International Relations

This article deals with ‘India-Nepal Relations.’ This is part of our series on ‘International Relations’, which is an important pillar of the GS-2 syllabus. For more articles, you can click here.

• India and Nepal are connected geographically, historically, religiously, economically and financially.
• Open borders, shared religious background, marital relations, and unrestricted movement of people between the two nations are unique characteristics of bilateral ties. 
• India and Nepal share a long boundary, and 5 Indian states-Uttarakhand, Uttar Pradesh, West Bengal, Sikkim and Bihar are adjacent to Nepal.
• But in recent times, the relationship between the two countries has been going through an obnoxious phase.  

Common Culture

• India and Nepal have had common culture since times immemorial. 
• For example
  • In Ramayana, Sita was from Janakpuri (Nepal).
  • Buddha was born in Rummendei in Nepal. Emperor Ashoka has also visited that place.

British Times

• Treaty of Sagauli of 1816: Britishers defeated the Gurkhas in the Anglo-Gurkha wars and subsequently signed the Treaty of Sagauli.  
• As per the treaty 
  • Uttaranchal, Himachal Pradesh and Sikkim were annexed to the British empire.
  • Treaty established Mahakali or Kali  River as a dividing line in the Western sector.
  • British resident was stationed at Kathmandu. 
  • Nepal surrendered its foreign policy to Britishers.
  • Britishers started to recruit Gorkhas to British Army. 

Treaty of Peace & Friendship, 1950

• After the Independence, India and Nepal signed the Treaty of Peace and Friendship in 1950.
• Under the terms of the treaty 
  • Nepal would consult India whenever they undertake any arms imports from any nation other than India.
  • Neither government shall tolerate any threat to the security of the other by a foreign aggressor.
  • Opening of the border between the two countries. 
  • Citizens of both countries are empowered to have the same privileges for property, trade and residence, movement, and work in India without a work permit.
  • As per Article X in the treaty, either party can ask for a change in the treaty whenever demanded.

• A large number of Nepalese work in India (nearly 30 lakh Nepalis or 10% of Nepal’s population). Significant among them are Gorkha soldiers in the Indian army. 
• Nepalese and Indians have common cultural & historical ties.
• A large majority in Nepal follows Hinduism.
• People belonging to the Terai region of India and Nepal have kinship and marital ties.  
• Nepal is a landlocked country, and access to the outer world is only through India. 
• Indian cinema & music is highly popular in Nepal.  

1 . Open Border Issue

• Peace and Friendship Treaty of 1950 accepted “open border” between India and Nepal. An “open border” means an unrestricted movement of people from either side.
• Due to Open Border, many illegal activities are carried like
  • Fake Currency,
  • Terrorist penetration, 
  • Drug Smuggling, 
  • Human Trafficking. 
  • Pakistan has been taking advantage of the open border to infiltrate terrorists and pump fake Currency into India. 

2. Kalapani Issue

• The origin of the Kalapani issue goes back to the Treaty of Sagauli. As per the treaty, the Kali River was designated as the boundary. In between the two streams of the Kali, the river lies Kalapani. The issue arises because India recognizes the eastern stream as the Kali river while Nepal recognizes the western stream as the Kali river. 
• Kalapani is a strategic position located at the trijunction of India, China and Nepal and provides an advantage to India vis a vis China. Nepal is demanding it (under Chinese pressure, demand is gaining strength). 
• This issue took an ugly turn in 2020. India built a new 80 km-long road in the Himalayas, connecting to the border with China, at the Lipulekh pass. The Nepali government protested immediately, contending that the road crosses territory that it claims and accusing India of changing the status quo. Later, Nepal enlarged its claim from 35 square kilometres of territory to nearly 400 square kilometres and incorporated it into the revised map through a constitutional amendment.

3. Nepal Constitution of 2015 and Madheshi Issue

Constituent Assembly of Nepal framed the constitution of Nepal, which came into force in 2015. But India was not happy with this development because of the following reasons:-

1. In the new constitution, the Madheshi (who constitute 70% of the population, speak Maithili, Bhojpuri, Awadhi and Hindi and have a close relationship with Indian living across the border) were left out. Out of 165 Legislative Assembly seats, they were given just 65 seats, while Pahadis were given 100 seats. 
2. It also intends to destroy the roti-beti character, as women from UP and Bihar states of India who marry a Madheshi will be treated as a foreigner for up to five years.

