It has a large bond market presently of about US $16 trillion , second only to that of the US  .

Shanghai Cooperation Organization and Belt and Road : With the collapse of the Soviet Union China was quick to seize the opportunity investing in Xinjiang and building links between the five new ‘stans’ of the Soviet Union – Tajikistan , Kyrgyzstan , Uzbekistan , Kazakhstan and Turkmenistan . China worked with Russia and has set up the Shanghai Cooperation Organization to boost economic cooperation with the ‘stans’ . As US and Western pressure mounted on Russia bringing NATO and EU to Russia’s doorstep , despite promises made to Gorbachev , Russia has been steadily driven into a tighter Chinese embrace. Now with the Ukraine invasion and Russia’s isolation its dependence on China has only increased which benefits China further .

China’s Belt and Road initiative is a straight forward deal : China will deliver trade , investment and economic benefits to partners that accommodate or do not challenge its core interest . As China develops military and political leverage in its Asian periphery it is likely to get further involved in the internal affairs of its neighbors .

China under Xi Jinping Under Xi Jinping the CCP command and control has been tightened . China is now spending more on internal security where the PLA has considerably increased its role in policy formulation .Decision making has been centralized and maintenance of the one party rule remains the highest priority of the Chinese regime .

The second priority is continued economic growth . China is now more dependent on the outside world than at any point in its history needing the worlds raw material , markets , technology and exports to grow its economy and maintain internal stability .Thus China finds itself in a unique situation which it has not faced before – which is a combination of power and outside dependency . A combination of interdependence and national rhetoric that legitimizes the CCP and the leadership .President Xi Jinping is said to have remarked that what kept him awake at night was the possible emergence of a Chinese Gorbachev leading to the collapse of the CPC .

Kevin Rudd the former Australian Prime Minister who has know Xi Jinping for some time describes Xi as a “ man in a hurry ‘ .Questions are why is China in a hurry ? Does it see a limited window of opportunity ? Its economy has been slowing and its society is aging rapidly . Regional powers such as India are rising in its vicinity ; it also faces push back from United States .This may prompt China to put in place and consolidate changes in the internal , regional and global order .China today is a global economic power , a regional power in military terms , a dominant power but not a hegemon in the Asia pacific .

China saw the 2008 financial crisis as the decline of the west and has asserted its position . This perception was further reinforced by President Trump’s handling of the pandemic and the events of January 2020 when right wing pro Trump supporters invaded Capitol Hill in Washington . In 2017 President Xi Jinping referred to the dawn of a ‘new era’ and said that ‘ the international structure has become increasingly balanced and this general trend has become irreversible ‘ . China is no more defensive about its communist ideology and authoritarian state . As Xi said – ‘ China offers a new option for other countries and nations to follow who want to speed up their development while preserving their independence ‘ .

Xi has introduced a number of significant departures from Deng’s policy prescriptions . First and foremost Xi has brought Party front and centre as the source of all political power within the country and with supreme authority exercised by the Party’s top leader . Xi has been projecting himself as a leader in the same league as Mao Zedong . He has amended the constitution to remove two terms imposed on the office of President . Under Xi State owned enterprises are back as the ‘mainstay’ of the economy and are expected to take the lead to achieve the ambitious goals of made in China 2025 .

It is likely that Xi Jinping will succeed in winning another term in October 2022.However there are signs of opposition building up against his claim to uncontested power . It is quite likely that the power transition in China may well be violent and disruptive .

Governance Challenges for the one party state :With economic progress and prosperity China’s middle class a product of globalization has made China harder to govern . Social change is evident in the return of popular religion and superstition in China as well as proselytizing faiths like Christianity .The CCP has attempted to co-opt Buddhism which is seen as indigenous and less threatening in not having an external focus of loyalty like Islam and Christianity .China also has a problem of a graying society like Japan , South Korea and Italy .. on present trends China will be old before it gets rich .An aging population will have economic consequences such as the need to set up a welfare system and provide for health and pensions . It will also affect military preparedness for the World’s largest army in terms of recruitment and therefore China’s stress on artificial intelligence and autonomous weapons system . Chinas growth was fed by globalization just as India’s however now the high tide of globalization has passed .The globalized economy is fragmenting into regional trading blocs and protectionist sentiment is on the rise in the United States and Europe .China’s share of global exports has been dropping and now its economy has to rely more on domestic demand and consumption and restructuring its economic engagement with the world. If it fails to reform it risks of falling into stagnation with high inequality which would result in social unrest and demands for change in the political structure.

