India-China bilateral hinges on border resolution
At a time when the BRICS grouping has been criticised for its inability to find common ground, Prime Minister Narendra Modi's successful meeting with Chinese President Xi Jinping shows that a strong relationship based on cooperation is possible even between two competing nations that don't see eye to eye on several crucial issues. The two leaders met for the first time in Fortaleza on the sidelines of the sixth annual BRICS summit and exchanged notes on a wide range of subjects. But even as they discussed strengthening economic ties, Prime Minister Modi emphasised the importance of an early resolution of the boundary dispute which has seen little progress even after 17 rounds of talks. Instead, repeated Chinese incursions have disturbed peace and tranquillity along the line of Actual Control. China's relationship with many of its other neighbours has deteriorated in the recent past due to Beijing's aggression in the South China Sea. In India's case though, it has signalled a willingness to resolve the long-festering boundary dispute. This is crucial to a robust future relationship.
Trade will, of course, be the primary currency driving the India-China bilateral. China is India's second largest trading partner, with bilateral trade touching $74 billion in 2012. Still, this is a far cry from the $100 billion mark the two countries had hoped to touch (but are unlikely to) by 2015. Also, India's widening trade deficit with China, pegged at $34 billion, is of serious concern. New Delhi has sought greater access to Chinese markets, especially for its pharmaceutical and information technology companies, but its efforts have brought limited results. Chinese investment in Indian infrastructure projects has also been below par. However, this should change soon. Memorandums of understanding have been signed with China for setting up industrial parks across India.
Perhaps, the most important Chinese gesture of goodwill and cooperation to India was Mr Xi's invitation to Mr Modi to attend the Brisbane summit of the Asia-Pacific Economic Cooperation in November. This is the first time that India been invited to the powerful 21-nation trade grouping, which includes the US, Russia, Japan, Australia, Singapore and South Korea, and to which New Delhi has long sought entry. It comes only days after China welcomed India to join the Asian Infrastructure Investment Bank as a founding member. The cherry on the cake, however, has to be the finalisation of the BRICS Development Bank. Conceptualised during the 2012 Delhi summit, it had almost been written off as BRICS member-states struggled to agree even on fundamental issues. Initially, China had sought to buy itself a commanding voice by contributing a larger share to the corpus, and, till the last moment, there were disagreements over the bank's location. Those issues have now been sorted — all members will be contributing an equal share to the corpus and each country will have only vote. The bank will be located in Shanghai; its first president will be from India; and it will have a regional centre in South Africa. The bank will be BRICS's most important deliverable and has the potential to emerge as a serious challenger to the Bretton Woods system.