4. River issues

• Nepal is an upper riparian state and has great hydropower generation potential. However, Nepal’s installed hydel capacity of 800 MW is much lesser than the potential of over 80 GW. Due to power shortages, power cuts are common throughout the country. India has approached Nepal to develop power projects on the Nepalese river on the condition of getting preferential rights over Nepalese waters. Still, Nepal has refused it due to sovereignty issues and the Indian track record of not delivering projects on time. 
• India and Nepal share three major rivers, i.e. Kosi, Gandhak & Mahakali. There are three treaties to regulate water sharing, and these include
  1. Kosi River Treaty: Kosi river causes tremendous flooding in Bihar. As per the treaty, the two sides agreed to manage Kosi flooding. India has constructed the barrage on the Kosi river in Nepal, and Nepal agreed to give its management rights to India for 199 years. 
  2. Gandak River Treaty: Under the treaty, both sides utilize water from the Gandak river to generate 20 GW of electricity. 
  3. Mahakali River Treaty: Under the treaty, India has agreed to undertake the creation of three dams at Sarda, Janakpur and Pancheshwar. Both sides have agreed to share costs. However, there has been no progress on these projects owing to pending social and environmental impact assessment.
• Certain sections in Nepal allege that India, while managing the barrage on the Kosi river, does not release adequate water for irrigation and, during floods, opens the gates, leading to many villages getting submerged completely.

• China has increased its footprint in Nepal. China in 2015 overtook India as Nepal’s biggest foreign investor.
• The present government has a clear tilt towards China.
• In 2024, newly elected PM Oli decided to make his first bilateral visit to China, a break from tradition.

• Chinese Project of which Nepal is part include
  • China and Nepal have signed an agreement for all-weather road connectivity between Kathmandu and the Tibet Autonomous Region.
  • China is planning to extend its rail network to the Nepal border. 
  • Nepal is part of the One Belt One Road (OBOR ) Project.
  • China is funding powerplant on Budhi Gandaki (worth $ 2.5 billion), Trishuli river etc. 
  • China has agreed to provide access to the Tianjin seaport to transit Nepali goods (but distance = 3,000 km || compared to 1,000 km from Haldia port ). 
  • China is making Dry Port at Kodari (China has already made the road from Kathmandu to Kodari) 
  • China is constructing a road connecting Kodari with Zhangmu (in Tibet).  
  • China Study Centers (CSC) and Confucius Institutes have been opened in large numbers in Nepal.

• In previous years, the Indian share in Nepal’s foreign trade is decreasing while China’s is increasing.

Why Nepal is interested in China

• Dependency on India: Nepal has found itself heavily reliant on India for an outlet to the outer world because of its geographical constraints. India can practically blockade Nepal in case of any dispute. 
• Ideological basis: The communist parties in Nepal have favoured and consistently protested against India.
• Economic Opportunities: Nepal views the Chinese railway as an opportunity to bring Chinese pilgrims and tourists to Lumbini, the birthplace of the Buddha, and the famous valley of Pokhara. The  
• Earlier, King Mahendra (in1960s), Birendra & Gyanendra too used China card. Hence, it is not a new problem.

Why China is interested in Nepal

• The market for Chinese products in Nepal.
• The Tibetan community in Nepal is a serious concern. China is pressuring the Nepalese government to do crackdown on Tibetan activities.
• Use Nepal in breaching the Himalayan barrier. 

Why India is worried?

• Strategic vulnerabilities: Rising Nepal and China cooperation signals that the Himalayas are not a barrier anymore.
• Debt Trap diplomacy of China: China can take parts of Nepal on lease as done in Sri Lanka in the case of Hambantota port.
• Effect on other neighbours: Including Bhutan, which has faced similar circumstances with India and China.
• Impact on regional groupings: Growing China-Nepal relations may become a hurdle in regional groups like BIMSTEC, in which Nepal holds a powerful voice.

Indian strategy to contain it

• Due to the Indian policy of not buying power from Chinese projects, the Nepalese government was forced to abandon Chinese involvement in the West SETI Power Project. Hence, the Nepalese government gave the project to NHPC.

