In the Esteem of Future Generations

On March 31, 2020, the United Nations stated that India and China would be an exception while the world economy will go into recession due to the coronavirus pandemic. The next day, on April 1, the two countries celebrated the 70th anniversary of the establishment of their diplomatic ties. Thus, India and China should follow the motto “Postera crescam laude” (meaning “grow in the esteem of future generations”).

Growing Economies

India’s history starts with the rise of the Indus Valley Civilization which flourished between 3500 B.C. and 1800 B.C. The economic system of the Indus Valley was based dominantly on trade which developed in sophistication with improved marine routes. India was one of the largest economies of the ancient and medieval world, respectively possessing over time one third and one fourth of the world’s wealth. From 1526 to 1858, India experienced affluence. The British systematically grabbed the wealth of India by importing raw materials at a cheaper rate and exporting expensive finished goods back to India. Research shows that by 1950 India’s contribution to the world GDP was mere three percent as compared to 27 percent in 1700.

It was only after 1947 that the process of rebuilding started. In the last 70 years, India’s GDP grew to about US$3 trillion. The nation’s foreign exchange reserves are US$481 billion compared to just US$2 billion at the time of independence. Against all odds, economists still show great faith in India’s economic growth, projecting a 20.8-percent contribution to the world’s total GDP by 2040.

China in the past four decades showed exemplary economic growth by demonstrating its opening-up approach. According to World Bank data, China’s GDP increased from US$150 billion in 1978 to US$13.6 trillion in 2018. China’s openness to the world helped it accumulate foreign exchange reserves of US$3.1 trillion. No doubt, economists are also confident in China’s economic growth in coming years and speculated that by 2040 it would possess 37.4 percent of the world GDP at purchasing power parity (PPP), followed by India in the second place.

The impressive and sustained economic growth of China is not a miracle but the fruit of a sustainable development path. By its fiscal, financial and exchange rate reforms put forth since 1992, the Chinese economy has experienced positive marketization. China’s entry to the World Trade Organization in 2001 served as a milestone where China and the rest of the world benefitted from each other. Two other keystones improving China’s economic structure are industrialization and urbanization.

The COVID-19 Challenge

According to the Asian Development Bank (ADB) COVID-19 assessment, China has successfully restricted the damage to its economy to a moderate level. To mitigate the pandemic’s negative impact, China has announced strings of measures. China’s State Council also declared measures to facilitate the employment of college graduates and rural migrant workers, offer financial support to micro, small and medium-sized enterprises. These measures have translated into signs of economic revival. In March 2020, the purchasing managers’ index (PMI) for China’s non-manufacturing sector surged to 52.3 from 29.6 in February.

As per the current scenario, India will be able to contain the coronavirus pandemic with moderate-level damage to its economy. By the end of the second quarter of this year, India should start rebuilding its economy.

As per Brookings, COVID-19 can cause 3.6 million deaths in just eight weeks at the current pace of lethality doubling each week. More than 80 percent of deaths are in G20 nations, causing a huge loss of knowledge workers. The world will also look towards India and China to fill this vacuum.

As per the Global Innovation Index (GII) 2019, India performs higher on human capital and research, market and business sophistication, and knowledge and technology output when compared to the average level of the upper-middle-income group. India ranks fourth among the economies in the lower-middle-income group. It has been an innovation achiever for nine consecutive years. China remains the top middle-income economy in quality of innovation for seven consecutive years. Positioned 14th, China is the only middle-income economy that is closing the gap with the high-income group in all three indicators.

The political economy of the human resource supply chain can be another area for cooperation between India and China in the post COVID-19 era.  

Narrative for Next 70 Years

Both India and China have very strong and popular leaders – President Xi Jinping and Prime Minister Narendra Modi. In the post-COVID-19 era, the pari passu usage of both the narratives, “India vs China” and “China with India,” may be myopically unsustainable. Thus, it is the most appropriate time for both nations and leaders to redefine the narrative of their bilateral relations. In the 70th year of the diplomatic ties and the third year for the two leaders’ informal summit, India and China should start resolving the impinging issues such as the boundary question and global diplomacy tussles, to help build a more dynamic and sustainable world.

With the world economy falling into recession, if India and China continue the pari passu usage of “India vs China” and “China with India,” then both may have restricted growth as it harbors the risk of external manipulations and also threats such as terrorism and trade barriers.

The COVID-19 pandemic will subvert the paradigm of the world order. The third informal summit should happen as soon as possible as it can shape this significant re-adjustment of the world order for the furtherance of India and China, and subsequently of the world.

In conclusion, I would say “远亲不如近邻” – that is “a relative afar is less useful than a close neighbor.”

The author is a Pentland-Churchill fellow for global public policy leadership at New York University (NYU) and University College London (UCL). Since 2016, he represented India at China-India Strategic Economic Dialogue as a member of the policy coordination group.