EconVue Spotlight | Is Winter Coming to the India-China Relationship?
posted by Lyric Hughes Hale on August 7, 2017 - 9:24am
There has been much discussion about China’s GDP surpassing the US. Less attention has been paid to forecasts that India will become not only the most populous nation in the world by 2025, but that by 2050 the size of the Indian economy will also surpass the United States.
Indian Prime Minister Narendra Modi has enacted a slew of economic reforms since he came to power in 2014. Inflation seemingly under control, last week India's central bank cut interest rates by 25 bps. Manufacturing has slowed, likely a result of dislocations caused by the GST and currency reform. Is India about to enter a sustained period of slower growth? Is Modi's government pursuing a two-track policy with China, with trade on the front burner and border disputes simmering on the back burner? What could go wrong, and what could go right with Modi's innovative economic reforms?
We've asked EconVue contributor Deepak Lalwani in London to share his views. Register to ask questions and comment on his panel. Links to his research can be found below.
Trade between China and India has increased significantly (nearly 500% over the last ten years) but in 1962 the two countries were at war. Tensions are again escalating and for the same reasons--territorial disputes in the Himalayas. China’s Ministry of Foreign Affairs released a paper and held a press conference last week, outlining their claims that India has violated its territory. Chinese media attention has reached a fever pitch.
In contrast to the North Korea impasse, both sides have differing views on the status quo, increasing the chances that escalation will continue. Politics is not the only area of disagreement; India’s trade deficit with China has increased and India has launched investigations into a bevy of Chinese products. This is a space worth watching. Ironically, the coming of winter could be a good thing. It will make border conflict in an extremely remote corner of the world nearly impossible to conduct.
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