For Chinese leadership technology represents its hope of breaking through the constraints on continuing China’s growth and development . The made in China 2025 plan specified ten high tech industries in which China would attempt to achieve global dominance : Artificial Intelligence , Quantum Computing , Electric vehicles , robotics , aerospace , biotechnology , semi-conductors , pharmaceuticals and agricultural equipment .

Influence of History on China : China’s engagement with the rest of the world is influenced by its past when the Middle Kingdom was subjected to violent and destructive assaults by nomadic and semi nomadic tribes across China’s northern and western peripheries . The narration of the century of humiliation of which we have read earlier is used by China as an instrument in nation-building and in elevating the CCP into the role of national savior . Again as history shows , China has enjoyed peace and prosperity when a strong and central authority ruled . The influence of Confucian orthodoxy is – order and harmony flow from maintenance of hierarchy and this influences China’s relations with other countries . Drawing from these lessons from history China is governed today by a strong central authority , wants to dominate its neighbors and wants to have an hierarchical world order in which China dominates .

US & China Today : One also needs to understand the high level of codependency between the Chinese and US economy . For several large US corporations and for Wall street China is the most important external factor in their bottom line profit and their manufacturing base .However the confrontation has begun- on the one hand the USA does not want a peer competitor on world stage and on the other China will not allow itself to succumb to US diktats which would prevent its rise and regime survival . Another fall out of this rivalry will be Pakistan not being an equal ally of both – where we see now Pakistan leaning more on China as it sees US as not dependable . China’s relations with Russia has strengthened as we saw earlier ; All of this is complicating the situation for India in terms of its relationship with Russia , Iran and Pakistan .

Just as the world depends on China for global economic growth and Asia-Pacific stability so too China depends on the world for its own growth – thus the dependence is mutual . Is an US China conflict likely ? Does not seem so as China and United States are economically joined at the hip , operate under nuclear deterrence and are part of a single global order .As regards China’s capability to dominate – it’s a hemmed in power  in a crowded neighborhood with limits to its own powers . It has overwhelming domestic preoccupations and regime survival issues .

Indo-China growth story – Both India and China share the humiliation of colonial occupation of once being among the richest and most advanced societies in the world in 1750 to becoming the poorest , weakest and least industrialized countries in two centuries .

India and China have embraced modernity , have deep rooted cultures and new nationalism following different pathways . Soon after independence both looked at Asian solidarity – for China it was for a useful defense against the West whereas for India it was meant to promote its engagement with both East and West .The Chinese state under the communists launched a radical and also successful attack on the agrarian hierarchical society including the religious aspect than India did .The effects were clear in terms of resulting literacy rates , relative income levels , land cultivation rights and gender relations in rural India and China .

To some extent this explains the differing effects on the India and Chinese societies of the liberalization and opening up introduced by both in the 1980’s and 1990’s .For China the social effect of growth has been the one party rule and state control whereas for India it has meant slower economic growth ( as compared to China) however with relative social and political stability and a free and vibrant society with less changes in traditional ways of thinking .

India chose an independent path post-independence a non aligned path where as China chose the aligned path aligning with the other communist power the Soviet Union and later having a de facto alliance with the United States.

An Adversarial Relationship : India and China’s initial attempt to built constructive relations did not succeed . After the Chinese occupation of Tibet the Indian and Chinese armies came face to face across the border which eventually resulted in the border conflict of 1962 and a long freeze in Indo-China relations . This adversarial relationship spurred the development of India’s nuclear program supported across party lines . India has become the strategic glue in China’s closer ties to Pakistan stretching to the internationally unparalleled Chinese supply of nuclear weapons and missile technology to Pakistan. China’s alliance with the United States after 1971 against the Soviet Union saw their first combined opposition to India and the birth of Bangladesh . China used the US alliance to keep India out of South east Asia ;

Rajiv Gandhi’s decision to visit China in 1988 was a brave and strategic one and can be ranked as one of the three most transformative events in India-China relations in the twentieth century after China’s entry into Tibet in 1950 and the 1962 war . He reached out to Deng Xiaoping and Premier Li Peng ; Post Tiananmen with China’s concern of the United States , domestic turbulence and the end of the Soviet union presented an opportunity to stabilize Indo-China relations ..the result was the Border Peace and Tranquility Agreement of 1993 which was signed during Prime Minister Narasimha Rao’s visit to China .

