Who Will Be The +1 In China+1?

Source– The post is based on the article “Who Will Be The +1 In China+1?” published in “The Times of India” on 6th July 2023.

Syllabus: GS 2 – Bilateral groupings and agreements

Relevance: India and China bilateral relationship

News- Rising tensions between the United States and China has brought the race among nations to become the +1 in the China+1 contest where India has many advantages over Southeast Asian countries.

What are the factors that are in favor of India?

First, it has by far the largest workforce. The UN Population Division estimates that working age population in India stood at 950. 2 million in 2021.

Second, India has lower wage rate because of the much larger workforce and the lower per-capita income. It because India’s 45% of the workforce is still in agriculture and its working age population is expected to grow more compared to Southeast Asia.

Third, India is internally a single market. It means there are no barriers to the movement of goods and services within. Whereas, Southeast Asia is even though connected by free trade area (FTA) agreement, the goods can only cross borders, once they satisfy the rules of origin criterion.

Fourth, India’s internal market is large. India’s GDP at $3. 4 trillion in 2022 is already significantly larger than $3 trillion of Southeast Asia minus Singapore which is in Southeast Asia but not a competing China+1 location.

What are the challenges in front of India?

One major concern is that the countries in Southeast Asia are already members of the Regional and Comprehensive Economic Partnership (RCEP). Therefore, supply chains of SE Asia with China are already well established. It is a major advantage for them. Malaysia and Thailand are also members of the Comprehensive Progressive Trans-Pacific Partnership (CPTPP), which accounts for one-sixth of the world GDP.

India is not a member of either of the agreement and has limited engagement with Asian countries.

Upgradation of “Look East” policy to “Act East” would not be fruitful due to deterioration of relationship with China.

However, India should consider strengthening it’s relations with rest of Asia.

How can India strengthen its relations with Asian countries?

Thus, two main avenues to deepening the engagement with Asia are strengthening the existing FTA with the Association of Southeast Asian Nations (Asean) and seeking the membership of CPTPP.

Joining CPTPP with a 20-year implementation period negotiated as a part of the deal has a potential to make India a developed country by 2047.

Simultaneously, gaining duty-free access to this large market is bound to make us the number one China+1 destination.