Historical Ties

• Sino-Indian friendship dates back to ancient times.  
• Buddhism travelled from India to China. 
• Chinese travellers like Fa Hien, Xuanzang etc., have travelled to India in the past.
• Both India and China were part of the Silk Road Trade. 
• Chinese inventions like paper making, sugar making etc., also travelled to India.

Initial Years

Both became independent at the same time 

• But at the time of independence, India was Non-Aligned, whereas China under the leadership of Mao was Communist.
• Nehru wanted good relations with China. Due to this reason, when the Chinese Army entered Tibet and took it over, India recognized Tibet as part of China. India gave up its rights over Tibet in 1954 (like the Right to station the army, control over post & telegraph etc.).

It removed the buffer of Tibet, which acted as a barrier between India and China. The British had always maintained Tibet as a buffer, and its annexation heightened Indian concerns. 

Vallabhbhai Patel favoured a more cautious approach and advocated for a military build-up and the creation of roads near the China border along with US cooperation to balance China. But unfortunately, he died in 1950, and India’s China policy came entirely into the hands of Nehru.

Panchsheel, 1954

India was disappointed in China’s Tibet policy. But, for the sake of friendship and as a confidence-building measure, they signed Panchsheel.

Five principles of Panchsheel were also incorporated in the agreement of 1954. These were

1. Mutual respect for each other’s territorial integrity & sovereignty; 
2. Mutual non‐aggression; 
3. Mutual non‐interference in each other’s internal affairs; 
4. Equality and mutual benefit;  
5. Peaceful co‐existence

Prelude to the 1962 War

• During the 1950s, when China began to consolidate its position in Tibet, the US, through its CIA, covertly supported Tibetans. The CIA’s support of arms and equipment convinced Mao that the India-US was collectively conspiring against China. In March 1959, there was a massive Tibetan uprising known as Lhasa Uprising. China crushed the uprising brutally. After the Lhasa Uprising of 1959, Dalai Lama came to take refuge in India. It made China suspicious of India. 
• The global situation changed as well.  Khrushchev came to power in USSR, and he was a reformist, unlike Stalin. Khrushchev was not liked by Mao & China started to fear both USA & USSR. 
• India had considerable influence in Africa, with Nehru constantly pitching for aggressive non-violent and non-revolutionary policies. According to Mao, this created a misleading effect on African leaders, who were being influenced to fight for freedom in a non-violent way. He advocated that revolution was the only way ahead.
• This period also saw the tense situation of the Cuban Missile crisis in which the USA and USSR reached at the brink of nuclear war. China decided to exploit this situation. 

War of 1962

Reasons of War

• Case of Tibet: Chinese felt that India supported the uprising in Tibet.
• China is an ambitious country & both India & China wanted to be leaders of the Afro-Asian world.
• Undefined borders between China & India: China refused to accept the Macmohan Line & India declined to accept Aksai Chin as part of China.
• For Mao, Nehru was a bourgeois leader, and he viewed Nehru and his policies with suspicion. 

Impact on Sino – Indian Relations

• There was a freeze in Sino-Indian relations till 1988. There was a situation of permanent hostility.
• The emergence of an alliance between China & Pakistan.  
• It pushed India to the side of the USSR.
• Massive militarization & nuclearization was seen in India.

Confrontation in 1986-87 and Rajiv Gandhi’s visit in 1988

• In 1986-87, both armies came to near conflict in Sumdorung Chu in the eastern sector.
• After that, PM Rajiv Gandhi visited China, which marked the new beginning in Indo-China relations and a Joint communiqué to restore friendly ties & work towards a mutually acceptable solution to border disputes. 
• Deng Xiaoping era, too, had dropped the revolutionary spirit of Mao and favoured a market-oriented economy. It played an essential role in the new Sino-Indian rapprochement.

