India and China are looking at investments to bridge the gap

Ways to reduce the widening trade gap that is bleeding the Indian economy will form the fulcrum of discussions between Prime Minister Manmohan Singh during his visit to China next week although the possibility of a Border Defence Cooperation Agreement (BDCA) being clinched between the two sides may occupy centre stage.

The issue of reducing the trade imbalance, slated to touch $30 billion this year, has occupied leaders and officials of both countries including during Chinese Premier Li Keqiang's May visit and Foreign Secretary Sujatha Singh’s interactions with Vice Foreign Minister Liu Zhenmin here in August. With breakthroughs for the Indian pharmaceutical industry and the IT sector still not in sight, India and China are looking at investments to bridge this gap, according to government sources.

An eight-member team from the influential Chinese National Reform & Development Commission (NDRC) has just returned to Beijing after interacting with Indian policy makers on their wishlist that will bring down the trade deficit to manageable levels. The team also explored the possibility of accelerating work on a four-nation transport corridor that would reduce transaction costs.

Power industry

Having signed a MoU that will give the Chinese power industry a firmer footing in India, the two sides will be looking at increasing involvement in non-traditional areas such as railways, energy efficiency, waste water management and electronic hardware. China leads over India in all these areas and has been displaying willingness to part with knowhow as well as investments in some cases.

For instance, in the area of railways, talks have touched on a joint venture for a massive project to increase rail speeds to 200 kmph on all major trunk routes, super heavy haul trains and remodelled railways stations. The NDRC team lead by Lin Dajian is also believed to have taken away Indian views on cooperation in energy efficiency that will improve the viability of heavy consumers such as steel, paper and cement industries. The Chinese have also taken a hard look at investing in an industrial park and sources said if ties remain on an even keel, a giant investment opportunity could open up either on the Delhi-Mumbai Industrial Corridor or the eastern Dedicated Freight Corridor, both being quarterbacked by the Japanese.

Agreements in principle between Dr. Singh and the Chinese leadership on these issues would lead to refined positions at the next Strategic Economic Dialogue, the sources said. However, a more definitive development — the signing of the BDCA — would symbolise the commitment of both countries to avoid jostling on the border that has led to a couple of potentially explosive situations. The BDCA would incorporate earlier pacts aimed at avoiding or diffusing a face off along with a few “bells and whistles,” among them a proposal for a hot line between military commanders. An earlier proposal to have a hotline between the two Prime Ministers was quietly buried after it was realised that more than symbolising the desire to resolve issues in real time, it would give the impression that bilateral ties were on razor’s edge.

However, India is unlikely to be accommodated on its desire to develop a joint mechanism on trans-border rivers, chiefly the Brahmaputra. China feels the transmission of river water flow data is enough and is apprehensive of a joint mechanism being misused as a bargaining lever especially when India is racing to set up dams close to the border in order to establish first user rights.

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