From UPSC perspective, the following things are important :
Prelims level : Not much
Mains level : Paper 2-Effects of politics and policies of developed and developing countries on India's interest, Indian diaspora.
“Phase one” of the trade deal between the U.S. and China notwithstanding, the ongoing dispute between the U.S. and China and other changing scenarios could turn out opportunities in various forms for India.
Oil prices windfall
- Slack demand and increased production by the U.S., had lowered oil prices which was good news for India.
- It could also help India address its current account deficit.
- But oil prices have surged more than 4% following the killing of Iranian general by the U.S.
- An outbreak of hostilities could send the oil prices soaring.
- India’s energy import from the U.S. is likely to touch $10 bn by 2019-20.
- While China is increasing its stake in Saudi Aramco- one of the largest oil production company in the world.
- China is also increasing its ties with the other oil producers which gives China the opportunity to increase its naval presence in the Indian Ocean increasing the Strait of Hormuz.
On trade front
- According to the State Bank of India report-Ecowrap, India has scarcely benefited from the trade war.
- Of the $35bn decline in China’s export to the U.S. $21bn was diverted to the other countries and the rest $14bn was made good by the U.S. producers.
- India contributed only $755-million of this diversion.
- The U.S. tariff made some other players-Mexico, Taiwan, Vietnam even more competitive.
- China is facing pork shortage but India exports pork indirectly through Vietnam, increasing its cost and reducing market share.
- China’s thrust on the AI, robotics, autonomous vehicles, and space technology has raised the U.S. suspicion, raising the prospects of high-tech war.
- The big three Chines high-tech companies, Baidu, Alibaba, and Tencent together invested $5bn in India.
- India could use this opportunity to insist China open its market for the IT sector and other tech exports.
- India has allowed all the players including Huawei to participate in the 5G trials but the outcomes are far from over.
- With all that said, the U.S.-China tensions drive supply chains out of China, with the right policies as Vietnam has done, India could emerge as an alternative destination.
- Restriction by the U.S. on China could lead to difficulties in reducing emissions and mitigate climate change in China.
- Restrictions on technology export often lead to an increase in domestic research.
- So, China could succeed in developing all the technologies that are denied to it by the U.S. under the restrictions.
- With the protests in Hong Kong showing no signs of abating, India may have to cater to refugees of Indian origin if things turn uglier.
Key regional issues
- The situation in the South China Sea is in favour of China as it already has occupied several of them.
- Though India is a member of “Quad” dialogue on border issues, it has no role in negotiating the “Code of Conduct” with the ASEAN.
- On the connectivity issues, the U.S. position is helpful for India. Recently the U.S. criticised China-Pakistan Economic Corridor.
- India is not a member of the Indo-Pacific Business Forum created by the U.S., Japan, and Australia.
- India is also not a member of Blue Dot network created by the U.S., Japan, and Australia.
- In future India might have to reconcile its regional connectivity issues with BRI projects that have mushroomed in the region.
- On the ideological fronts, China is so emboldened by its economic success that it seeks to challenge the liberal democratic model and offers an alternative based on its own system.
- India might have to contend with the greater Chinese presence in the Asia-Pacific theatre.
India’s relations with the U.S. and Chinas growing influence in economic as well as all the other sphere represents multiple challenges for India and are likely to grow in the future.