Fall of USSR and Indo-China Relations

• In 1989, when USSR began to disintegrate, there were protests in China that challenged the CCP rule in China. These were brutally crushed, resulting in the suppression and massacre of the mobs at Tiananmen Square. Moreover, the fall of communism, the Berlin Wall and the independence of the satellite states of the Soviet Union made the survival of CCP uncertain. The CCP, out of its need for survival, initiated a good neighbourhood policy to build up relations with India. 
• As the Cold War ended, India lost the power backup of the USSR, and as the Gulf War progressed, it created a financial crisis in India as it choked its remittances from the region. India and China began to develop proximity and mutual understanding for their survival. China wanted India not to internationalize the Beijing massacre, while India conveyed to China that it would support the Chinese ideology of opposing any western interference in internal affairs.

Xi Jinping Era

• The present era is the Xi Jinping Era, marked by the concentration of power in the hands of Xi by demolishing the old leaders and placing the loyals in the politburo.
• Big country diplomacy: Xi regime has shed the earlier strategy of remaining low key and now started to follow Big Country Diplomacy. It has achieved this via large scale investments in infrastructure projects in other countries, developments of 5G technology, up-gradation of the military etc.
• Wolf Warrior Diplomacy: The shift in Chinese foreign policy from conservative, passive and low-key to assertive, passive and high-profile. The term is based on a 2015 Chinese movie titled ‘Wolf Warrior’, which involves a group of Chinese soldiers who go out of China and carry out offensive attacks in enemy countries. The examples include the aggressive attitude wrt border issues (against India, Japan, Vietnam, Philippines etc.) and aggressive counter of the anti-China narrative post-COVID-19. 

Recent visits and developments

There are three sectors where boundaries are disputed by India & China.

Since boundaries are not clearly demarcated. Hence, a lot of incursions take place.

1. Aksai Chin Issue

• The territorial dispute over Aksai Chin can be traced back to the failure of the British Empire to demarcate a legal border between its Indian colony and China. 
• Two borders between India and China were proposed during the British Raj – 
  1. Johnson Line: It shows Aksai Chin under Indian control.
  2. Macartney-MacDonald Line: It places Aksai Chin under Chinese control. 

Conflicted Claims

During the war of 1962, China took control of Aksai Chin. 

Note: Main reason for annexing Aksai Chin was to build a road connecting Xinjiang Region and Tibet to strengthen its hold over Tibet. The only way to build a motorable road was to pass through Aksai Chin. Till the war of 1962, the Chinese were ready to accept Arunachal Pradesh and other disputed regions as part of India, provided India accepted Aksai Chin as part of China. Chinese always felt that the Indian claim on Aksai Chin was to undermine the Chinese influence in Tibet as historically India had never occupied, nor was of any strategic importance to India.

2. Tibet Issue

• Tibet’s political system was based on the Buddhist faith. Dalai Lama was also the political head of the country. 
• Tibet’s political connections with China varied from time to time. But Dalai Lama, both the spiritual and political head of the Tibetans, never owed any allegiance to the Chinese emperor like the rulers of Korea and Vietnam did.

• 1914 Shimla Agreement: Under the provisions of the Agreement 
  • Inner Tibet was placed under China.
  • Outer Tibet was placed under Dalai Lama. 
  • Agreement also demarcated a line between Tibet & North East India known as Macmahon Line. 
  • India was given certain rights in Tibet, like free entry in Tibet, the right to station troops & maintain communication etc.
• But, China disputed this line as an imperial line drawn by the Britishers.    

• China insists that Tibet has been a part of China since the 12th century Yuan Dynasty and has branded the military operation to invade Tibet in 1950 as an exercise of peaceful liberation. On the other hand, Tibetans hold that Tibet was independent before the 1950 Chinese operation. In the Yuan Dynasty period, China and Tibet had established a priest-patron relation which in no way implies that Tibet became a vassal of China.  
• In 1959, Lhasa Uprising started in Tibet. The Chinese Army crushed it, and as a result, Dalai Lama took refuge in India. It worsened the Sino-India relations leading to the War of 1962.
• India continues to officially support that Tibet was a part of China as recognized in 1954 but, ironically, still supports the Tibetan government in exile in India as Tibet can give India the required leverage against China.