After the visit the border was generally peaceful , even in the absence of a boundary settlement and stayed where it was until 2013 .

The India-China bilateral relationship developed through the 1990’s and 2000’s and trade grew steadily until China became India’s largest trading partner in goods . China has significant market share in important Indian markets such as smartphones , power generation equipment , telecom and ICT equipment ,steel and toys. The trade imbalance has grown to the point where it accounts for 40 percent of India’s overall deficit on trade account .

In 1988 India did less than US $ 200 Million in trade with China .Bilateral trade grew from less than $ 2 Billion in 2000 to over $ 93 Billion in 2018 . More than 23,000 Indian students study in China . Since 2014 China has invested over US $ 26 Billion in India mainly in IT , Financial payments and smartphone segments . Both have benefited from globalization however the gap between India and China has grown .

As China Asserts – Consequences for India :

Chinas growing strength and aggressive nationalism was on full display in its opposition to New Delhi and Tokyo’s bid for permanent seats in the UN security council , the Senkaku island dispute , intimidation of Taiwan and India’s 1998 nuclear tests .

Three decades of double digit budgetary growth has transformed the PLA  and the infrastructure to support it . For India the direct consequence is the mobilization times in Tibet have shrunk from two seasons to two weeks  .China has also modernized its nuclear and missile forces into a more capable second strike force and developed medium range ballistic missiles and cruise missiles that is altering the regional military balance even with the USA .The ports and other infrastructure it has built are useful to the PLA Navy . China established its first PLA base at Djibouti , has access to Gwadar and Karachi and is involved at Hambantota port . All these steps are the military underpinnings for a larger economic and political role that China seeks for itself in its periphery and Asia-Pacific .

In 1979 India and China were economically at par , forty years later China has become a Global economic power with a GDP four times India’s and second only to US . Since 2012 the Indo China relationship has been stressed such as the entry of 1000 Chinese troops in a disputed area on the very day Xi landed in India ( 2014) and eventually withdrawing and then the faceoff in Doklam in 2017 which took 72 days to resolve . However though China vacated the face-off spot they established a permanent year round presence on the plateau itself .

Since 2015 China has made known publicly their opposition to India’s membership in the Nuclear suppliers group . India has criticized China’s Belt and Road initiative . One factor above others that brought renewed stress in to the Indian view of China is China’s strategic commitment to Pakistan since President Xi Jinping’s visit to Pakistan which announced the $ 62 Billion China Pakistan economic corridor ( CPEC ). China’s long term presence in POK as part of the CPEC is a Chinese bet on Pakistan’s continued hold on Indian territory . Further Chinese military presence at Gwadar , Djibouti and other ports around the Indian ocean coincide with a shift in Chinese strategy towards power projection which changes India’s security calculus .

With China’s urge to create globalization with Chinese characteristics, and its need to dominate the neighborhood the Indo-China relations are in for a period of turbulence and uncertainty . The more the India rises the balance will shift from cooperation to competition .However the balance of power has shifted in China’s favor – with India’s dependence on Chinese power generation and telecom equipment and for vast infrastructure needs of the Indian economy .India is the largest beneficiary of the Chinese led Asian Infrastructure Bank .

Today both sides are in a tense military standoff involving several divisions .Public opinion in India is overwhelmingly critical of China .India is also trying to woo manufacturing from China and built supply chains along with Australia and Japan . Though India and US are not into an alliance the Indo US defense security ties have been strengthened ;

Since 2014 India has strengthened its relations with the US , the Quad grouping has been revived .

For India the ‘China Problem’ is that China’s periphery is also that of India’s .It is here that China seeks primacy and projects power The same periphery is critical to India’s security and to its prosperity . China’s behavior whether as a frustrated power or as a benign hegemon shall affect India as its other neighbors .

