India and China in a Trexit world

The face-off between China and the US enables India to play one against the other to emerge as a leading power in its own right


India and China need to support the BCIM project, a 2,800km-long corridor which seeks to revive the southern Silk Route between Assam and Yunnan. Photo: Bloomberg
India and China need to support the BCIM project, a 2,800km-long corridor which seeks to revive the southern Silk Route between Assam and Yunnan. Photo: Bloomberg

India’s foreign policy has been forged in the crucible of its geopolitical challenges. It is surrounded by failing states, including Pakistan and Bangladesh, and hemmed by an emergent superpower, China, with whom it shares a troubled history. One has referred in this column of China’s growing proximity to Pakistan, best exemplified by the China-Pakistan Economic Corridor (CPEC). Even though the threats posed to India include the passage of the CPEC through Pakistan-occupied Kashmir (PoK), the location of the corridor, and the internal conflicts in Pakistan between hardliners on Kashmir and votaries of economic development, suggest that the danger may be overstated. Simultaneously, the development of another road spanning Bangladesh, China, India and Myanmar (BCIM), offers India an opportunity to create its own win-win relationship with China. 

The BCIM is a 2,800km-long corridor that starts from Kolkata and passes through Bangladesh and Myanmar before ending at Kunming in China. It seeks to revive the southern Silk Route between Assam and Yunnan, and is expected to cost $22 billion. It offers significant gains to China. This includes access to the Indian market, unfettered access to the Bay of Bengal for fuel supplies, and development of Yunnan, a backward province. 

Many commentators have cautioned against India’s participation in the corridor because of the vast gains accruing to China. That thinking is appropriate in a zero-sum situation where the gain of one country is equal to the loss of the other. However, in a non-zero-sum situation, each country should aim to do as well as it possibly can, not in an absolute sense but with respect to what the other country is doing. In such a situation, the objective is to find a Nash Equilibrium—a configuration of strategies that constitute a mutual best reply. 

Given China’s long-term vision of the development of the One Belt, One Road, a $4 trillion project of which the CPEC and the BCIM are part, it is clear that China’s dominant strategy is to support both projects. India’s gain from the BCIM include the ability to connect to the One Belt, One Road project thus opening up markets to the east. It can also use the economic corridor to break out of the pattern of exporting primary products to China and importing manufactured goods by negotiating for downstream industries to be located within India. 

In this interaction, India has no dominant strategy. For instance, if China only supports the CPEC, then India is best served by expressing its support for the BCIM and muting its opposition to the CPEC in order to incentivize China’s participation in the BCIM. On the other hand, if China supports both projects, then India should support BCIM while taking a disapproving stance on the CPEC. 

The equilibrium of the game is achieved at the point where China uses its dominant strategy of supporting both projects and India chooses its best response to this strategy—supporting BCIM and opposing CPEC. Note that even though China is using its dominant strategy, it does not get its most preferred outcome—which is not having to deal with India’s objections to the CPEC. And India does not get its most preferred outcome either which is China supporting only the BCIM. A threat by India that it will not support the BCIM if China supports CPEC is unlikely to compel China to drop the CPEC as it can build part of the BCIM without India and will not want to give up on its strategic interests in Pakistan. 

Finding the equilibrium is only the first step. Equally important is the task of negotiating to maximize the share of the surplus on offer at the equilibrium. What will China’s position on fostering Indian manufacturing be? What will be its policy on the ongoing insurgencies in the North-East? What stance will it take on cross-border terrorism initiated from PoK? 

In such negotiations, Roger Fisher and William Ury in their 1981 best-seller, Getting To Yes: Negotiating Without Giving In, suggest that a party can improve its chances by enhancing its “BATNA”—best alternative to a negotiated agreement, i.e. its prospects in the event the negotiations break down. India can improve its BATNA by developing the North-East as well as kick-starting various projects already on paper, including the India-Myanmar-Thailand trilateral highway. 

To further strengthen its BATNA, India should pursue a policy of support for the US. The fate of President Barack Obama’s pivot to Asia remains unclear as president-elect Donald Trump declares his intention to “Trexit” many key strategic positions of his predecessor. But it is hard to imagine that the US would abandon its interests in the South China Sea entirely. India should aim to become the US’ strongest partner in its aspirations in that part of the world without surrendering its traditional stance in West Asia.

The face-off between China and the US enables India to play one against the other to emerge as a leading power in its own right. India is a poor cousin to China in economic and military terms, but if Trump is unable to control the genie of divisiveness he has released, India can emerge as a leading repository of soft power, a beacon for the pressing needs of our world—democracy, respect for diversity, and an urgent attention to the environment. Many of the finest artefacts of our society—classical music, classical dance, poetry, film, food, fashion, and spiritual thought, represent a confluence of many mighty streams. On the strength of this heritage, can we come together even as the world falls apart? On this rests the future of our ambitions to play a leading role on the world stage. 

Rohit Prasad is a professor at MDI Gurgaon. Game Sutra is a fortnightly column based on game theory.

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