Latest Issues

• China is increasing the number of Han Chinese in the region to change the demography of the Tibetan area. Soon, the Han Chinese will become the majority while Tibetans will be reduced to a minority in Tibet, diluting the overall cause of Tibetan autonomy.
• China’s massive military build-up and infrastructure development in Tibet.
• Plans to divert or dam rivers (e.g., Zangmu, Dagu etc., on the Brahmaputra) that rise in Tibet and flow into India. 
• China’s ‘Gold Rush’ in Tibet: China’s has started mineral mining to extract precious metals, rare earth etc.
• Geoengineering Experiments: Recently, there have been reports of China’s geoengineering experiments to “trigger natural disasters such as floods, droughts and tornadoes to weaken” an enemy in the event of a war. 

Side Topic: Why is Tibet so important for China?

• Buffer between powers across Himalayas i.e. India and China.
• Source of water as it is house to large number of glaciers. Major rivers like Brahmaputra and Satluj originates in Tibet.
• Tibet is resource rich and China has planed to extract minerals such as gold and rare earth metals from the region.

Galwan Issue

• Chinese soldiers crossed the LAC around the Galwan River valley during May 2020. 
• It was followed by killing at least 20 Indian soldiers in a clash with Chinese forces. It was the first such clash in the border area in at least 45 years.

Reasons for Galwan confrontation

• India is developing large scale infrastructure along LAC like Daulat Beg Oldie Road, which has challenged the Chinese superiority in the region.
• Response to Doklam Crisis (dealt below).
• Reorganization of Jammu and Kashmir: China had earlier also protested against the formation of the new Union Territory of Ladakh and accused India of transforming the status quo unilaterally.
• The global backlash against China for spreading and mishandling of COVID-19. 
• Signs of new Chinese aggressiveness and part of ‘Wolf Warrior Diplomacy‘. 
• The Chinese response to India’s participation in Quadrilateral Security Dialogue (Quad) and challenge to Chinese position in Indo-Pacific region. 

Doklam Issue

• Doklam (Donglang in Chinese) plateau is disputed between Bhutan (not India) and China.
• Town named Yadong in Chumbi Valley (in China) is connected to Lhasa with an all-weather road. China was building a road connecting Yadong to the Doklam Plateau, which facilitated the fast mobilization of Chinese troops to Doklam in case of war. Indian troops intervened to block Chinese soldiers since the area was disputed.   

Importance of Doklam

• India can’t allow this because that will bring Chinese troops within striking distance of the Chicken’s Neck or Siliguri Corridor.
• Sikkim is one of the few sectors where India has a strategic advantage vis-a-vis China. Doka La, the Indian Post in Sikkim, has the advantage of height wrt Chinese forces in Chumbi Valley. China wants to build a base in Doklam to nullify the Indian advantage.
• India serves as a virtual security guarantor of Bhutan. If India abdicates its responsibilities towards Bhutan, India’s image as a counterforce to balance China will suffer.

Side Topic: Salami Slicing Policy

• The term ‘Salami Slicing Policy’ was coined by Hungarian Matyaas Rakosi in 1940s.

• Salami Slicing means a strategy of carrying out small actions in a covert manner that eventually accumulates into a larger action.
• Using this strategy, China initiates territorial claims by staking claims to territory. Then, it carries out intensive propaganda at all platforms (domestic and international) to claim the territory. The propaganda by China is so intense that it positions the territory in concern as a ‘dispute’. Then China uses all it’s diplomatic and military might to resolve the dispute by avoiding a forceful intervention.

Side Topic: Stapled Visas

• Stapled Visa is a visa where the country’s stamps are not placed directly on the passport, but pages are stapled to it. When the visitor leaves the country, his visa and entry and exit stamps are torn out, leaving no record on his passport.
• In the case of China, Indian citizens from Jammu and Kashmir and Arunachal Pradesh are given Stapled Visas. 
• The reason given by the Chinese Foreign Ministry is that since J&K and Arunachal Pradesh are contested territories, so they can’t directly stamp the passport of a person’s belonging to that region. Stamping a passport would imply recognition of the status quo. 

China has become India’s largest trading partner. But India has a huge trade deficit with China of 77 Billion $, contributing to India’s 25% trade deficit with the whole world. 

Why is  India  Important to  China?

India is essential for Chinese growth because it provides China with 

• Access to a billion-plus market for its products.
• Avenue for the investment of surplus Chinese capital. 
• Alternative market due to to the western markets.

