India has been skeptical of the China Pakistan Economic Corridor (CPEC) from its very inception. It recognizes CPEC as a stumbling block for realization of its dream as a great power of Asia.
In 2018 India presented 7.5 percent growth rate as a sign of overcoming China with a growth rate of 6.5 percent. In mathematical terms it seems fascinating but its translation into real development of net worth does not make any difference. According to calculations published in the Times of India in March 2018, they clearly rejects the notion of any comparison between China and India in term of gains in net worth during 2017-2018.
Calculations show that with 7.5 percent growth India would only be able to add 215 Billion US dollars in 2018 to its GDP. For China, the figure would be 1181 billion US dollar. China’s rate of increase in economy almost equals half of India’s economy every year.
There is no doubt that India is a rising middle power and it has its own advantages. It is one of the biggest markets. It has a rising middle class, which is important for sustainable growth. But the point is that India has to be realistic in exhibiting its status and power and play a constructive role. It will reap the benefits of cooperation and economic initiatives.
Unfortunately, India’s actions point to another direction. From its perceived imagination India is trying to act as a stumbling block in the region. CPEC is the latest victim of this attitude of India. Although some experts believe that it is due to enmity of India toward Pakistan, but it is not the full story.
India is a rising middle power and it has its own advantages. It is one of the biggest markets. It has a rising middle class, which is important for sustainable growth. But the point is that India has to be realistic in exhibiting its status and power and play a constructive role. It will reap the benefits of cooperation and economic initiatives
However, sane voices in India are arguing in another direction. They are asking their government to be a partner in CPEC and reap the benefits of economic development. CPEC has enormous benefits for India. Shyam Saran, ex-Indian diplomat pointed out that looking at the financial health of India, it is wise for India to be part of the Belt and Road Initiative (BRI), and CPEC presents an opportunity.
For improving regional connectivity there is a need to improve transport and related infrastructure. South Asia is lagging behind on this by a million miles. The World Bank in 2014 estimated that South Asia needs 1.7 to 2.5 trillion dollars to improve its infrastructure related to transport, service and others till 2020.Annual spread of this required investment shows that every year South Asia will have to invest 6.6 to 9.9 percent of the accumulative GDP of South Asia. Another dimension of the issue is that lack of investment will increase the cost of investment, as we have observed it has increased form 3 percent in 2010 to 6.6 to 9.9 percent in 2014.Pakistan and India stand alone in all these calculations due to increasing population and middle class.
CPEC provides an opportunity for the region to benefit from it and become part of the greater plan of BRI. Although CPEC will not be able to provide all required investment but it will help to cover a substantial part of it. Pakistan by recognizing this fact has become part of CPEC. In recent years Pakistan has immensely benefited from investment in energy and transport infrastructure. It is also advisable for India to be part of it and reap the benefit. Inclusion of India will also pave the way for other regional countries and there would be smooth sailing for CPEC and BRI. It is also important for India in context of transition of economy from primary to tertiary stage. Right now, India’s secondary sector i.e. manufacturing sector, did not show much development. It is necessary in transition phase that manufacturing sector takes off to create jobs. The same is true for Pakistan and Pakistan is trying overcoming this through CPEC investments. Planned Special Economic Zones are a step in this direction.
Moreover, joining of India to CPEC will also open doors of opportunities for regional connectivity and connectivity to Central Asian States. Being part of CPEC and BCMI, India can benefit by creating linkages between these corridors. It will open Afghan and Central Asian markets for India. India is craving for many years to enter Afghanistan and Central Asia, CPEC can help it. It would also be beneficial for other regional countries, as it will open markets for Nepal, Sri Lanka and Myanmar etc.
Fortunately, China and Pakistan are open for inclusion of India or any other country in CPEC. Both countries have reiterated many times that CPEC is a project of the future and for everyone. However, India’s self-perceived fears, assumptions and dreams are hindering the inclusion of India. India can decide anything as a sovereign country, but it has to keep in mind that the opportunity cost of missing CPEC and BRI is very high for India and the region.
South Asia needs an investment of 1.7 to 2.5 trillion US dollars, only for infrastructure. This does not include the investment in education, health, skill development or human capital development. Addition of these costs may increase the investment figure to 3-5 trillion US dollars. Therefore, taking any initiative, India must remember that 3-5 trillion is beyond the capacity of any country or South Asia as a region.
The writer is Executive Director of the Zalmi Foundation
Published in Daily Times, January 28th 2019.