India’s Way Forward : The west and Japan recognize that perhaps India is the only country which has the civilizational heft , area , population and a significant managerial , technical and entrepreneurial skills to match and even overtake China .  They would therefore be ready to invest in India’s emergence as a top ranking power .India should take advantage of this position and create a congenial space for flow of capital and technology to India .It needs to mange plurality and have a cosmopolitan temperament .It should built on the stable polity and prevent the rise of narrow nationalism and deliberate stoking of communal discord ; The success of China’s economic miracle can be attributed to the era of globalization that prevailed which helped it pursue its investment and export led growth strategy and less to that of a one party state .Therefore we need not denigrate our democracy alone for our slower progress . 

India may not be able to emulate the development trajectory of China which was highly energy intensive . Its demand for raw material for its industries and energy resources like coal , gas and oil became a large proportion of global demand .However there is no place for another China in the global economy because there are simply not enough resources . Therefore rather than follow in China’s footsteps and soon reach a dead end India needs to design and implement its own resource frugal and sustainable energy oriented growth strategy .

There is much that India can learn from China . China’s economic success is integrally linked to the single minded promotion of its human resources through quality education at all levels . It has invested heavily in developing state of the art physical infrastructure across the country .It has greatly improved its Human Development Index over the years . These are not beyond the capacity of our democracy .

There is likely to be a prolonged political and economic uncertainty in the aftermath of the Ukraine war . This geopolitical churn may lead to unexpected power equations in the world . For India this will be a bigger and complex challenge , but history tells us that periods of change and transformation also create opportunities for more nimble states to expand their strategic space and influence  .India is well poised to explore those opportunities .

A Second Term of Tolerance and Reforms

 

The count down has started for the 17th Lok sabha elections and in a couple of days we would need to firm up our choice of candidate to be able to cast our vote . The question is would we be really looking at the candidate ? or the candidates party ? May be neither ..for we may not have much to relate to either . The pre election narrative has been such that the voter has been left with a choice between PM Narendra Modi and Rahul Gandhi of the congress or any of the regional satraps now in the fray and loosely banded as the mahagatbandhan . So it is a virtual Presidential election where in we are as good as directly electing our Prime Minister -at least as far as the BJP is concerned . Thus if we are rooting for Modi all we would look for is if the candidate belongs to BJP or is an ally of the BJP and if we are anti Modi then all we would look for is if the candidate belongs to Congress or is part of the mahagatbandhan . In this scenario even if one was not a Modi bhakt – Modi could still be a wise mans choice being the known devil as against an unknown devil .
Would incumbency matter – As per Prannoy Roy in his latest book – The Verdict – Decoding India’s elections , the era from 2002 up to 2018 has been classified as the era of the wise voter when incumbency and anti incumbency have both had a 50% success ratio .The voter has rewarded the government which has delivered with a second term or even the third term and has punished the government which did not perform . For the BJP to gain the incumbency vote the question shall be – has Modi done enough in his first term :

Where Modi gains :

* There has been no big Corruption scandal unlike the previous UPA rule which was voted out for the numerous scandals which kept tumbling out
For all the chowkidar rhetoric Rafael has not stuck .
 * Inflation has been Low and that has helped keep food prices under control which matters to the aam admi and does influence election outcomes .
 * Infra development has been note worthy – highways and road works have been completed at record speeds & metro works are in full swing across various cities . Electrification and low cost housing have also been given a boost
 * Astute Fiscal Management – Fiscal discipline has been followed by the mandarins at Raisina Hills with freebees been kept largely under control.
 * Swatch Bharat has been a worthy initiative for our filthy cities and has indeed made a difference to the common man . For sure a serious attempt has been made to eradicate open defecation .
 * GST roll out was a mega tax reform and although hastily implemented has been rationalised and corrected over the past two years .
 * Security Policy – Pakistan’s nuclear bluff has been called off ; this has given a BIG fillip to India’s international stature .At long last we are not seen as a nation twiddling our thumbs and wondering what diplomatic steps to take in the wake of repeated terrorist attacks sponsored by our neighbour .

