Debates, though essential for good policymaking, can also also create unwarranted dilemmas. The debate in India’s policy circles over the US-led Indo-Pacific Economic Framework (IPEF), is a distraction.
Created in September 2022, IPEF was discussed during the Modi-Biden meeting this September. However, many are apprehensive that the loose, open framework will evolve into an economic bloc outside China’s ambit.
The confusion might grow after the recent thaw in ties between India and China, the diplomatic dogfight initiated by Canada, and the over-the-top reactions of the US Ambassador Eric Garcetti. The policy uncertainties over the US election adds another layer of confusion. Democrats might continue a proxy war with Russia but may not give a free hand to Israel. Republicans may have a different world view.
In comparison, China needs Delhi to protect its economic interests in the face of a sustained economic onslaught by the US. Indian economic growth is also reliant on China’s supply chain.
Long-term objective
However, one must guard against jumping to conclusions. The global geo-political uncertainty also needs to be factored in.
Unlike trade blocs, which thrive on tariff liberalisation within members, IPEF is taking a more holistic approach to creating alternate supply chains, promoting clean technologies, and capacity building for fair competition.
Trade is one of the pillars. But, it is neither the prime focus at this stage nor is it mandatory for members to participate in all the pillars. India has not joined the trade pillar.
IPEF is a result of three critical factors: the regional security alliance of the US, the US-China tariff war and, the post-Covid realities of supply chain constraints.
Both security alliance and tariff war plans were drafted during Barack Obama’s presidency. The pandemic exposed the weaknesses of the ‘cheapest source is the best source’ policy.
With 70-80 per cent of the global supply chain concentrated in China, the world was severely impacted by President Xi Jinping’s ‘Zero Covid’ policy. It was time to diversify sources be it for medicine, food or critical industrial inputs.
Over the last two years, IPEF members prepared a list of their respective vulnerabilities and alternate sources, if any. Technology players identified critical investments which can be shifted from China.
India has a huge stake in the game. New Delhi is keen to reduce its dependence on China for critical supplies and wants to take advantage of the ‘China plus One’ strategy to attract investments, as it did with Apple and a few other instances.
The best part of IPEF is its loose structure. New Delhi should pursue selective trade and investment goals with China to spur immediate growth. IPEF is the solution for longer-term objectives.
Flexibility is crucial
Keeping the options open is crucial in the current geopolitical scenario. When was the last time the US election became a global issue, riddled with so many controversies, allegations and counter-allegations?
An unsure superpower might end up creating problems even for its allies. Though there is some stress in US-India ties currently, they have deepened over the last decade. And, the current phase is temporary.
In the end, both the US and Russia need India as a counterweight to China. And, Beijing will remain New Delhi’s biggest, if not the only rival in the decades to come, with little possibility of even limited geopolitical alignment between the two. The border dispute might subside now but that will surely be a temporary phenomenon.
The two sides agreed to maintain discipline at the border in 1988. There were clear rules and regulations for dispute resolution. But that did not prevent border clashes. China continues to issue provocative statements on Arunachal Pradesh.
The point is clear: India must pursue business relations with China but trust is still an issue. The US may be mercurial but, it is a longer-term partner. The US-led West was critical of India’s neutrality on the Russia-Ukraine conflict.
But, that did not stop the US Congress from approving the landmark GE Aeronautics investment in India in August 2023. It was arguably the biggest leg-up to ‘Make in India.’
The writer is an independent columnist