Issues

• Huge Deficit: India has a huge trade deficit of $ 63 Billion with China. 
• Currency Manipulator:   China keeps the Yuan undervalued to promote Chinese exports. 
• Non-Tariff Barriers: Indian Farm sector, agro-processing industry and Pharmaceutical Sector face Non-Tariff barriers from China. 
• Security implications
  • Chinese Mobiles can be used for surveillance.
  • Significant Chinese investment in Power Sector results in the transfer of the blueprint of Indian Power Grids in Chinese hands.
  • India’s excessive dependence (up to 80%) on China for Active Pharmaceutical Ingredients (API).
  • 5G security issue, especially with Huawei due to its alleged links with CCP.
• There are large scale Chinese investments in Indian startups. Chinese companies indulged in the hostile takeover of Indian companies during Covid pandemic.
• Negative impact on Indian Industrial Growth: The import of Chinese goods is not good for the development of Indian industries. The dumping of cheap Chinese goods negatively impacts the MSME sector as they cannot compete with cheap Chinese products. 

How to address?

• Foreign Trade Policy 2015 recommended concentrating on things like Buddhist tourism & the entertainment sector.
• India should effectively implement Make in India and Assemble in India. 
• Increase trade competitiveness of Indian goods.
• Use Anti Dumping Duties. 
• Promote Chinese investment in Indian manufacturing, SEZ, NIMZ etc., so that Chinese Companies make products in India. 
• Implement Katoch Committee report (to address the API issue). 

Recent steps taken by India to address this

• Production Linked Incentive (PLI) Scheme to boost domestic manufacturing under AtmaNirbhar Bharat.
• The Indian government has banned more than 100 Chinese apps, including Tiktok. Ban is a big blow for Chinese companies as India was one of the most significant user bases of these companies.
• The government introduced changes in FDI rules which mandate “prior approval” from the Centre for foreign investments from countries “that share border with India”.
• India has invoked stringent quality control norms to curb poor-quality Chinese imports.
• Chinese companies have been barred from taking part in road projects.

China is becoming an enormous naval power, corroborated by the Chinese navy’s having the largest number of personnel. Along with that, China is producing the largest number of ships. Moreover, China already commissioned the first indigenous Aircraft Carrier in 2018.

Military Reforms done by China

• People’s Liberation Army (PLA) will be cut by 3 lakh personnel as PLA want to focus on the modernisation of the army. 
• The first Oversea Chinese Military Base in Indian Ocean Region has become operational in Djibouti.
• All armed forces were brought under a joint operational military command in 2020 (on the lines of the US Army).  

String of Pearls

• The theory was given by the Pentagon.
• The theory says that China is trying to increase its naval presence in the Indian Ocean & counter India by surrounding it. It is developing a string of ports around India for this purpose. These pearls include 

Impact on India

• China can use it to impose an embargo on India in case of war (note: 90% Indian Trade passes through the Indian Ocean).
• It disturbs the balance of power heavily in favour of China.
• It marks the entry of extraterritorial power in the Indian Ocean, countering the Indian position of ‘Net Security Provider in the Indian Ocean’. 

Steps taken by India

India is taking following steps in the neighbourhood to counter China

• Apart from that, India is trying to contain China through the following ways:- 
  1. Formation of Quad consisting of India, USA, Japan and Australia to contain China. 
  2. Making alliances with Vietnam ( Vietnam too had issues with China in the South China sea ) 
  3. Making a strategic partnership with Mongolia.
  4. India has made strategic ties with Japan. 
  1. Malabar practice with US & Japan .  
• Military Modernization: Agni, Sukhoi, Nuclear submarines, Aircraft Carrier-Vikramaditya are not meant for Pakistan but to fight against a powerful nation like China.
• India has leased Guardian drones and bought P-8I from the USA for surveillance in the sea. 
• India is building roads and infrastructure on the North-Eastern border for faster mobilization of troops. 

OBOR  consists  of  following  elements.

1 . Silk  Road  Economic  Belt  (SREB)

• The Eurasian land corridor from the Pacific coast to the Baltic Sea.

2. Maritime  Silk  Road  (MSR)

• It aims to develop ports across the Indian Ocean. 