Where Modi loses :

 * Demonetisation was too ambitious and caused much hardship to the daily wage earner and the self employed ; However the intent had been right and in any case did not end up serving any vested interest of the ruling party .
 * Jobs are simply missing ; a burgeoning young population needs work and wages which are not forth coming ; Make in India is still an idea in the making .
 * Farm Distress – Farm reforms have not happened ; the farmer has been unable to get the right price for his produce causing much hardship to the rural poor .
 * Anti Minority rhetoric and ascendancy of pro hindutvata voices – Cow vigilantism , beef ban and love jihad have been given a bull ride the excesses of which have been quietly acquiesced by the top BJP leadership This has sowed the seeds of divisiveness and distrust – exploited by the so called fringe elements .
 * Zero tolerance or intolerance – the other view and contrary opinion is being more often then not been shouted down as anti national which does not augur well for our democracy .
 * Institutional independence – is being compromised with pro government lackeys been appointed to head such bodies . RBI being a case in point .
 * Kashmir policy – has been a failure with dissent and strife having only increased amidst the Kashmiri’s and a solution to the vexed problem being no where in sight .

In my opinion the Modi gain factors out-weigh the Modi lose factors and that would help cast the vote in favour of incumbency . The Wise voter would want to give Modi a second chance and more so in the absence of any credible opposition .
Will Modi win by a landslide ? Would 2014 be repeated ? That seems unlikely . Modi would yet again form the government and get his second five year term albeit with a reduced majority . The opposition is likely to gain in pockets and more so in the south. Which in a way would be good for Indian democracy to have a strengthened opposition that keeps a check on hindutvata excesses , institutional marauding and minority bashing . What we would look forward to in Modi’s second innings is a more tolerant Modi who is a reformer and not just a performer . What we would not look forward to is Modi as the majoritarian leader of a Hindu nation .

 

Ache Dino ki Khoj – Demonetisation

Master stroke ! Bold ! Unprecedented ! Ambitious ! Foolish ! Devastating ! We have been reading all such reactions from politicians , journalists , economists and the Aam Admi .. in this milieu of contrasting voices how does one judge the demonetisation decision of our Prime Minister ? Will it achieve its intended goals – unearth black money , stop counterfeiting prevent  funding of terrorists and put a curb on corruption ?
Stop counterfeiting – Yes … without doubt … the new currency could largely address this .
Funding of terrorist – in the short term – Yes .. however as the cash gets back into circulation … this menace could recur . The visible success is what we are witnessing in the Maoists surrenders and the almost complete stop of stone throwing in Kashmir valley .
Curb corruption – it might be at a low right now due to the absence of cash – but it would be foolhardy to expect that it would be reduced due to demonetisation . As long as people have greed , are dishonest and where the society acclaims the powerful and rich irrespective of their source of funds … corruption shall prevail .
Unearth black money – to a limited extent – Yes . It depends on the quantum of black money held in cash and again the ingenuity of holders to convert it into legitimate currency .

For sure there are collateral benefits just as there have been collateral damages . Digital money or E wallets have got a boost – this in turn should bring in many more commercial transactions in the banking domain and help the governments tax collections . Hoarders of black money have got a jolt and at least a few may refrain from getting back to their murky ways . The aam admi who did not want a bill and was happy to evade the indirect tax – may think twice – not because she has suddenly become honest but because of the fear of being caught by authorities who have become more vigilant . For the masses , the poor the middle class it surely is a good feeling that the rich are being punished for their dishonest ways . However the flip side is the hardship on the migrant worker and the daily wage earner , the hawkers and the petty self employed , the thousands and millions in the unorganised sector . With the cash sucked out of the system their livelihoods have been severely affected . Indeed they are being asked to pay a big price to teach the greedy and the rich a lesson . However it should be a short term effect and they could go back to their cash and subsistence economy as soon as there is enough available .

The Prime Ministers intent is honest and for a just cause – although not totally devoid of any political calculations . Surely no political party is happy about it ( they all indulged in notes for votes  ) . The large bureaucracy which runs the government and which has totally failed to deliver even basic services is alarmed and upset . The professionals and the rich traders and businessmen who had got into the habit of evading taxes have been caught on the wrong foot … its the salaried class … the honest business man and women .. a minority .. and the poor who are rejoicing …  with the hope if this could usher in the ache din …

Of Cranes and Cleaning. ……. ( Bingo said it )

As I walked in to the drawing room .. Saw Bingo ( our Dog ) working furiously ( Bingo is never furious with strangers ) on the key board ..

