Look Delhi, go Beijing

My last column on China (Keep the powder dry, September 3) focused on the geopolitical space between our countries, but as I mentioned, there is a lot more that’s positive to talk about in our economic relations. China and India are two countries wh­ose development will have a significant impact on the global sy­stem, which is why how we can cooperate becomes important.
China and India are the two most populous countries in the world, together making 38 per cent of the world’s total population, with Indians set to outnumber Chinese around 2034. Together they account for nearly a tenth of global gross domestic product, a fifth of world exports and a sixth of all international capital flows. China and India are the world’s second and fifth largest economies in PPP (purchasing power parity) terms. China holds by far the largest foreign currency reserves in the world, at close to $2 trillion. India’s is around $300 billion.
We can say with some confidence that both countries will continue to prosper and pull more millions out of poverty than they have ever done; that they will compete effectively with Western corporations for business, purchase foreign companies and assets, expand their trade and overseas investments, invent and develop new technologies, and displace more economic weight around the world.
The basic task for countries like China and India in international affairs is to wield a foreign policy that enables and facilitates their own domestic transformation. We are both engaged in the great adventure of bringing progress and prosperity to a billion people each, through economic development. At the broadest level, our foreign policy must seek to protect that process of transformation — to ensure security and bring in global support for our efforts to build and change our country for the better.
This is why economic relations are important for both of us. Trade has increased twelve-fold in the last decade, to an estimated $51 billion last year; China has now overtaken the US as India’s largest single trading partner. The two governments expect to cross the $60 billion mark in the current fiscal year (a figure that is 230 times the total trade between the countries in 1990, just 20 years ago) and Beijing has already spoken of aiming for $70 billion the following year.
In my last column I described the complementarities that facilitate our cooperation, notably Indian software and services meshing with Chinese hardware and manufacuring. So Mahindra and Mahindra manufactures tractors in Nanchang for export to the United States. The key operating components of Apple’s iPod were invented by the Hyderabad company PortalPlayer, while the iPods themselves are manufactured in China. Indian investments in China are nearing the billion-dollar mark. The trade imbalance is two-thirds in favour of China, but this can be addressed if China takes steps to reduce the non-tariff barriers to entry into its market that have been thwarting Indian companies.
But our economic cooperation need not just be in each other’s countries. Inevitably our search for markets, technology and resources to fuel our growth will be key drivers of our international relations. This is why we are both looking far afield, to Africa and Latin America, for opportunities.
Energy is an obvious area for cooperation. The US’ department of energy estimates that China’s oil consumption will rise 156 per cent and India’s oil consumption will rise 152 per cent by 2025. While both countries are seeking to expand their domestic production, opportunities for growth are limited, and both countries will become more dependent on imported oil, making them more vulnerable to irregularities of supply and price volatility. This makes the quest for reliable sources of supply and secure sea lanes of communication a shared interest. After all, both China and India are relatively new entrants into the global oil system. They are facing fierce competition from much larger, more experienced, and arguably more resourceful Western oil companies. Cooperation between Indian and Chinese oil firms is essential.
Prior to 2002, India and China competed aggressively with each other to acquire oil and gas fields abroad. Wisdom dawned, however, with improved energy cooperation starting that year, when India’s Oil and Natural Gas Corporation (ONGC) purchased a 25 per cent share of Sudan’s Greater Nile Oil Field, operated by the China National Petroleum Cooperation (CNPC). The experience has been positive and continued cooperation in the global energy sector, including some examples of joint bids and at least one successful joint acquisition, has occurred. The prospects for further collaboration, to jointly explore and develop oil and natural gas resources in third countries, are high.
To take another example: Our demand for food will inevitably rise as well, perhaps by 50 per cent in the next two decades, as a result of our growing population, their rising affluence, and the improved dietary possibilities available to a larger middle class. We will need to multiply our sources of food, including acquiring agricultural land abroad, in Africa and even Latin America. Lack of access to stable supplies of water is reaching critical proportions, particularly for agricultural purposes, and the problem will worsen because of rapid urbanisation over the next 20 years. We will need skilful and creative diplomacy to ensure that interruptions in the flow of water across our borders do not bedevil relations with our neighbours or with each other.
All this underscores that fore­i­gn policy is basically about fulfi­lling domestic objectives. Let us never forget that if we, the two largest developing countries in the world, succeed — when we succeed — in our national transformations we will be inc­l­u­ding more and more of our people in the great narrative of hope that has been the narrative of social and economic developm­e­nt in the West over the last 200 years.
In his recent book Rivals, Bill Emmott quoted an unnamed senior Indian official as saying, “Both of us (India and China) think that the future belongs to us. We can’t both be right”. Actually they can both be right — it’s just that it will be two very different futures. And there can be room for both in the world of tomorrow.

Shashi Tharoor is a member of Parliament from Kerala’s Thiruva­nanthapuram constituency