3. Digital Silk Road (Latest addition)

• It is the virtual dimension of OBOR.
• It is about 
  • strengthening internet infrastructure,  
  • lowering barriers to e-commerce, 
  • developing common technology standards, 
  • promoting cyber security 
  • promoting Chinese 5G technology 
• China is deploying its nationally developed platforms based on Artificial Intelligence, Big Data, Cloud Computing, Quantum Computing to pursue these goals. E.g.: 
  • Huawei is constructing PEACE (Pakistan – East Africa Cable Express) to connect Pakistan to Kenya via Djibouti.
  • Alibaba’s massive investment in e-commerce.
  • Promoting Beidou in contrast to GPS.

• Belt and Road Initiative (BRI) is the largest infrastructure project under which China invested in over 2600 projects in 100 countries. Analysts believe the OBOR initiative will impact  4.4 billion people and generate $ 2.5 trillion in 10 years. 
• It will involve 
  • Building physical infrastructure (highways, railways, ports in coastal nations, fibre-optic lines) 
  • Establish free trade zones (by coordinating customs, quality supervision, e-commerce etc.) 
  • Increasing cultural exchange etc.

Reasons  behind  OBOR  Initiative

1. Restructuring Economy

1. In 2008, due to Great Depression, there was a decrease in demand for Chinese products abroad. Hence, China changed its economy to an ‘Internal Consumption Led Economy’. But, now there is an issue of overcapacity in the infra sector, and China wants to address this by exporting infra projects.
2. Rising labour costs: China is shifting production to underdeveloped western regions.

2. Strategic Reasons

• China is decreasing its dependence on Malacca Strait (80% of Chinese energy and exports pass through it) and addressing the Malacca Dilemma.

3. Using Vast  Forex  Reserves

• China has forex reserves exceeding $ 3 Trillion. China wants to put this large surplus reserves in building railways, highways, industrial parks along the Silk Road Economic Belt.

4. Diversifying Trade Routes

• China wants to diversify its trade routes as excessive dependence on a single route is a  strategic vulnerability. 

5. Development of Under-developed areas

• China’s economic development was primarily concentrated in its eastern coastal provinces. OBOR will provide outlets to its underdeveloped southern and western provinces and markets and coasts. Development of regions like Xingjian will help in containing Uighur militancy as well.

Should India  Join Or Not ?

OBOR  has  specific  risks  and  opportunities

Arguments in favour of joining

India should join this initiative because of the innumerable benefits

1. Economic

• Road to Central Asia: It will enhance  India’s  connectivity  with  (1) Central  Asia  through  China, (2) Russia and (3) Eurasia.  
• Connectivity to North East: It will increase connectivity of North East India with South East Asia and China. It will also give a push to tourism in the North East. 
• Decreasing Trade Deficit with China: Chinese experts say that India’s participation in the Silk Road project will ease the trade deficit.

2. Political

• Better economic relations improve political relocations and mutual trust.  

3. Strategic

• It will help in balancing Pakistan and China relations.   

4. Other

• India may also face some difficult choices in the road ahead because as a co-founder of the Asian Infrastructure Investment Bank and as a member of the Shanghai Cooperation Organisation, it will be asked to support many of the projects under the B&RI. 
• It will lead to the revival of ‘continentalism’ & old ties.
• With OBOR & other initiatives, China is making new world economic order. Not being part of it may isolate India from New Economic Order.

Arguments that India shouldn’t join

• Sovereignty Issues: CPEC (part of OBOR) passes through POK.    
• It is ‘opaque’ in nature as OBOR may be nothing but an economic disguise for the ‘string of pearls’.
• It is detrimental to India’s geopolitical interests in the Indian Ocean Region. It challenges India’s stature as a ‘security provider’ in the region. 
• OBOR promotes  Chinese neo-colonialism as loans are being used as a debt trap. E.g.
  • Seen in Hambantota (where China took over the port for 99 years in case of loan default)
  • Malaysia halted projects   
  • Myanmar also wants the port built by China to scale down. 
  • Even in Pakistan, voices are raised against CPEC (termed it as next East India Company) 
• A  stronger China is a strategic risk for India. India has 4078 km of the disputed border with China, and China claims a large portion of Indian territory (nearly 80,000 sq. km).
• Due to this, relations with the USA may get hampered.  
• Environmental and Social Risks: Due to insufficient ecological feasibility studies and other risks, its compliance with environmental and labour standards is poor. 