What’s so interesting I enquired ?

Am doing a study on all companies having anything to do with cranes .. Replied Bingo , all attention to the work on hand .

Why cranes .. ?

Crane companies are going to be the 10 baggers… And I don’t want to miss this opportunity ..

And why would that be ?

Bingo .. Don’t you know Kiran Bedi is inducted into the BJP and is most likely to be the CM ?

Oh.. That was a long time ago .. She is no more a Police Chief and even Indira Gandhi is no more ..
Bingo continued … She has promised to clean up Delhi … Both the roads and the criminals .. Probably she may make a better use of the AAP broom ..

That may be so … But There is a lot more to Ms Bedi and its a very shallow way to think of cranes when you think of Ms Bedi ..

Bingo … Yes there is a lot more to her .. Even AK ( Kejri) is happy that she has joined politics ! Although he may have not liked her saying that she is prepared for a direct fight with her ex- colleague ..

But not all of Kejris ex- colleagues want to fight the elections .. That’s what Shazia said ..

Bingo .. Shazia like MJ ( Akbar ) wants to strengthen the party and cleanse it of all the hypocrites ..

That’s good .. Let us hope it’s all for the good of Delhi …

Bingo … Yes… But Rajnathji is not so sure … Ms Bedi may not be the parliamentary boards choice !!

Rajnathji who ? … Had heard of Shah and Modi ….

Inducting CEO’s

Team MS- Modi – Shah seems to have a free hand and they are doing it Right ! It probably started with Suresh Prabhu … Whom Modi very much wanted in his team and so a day before he was inducted into the Cabinet he joined the party . In case of Mr Prabhu one could say he was already safronized having been part of the Sena but the same cannot be said about Kiran Bedi . She may have had leanings towards the Sangh if the congresswalas have to be believed but then she was not from any party in particular and was an activist with loads of credibility . That she has been promised the Delhi Gaddi and that prompted her to join the party is possible . But that MS have been able to pull this goes to speak a lot about their political acumen .. In one swift stroke the duo seems to have halted the AAP revival if there was any !

Now if one looks back at the Congress era ( and that already seems to be a long time ago ) one cannot recall a single instance when a non congresswala has been inducted into the cabinet or probably into the chief ministership . This may be true of other parties too .. And as such nothing is wrong about it . If there are competent people in the party then they are as well given the opportunity that a democracy has thrown up . It raises a fundamental question as to why people join political parties … They would agree with the party ideology and would seek an opportunity to do public service as when such an opportunity becomes available through an electoral victory. And that being the case there would be many aspirants from BJP who would be aspiring for the CM Gaddi and for that matter for the Railway ministry .. And that the duo of MS have been able to defy the many aspirants and been able to exercise their diktat tells a lot about the clout that they hold in the party .

These have been bold decisions going against the grain of party politics and for sure would have won many more admirers for Modi and his brand of development politics . The intent is clear and the sights have been set for the long term .. And with such chanakya like astuteness the duo would help steamroll all the opposition in its path. But more important by inducting such competent people from outside the party .. a new approach to governance has been initiated and one hopes that the same standards are applied ( as done while inducting these two ) to evaluate the partywallas performance who occupy important portfolios ..

Gambling with the Sangh ..

 

Being election season and “ Dance of Democracy” being the “ Chai Pe Charcha” and all the polls pointing to the eminent rise of the saffron sun I felt the need to introspect on the BJP, the ruling party to be … as I know it . In many a social interaction I have found people to be apprehensive about Modi being anointed the Prime Minister , the worry being more on the Hindutvata score and if the wild and communal horses of the Togadias and Girirajs  would bolt the stable spreading intolerance and hatred and thereby spawn more Mumbras and Bhivandis  !

