India and The World

India’s Concerns with regard to CPEC and the way out?

Pakistan and China are on the path of executing a multi billion dollar mammoth infrastructure project called China-Pakistan Economic Corridor (CPEC). These two countries are describing the project as a “game-changer” and a crucial arm of China’s One Belt One Road (OBOR) Project. The project announced in June 2015 by Chinese President Xi Jinping stipulated an investment of $46bn to develop infrastructure and energy projects in Pakistan. India was not invited by China in its OBOR or New Silk Route Project or CPEC. India raised its objections against the CPEC on strategic concerns and said that it was “unacceptable”. The CPEC is part of China’s “One Belt and One Road” or new Silk Road project  and consists of a series of roads, railways, pipelines, hydro power plants and other development projects, being built from the restive Xinjiang province in China to Gwadar in south-western Pakistan. The CPEC came into operation last November.

The CPSE passes through Gilgit-Baltistan in Pakistan-administered Kashmir. But there is a dispute between India and Pakistan on Kashmir region. The Indian Prime Minister clearly said in January 2017 that CPEC can fulfill its promise of regional connectivity only by respecting the sovereignty of countries involved. On a separate occasion India’s foreign secretary, Subrahmanyam Jaishankar also expressed hope that the developers of CPEC would respect other people’s sovereignty.

China-Pakistan Claims on CPEC

 China claims the main purpose of CPEC is regional connectivity for economic development.  Further, Pakistan dismisses India’s concerns. Nafees Zakaria, a Pakistan foreign ministry spokesman asserted that the economic corridor was a “comprehensive and broad-based economic cooperation project”. The project will contribute to economic development of the entire region and not only for Pakistan and China. Pakistani analysts believe, “It can be a catalyst for economic connectivity and integration in Central Asia, South Asia and West Asia. Pakistani analysts hold the opinion that objection by India or any other country to such an economic project was beyond comprehension.

The 3,200km-long corridor is intended to connect the world’s second largest economy, China, with the Middle East and Central Asia, reducing the alternative sea route distance – via the Malacca Strait – by 10,000 km. China is rising to become a global power and it is already the second largest economy of the world. By 2050, according to a report by Price waterhouse Coopers, China is projected to become the world’s largest economy, with a GDP of $58.5 trillion, up from $5.7 trillion in 2010. The country’s GDP growth rate has declined in recent years, however, from 7.3 percent in 2014 to 6.7 percent in 2016.

Pakistani economy is small and not so diversified. It depended much on the US assistance for its contribution in war against terror. In recent past it requested lloans from the World Bank even for its budgetary expenditures. The CPEC is anticipated to boost Pakistan’s economy, where the GDP is expected to grow by more than five percent by 2020, according to an IMF growth forecast. Price waterhouse Coopers predicts that Pakistan’s GDP will reach $4.2 trillion by 2050 from the current $988 bn.  For Pakistan, the combined value of the CPEC’s infrastructure projects would be equivalent to 17 percent of Pakistan’s GDP in 2015, a report by Deloitte predicted. The report estimated that the economic corridor would create some 700,000 direct jobs between 2015 and 2030, and add up to 2.5 percent to the country’s growth rate.

India’s Concerns

Although the project promises to be an immense economic and strategic windfall for China and Pakistan, for India it is a matter of strategic concern. The problem is multi-pronged pronged. First is the isolationist approach of China and deep alliance with an adversary of India with an aim to contain India. It is easy to understand that if China is spending such a mammoth amount on a project which would take years to be economically feasible and rewarding, there must be strategic reasons behind undertaking such a project (because economic returns are not possible immediately). The idea that this project would lead to economic benefits to the region is doubtful because Pakistan has always obstructed India’s direct trade access to the Central Asia or other regions in the Middle East. India is the biggest trading country in the region after China. Secondly, China may be keeping in mind its own logistic requirements including uninterrupted energy supply and military access through CPEC, despite claiming it purely an economic venture. Thirdly, the CPEC project passes through disputed POK where the presence of a third party is unacceptable as long as dispute is not settled. Fourthly, China is engaging with Pakistan and helping Pakistan through military and development cooperation so as to contain India. Overall, India cannot take the project as purely economic and it needs to be cautious.

India’s counter strategy: Possibilities and realities

There is one possibility that China and Pakistan co-opt India as a partner in the CPEC. But given the above mentioned concerns would India be ready to join the CPEC? Andrew Small, author of The China-Pakistan Axis: Asia’s New Geopolitics, doesn’t believe that the offers to India to join CPEC will elicit a positive response in the near future. But he believes there is a view among a number of officials in China and Pakistan that, in the long-term, that door needs to be kept open.However, according to Small, keeping the door open does not mean that India will become enthusiastic about CPEC but that “it will be neutrally disposed – seeing some potential security benefits if Pakistan’s economy is stabilized.”