Indian Answer to OBOR

• India has started the ‘Cotton Route‘ to strengthen economic ties between countries in the Indian Ocean rim. 
• It has also launched Project Mausam and Spice Route, apparently responding to China’s Belt and Road initiative.          
  • Project Mausam aims to re-establish India’s ancient maritime routes in the Indian Ocean. 
  • Spice Route aims to revive old links between 31 countries in Asia and Europe with India, especially Kerala. 
• India & Japan have developed an Asia Africa Growth Corridor (AAGC) to counter China’s OBOR. 
• India is also developing a large number of standalone projects which can be joined under one OBOR like project at a later stage (China too used this strategy). These projects include 
  • Chabahar Port project and the International North-South Transportation Corridor  
  • Bangladesh-Bhutan-India-Nepal Motor Vehicles Agreement (BBIN MVA). 

China’s Aggressive claims  in  the  South  China  Sea

Dispute

• China claims vast regions of the South China Sea through the Nine-Dash line theory.
• While other nations like Vietnam, the Philippines, Indonesia etc., lay claim on them based on UNCLOS. E.g.: 
  • Paracel Island (conflict between China vs Vietnam) 
  • Spratly Island 
  • Paratas Island etc. 

Earlier, the Philippines has approached the International Court of Arbitration to settle this issue. The court declared the claims of China to be illegal. But China declined to accept the judgement.

Interest of China

• Seabeds of the South China Sea have reserves of oil and natural gas.
• It is essential for the fisheries and food security of China and South Asian countries.
• It is important to control the South China Sea through which half of the world shipments pass.
• The control of this area helps maintain the Chinese hegemony in the region & oust US influence from the neighbourhood.

Indian Stand

• India has taken a neutral stand that countries involved should negotiate and resolve it peacefully.  
• India has also emphasized freedom of navigation for all South China Sea littoral countries.

Importance of the South China Sea and its littoral states for India

• Around 55 % of India’s trade with the Asia pacific passes through the South China Sea. 
• With its presence in the South China Sea, India can pressure China to counterbalance China in South Asia & Indian Ocean Region (IOR). 
• To secure the energy supplies (India ships oil from Sakhalin to Mangalore through this region). 
• India’s ONGC Videsh Ltd has invested in areas China claims to be disputed (like Oil Block 127 & 128 of Vietnam). 
• Vietnam, with which China has issues, is India’s strategic partner.

India and China constitute 17% and 20% of the world population, respectively. But as far as water resources are concerned, China has 7% of the world’s water resources while India has only 4% of the world’s water resources. Hence, water is a precious resource for both India and China.

North-South Water Diversion Plan

• Problem with China: Although southern parts of China have water, Northern parts have an acute water shortage. Ideas have been given for a long time to use Tibetan water resources to meet the thirst of the north. It leads to the North-South Water Diversion plan.
• This project is worth $33 billion. With this project, China intends to divert the water of Brahmaputra towards its Northern water-deficit region. 

Dams on the Brahmaputra

• Under the Chinese North-South Water Diversion Plan, the plan is to build four dams – Dagu, Jeixu, Zangmu & Jiacha on the Brahmaputra.

Problems which India can face

• India and China don’t have any river water-sharing agreements. 
• Impact on the sediment flow: The sediments offer immense ecosystem services for the downstream economies of India’s N-E states and Bangladesh.  
• Potential use as political leverage in border disputes: Apprehension of China using water in conflict events to create flooding downstream. 
• Any significant diversion of water could impact hydroelectric projects downstream, especially Lower Siang and Upper Siang Project in Arunachal Pradesh.
• Environmental Impact: Several concerns emerge, such as increased pollution in the river (Siang- Brahmaputra’s main artery recently turned blackish grey as it entered India), the potential impact on climate change, a threat to biodiversity in the region and altering the monsoonal patterns of the area.   
• Increased disaster vulnerability: Artificially controlling and consequent sudden release of water flow increases the probability of floods, especially in lower riparian areas of India and Bangladesh.  
• Chinese record on shared waters is not good. Earlier, it virtually stopped the Irtysh river from going into Kazakhstan. 

Way forward

India and China should sign a treaty on the model of the Indus Water Treaty with China.