Years back my first memories of the then Jana Sangh was of the local Sangh leader who would almost regularly , in late evening , after office hours , come out with his band of loyal followers , a motley group of not more then 15 to 20 who would go around this small Mumbai suburb banging spoons on steel plates – lodging their protest against price rise . One knew that the sound of the banging spoons would never be heard and that it made no difference to the powers that be , yet the sanghis stuck to their cause and what one admired was their dedication and loyalty to their party .Those were also calamity days …when some national calamity or the other , usually in the form of floods and sometimes of famines would strike some part of the country and then one would read about the RSS volunteers who selflessly worked and helped the needy . And then there were the RSS morning parades when you saw a few young boys in their khaki half pants marching at the corner open space – grounds having always been a scarcity in Mumbai . One noticed that the sanghis were few , a minority and usually had a known sect of followers such as the Maharashtrian Brahmins ( usually Koknasthas) or people affected by the partition such as the Sindhis and the Punjabis ( not the Sikhs) . One of my uncles ( not a Maharashtrian Brahmin though) who was a Sangh leader of some prominence would always speak of the eminent Muslim threat and how in years to come the Muslim population would surpass the Hindus with Hindustan being converted into an Islamisthan  !! This ‘Hate and Fear Muslim” ideology never really appealed to us boys and none of my friends ever joined the morning parades …or may be it was just the peculiar high waist stitch of the khaki half pants which kept us away !

Much later the emergency gave birth to the Janata Party and the Janasangh was merged and dissolved into the hotchpotch of the ‘Indira Hatao” parties . However this was not to last and from the hotchpotch remerged the new avatar of the sangh the BJP ..Which is of course more recent history but largely over shadowed by Advanijis Rath Yatra followed by the Babri demolition , the riots that followed and then the communal carnage in Gujarat . During the NDA’s stint in power lead by the BJP , the temple was not built nor was article 370 abrogated and the uniform civil code implemented . Probably it was Atalji or the allies who kept the  “Attal” sanghis in check . Will Modi be able to do the encore and keep the sanghis in check while he launches the “ Gujarat Model” across the nation ? Will the largest minority of Muslims be not looked with the aspersion that they would eventually overwhelm the majority ? Would the two communities truly integrate and prevent the need of a Mumbra ? In this developmental vs corruption debate what place would the slogan “ Garv Se Kaho Hum Hindu Hai” have ?

With this perception of the BJP and the sangh , it would not appear to be the most popular political combine that people wish to vote for . Their regional allies are not helping either . Is it then the popularity of Narendra Bhai which is drawing the crowds and probably the votes ?  Modi seems to be largely a social media creation whose backroom boys have run an extremely successful campaign . What the BJP seems to be gaining from is the anti incumbency vote , the economic down turn , the corruption scandals that were unearthed and not the least .. Rahuls disconnect with the youth .Though Arvind Kejriwal has lagged behind he needs to be credited for awakening the voter and for the increase in percentage of votes polled , the benefit of which shall ironically accrue to Modi …at least for the present.

Now that it is a given – will Modi make the difference and take the nation truly away from vote bank politics . Has BJP truly metamorphosed ? M J Akbar thinks so . I too have gambled that way !

 

Democracy Breeds vote banks..

In all our discussions and debates when we try to understand as to what went wrong and why India has been subjected to this ‘Hindu Rate” of growth , the one thing which stands out and for which we always thank the founding fathers of this nation is for the precious gift of Democracy which they bestowed upon us . It’s not only we Indians who are proud but the world at large admires this largest democracy where 815 million are in the process of exercising their franchise to elect the government of their choice . But has democracy delivered to our expectations ? In almost all the social indicators we still lag behind and in some cases are even on par with sub Saharan Africa . So what is it to be proud of about a system which has abysmally failed us ? It is said that Democracy is the glue which has held this diverse country together – a country with multiple faiths , languages and cultures . Democracy has been the pressure release valve which allows different interest groups to vent their feelings through the ballot box . Everybody has his or her say …but does she ? Ironically this very feature of democracy is exploited by the different interest groups who create their vote banks to extract favours from the powers to be . So can we then say that Democracy does breeds vote banks . The interest groups may band together of their own accord or could get banded together by the wily politician who lurks for such opportunities ..in one case it could be a genuine effort to get what they have been denied or as in the later a simple exploitation of a bogey created by the opportunist politician . The forms of the later type being many ..it could be a religious minority in whom the fear of being subjugated by the majority is implanted or the parochial zealot who talks about local jobs being taken over by the ‘outsiders’ .

Ultimately it will only be the maturing of the voter who shall be able to eliminate this scourge of democracy when the only criteria for casting her vote would be based on the candidates or the parties ability to deliver on development be it social or economic ..