According to a report released by the Stockholm International Peace Research Institute – a Swedish-based think-tank – India’s opposition to CPEC reflects a concern over the internationalisation of the Kashmir dispute and the growing influence of China in the Indian Ocean. It says that there is considerable concern within India that China, which has been neutral on Kashmir since 1963, can no longer be so now that its economic and security interests in these territories are growing. After the 1962 India-China war, Beijing sought to cultivate good relations with Islamabad, which has emerged as the biggest buyer of Chinese defence equipment in recent years.

The option of co-opting India in the CPEC is, nevertheless, not so easy in the immediate terms because of the intricacies of the geopolitics in the region. Small explains that India doesn’t need to “join CPEC” anyway – in the future, it could maintain its formal objections to the initiative but still deepen trade relations with Pakistan, and in the process implicitly be utilising CPEC infrastructure, energy projects, industrial zones and more. But Mihir Sharma, who is the author of Restart: The last chance for the Indian Economy, says that India’s relations with Pakistan are simply too unstable for the former’s primary land connectivity corridor to Central Asia, Russia and Europe, to run through the latter’s territory. “The risk of the investment and of trade through that corridor, in both geo-strategic and economic terms, might be too high.”

Chabahar Project and route to Central Asia through Afghanistan

Another answer which India has already conceived and started working on as an alternative route is through Chabahar to Central Asia. The Chabahar alternative may be India’s answer to CPEC for the time being, but it has its own problems- poor infrastructure and disturbed western region of Afghanistan may be a major hurdle in implementing the project.

India signed (May 23, 2016) a historic deal to develop the strategic port of Chabahar in Iran and agreed on a three-nation pact to build a transport-and-trade corridor through Afghanistan that could help halve the time and cost of doing business with Central Asia and Europe.The deal was signed in the presence of Afghan president Ashraf Ghani and Iranian President Hassan Rouhani. Developing the Chabahar port was seen as crucial for India because it will not only allow New Delhi to bypass Pakistan and access global markets but also counter China’s expanding influence in the Indian Ocean region. But the project’s land route through Afghanistan remains a security headache. According to the Prime Minister of India, “The agreement (if successful in its mission) …can alter the course of history of the region. Studies show that… the corridor could bring down cost, time of cargo trade to Europe by about 50%.”

India has watched with unease Chinese funding for a strategic port in Gwadar, Pakistan, which New Delhi believes will give Beijing access to the Indian Ocean region. In response, New Delhi began negotiations with Tehran more than a decade ago to develop the Chabahar port to counter the Chinese moves in what is seen as part of India’s sphere of influence. The Chabahar bilateral deal with Tehran will see India spend about $500 million (Rs 3,400 crores) to develop the port in southeastern Iran’s Sistan-Baluchistan province as a regional trade hub. This will allow it to open up an alternative land-sea route for trade with Afghanistan.

As part of a separate trilateral deal, India, Afghanistan and Iran agreed to establish a land transit-and-trade corridor. The three nations have engaged in protracted negotiations since 2003 but the lifting of sanctions on Tehran in January has boosted prospects of the port’s development.

From Chabahar port, the existing Iranian road network can link up to Zaranj in Afghanistan. This road can then connect to the 218-km Zaranj-Delaram road — constructed by India in 2009 at a cost of Rs 680 crore – and finally to Afghanistan’s Garland highway. This will give India road access to four major cities; Afghanistan-Herat, Kandahar, Kabul and Mazar-e-Sharif but Kabul has already warned New Delhi to be ready for possible attacks by Pakistan-backed elements to delay the project. Future plan include an International North-South Transport Corridor through Iran to Russia and Europe. Indian will invest $500 million (Rs 1,000 crore) in phase-1, including $150 million line of credit from Exim Bank to the Iran’s Maritime and Ports Organisation for making jetties and berths at Chabahar.

State-owned construction firm Ircon signed an agreement to lay a rail line from Chabahar port to Zahedan and Nalco signed a deal to look at the possibility of setting up a 0.5 million tone aluminium smelter at Chabahar free-trade zone, provided Iran gives cheap natural gas. India Ports Global, a recently formed port project investment arm of the shipping ministry and a joint venture between the Jawaharlal Nehru Port Trust and the Kandla port, will invest $85 million in developing two container berths with a length of 640 metres and three multi-cargo berths.

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