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Why India Should Rethink Belt and Road
The world's two most populated countries need dialogue to iron out differences
By Amitendu Palit | NO. 22 JUNE 1, 2017

Asian regional connectivity will significantly change in design and capacity due to the Belt and Road Initiative that comprises the Silk Road Economic Belt and the 21st-Century Maritime Silk Road. This ambitious China-led connectivity plan links the continents of Asia and Europe through an integrated network of land and sea routes. While a lot of attention has been devoted to the land part of the initiative that includes the much-discussed China-Pakistan Economic Corridor (CPEC), the maritime segment is equally significant.

It connects the Chinese coast through the South China Sea, Indian Ocean, Bay of Bengal, Persian Gulf and Mediterranean Sea to Southeast, South and West Asia and Europe. It aims to build transport linkages across this vast stretch of maritime terrain through new ports. It also plans to connect these new ports with sea lanes and land routes.

Asia has been witnessing the development of multiple economic corridors with China being an active player in many of them. Some of these corridors connect the Chinese mainland to other parts of Asia, such as the Greater Mekong Subregion Corridor that links China with Southeast Asia, and the Central Asia Regional Economic Cooperation Program connecting China with Central Asia. Then there is CPEC and the Bangladesh-China-India-Myanmar Economic Corridor.

Room for cooperation

All these are land corridors connecting countries through land borders. Implementing them becomes difficult if there are territorial issues between neighboring countries. The CPEC, for example, is being objected to by India as it is proposed to pass through a section of the Kashmir region that India claims is illegally occupied by Pakistan. Pakistan, on the other hand, denies this and says the other part of the region is illegally occupied by India.

One way in which India can try to resolve this is by initially delinking the land part of the initiative, where it has a problem, and focusing on the maritime part instead, where it has lesser issues.

A large maritime corridor like the maritime initiative covers many countries, regions and even continents. These areas vary greatly in economic conditions and capacities. Regions and subregions within Asia are very different in their ability to trade mainly because of the quality of their domestic infrastructure facilities. In this regard, East Asia and Southeast Asia trade much more and are far more economically integrated with the rest of the world than the Middle East, Central Asia and South Asia.

Different capabilities

The high trade intensities of East and Southeast Asia have led to the extensive presence of their industries and businesses in global value chains. Such trade and presence is much less for businesses from the other regions of Asia featuring in the maritime initiative.

Logistic capabilities also vary significantly. Southeast Europe, East Asia and Southeast Asia are ahead of the other regions mainly because of their more efficient ports and better cargo handling, invoicing and customs facilities.

These variations in economic conditions and capacities mean countries with more efficient ports and better logistics will be better placed to exploit the facilities of the initiative than the ones lagging in this regard.

India, like the rest of the South Asian region, does not have as strong port and logistics capacities as China, Singapore, Malaysia or Greece. It will not be able to reap maximum benefits from the maritime initiative till it upgrades its own domestic infrastructure capacities, both in ports and connections from its hinterland to the ports.

Indian businesses might not be visualizing great prospects from the maritime initiative. But in fact, it may be an opportunity for India to get greater investment to upgrade its ports. With its considerable economic clout India can negotiate successfully with interested investors from outside India and set its own terms to ensure that its national and security concerns are not affected.

Improving regional cooperation is an important objective and the Belt and Road notes various existing regional and multilateral mechanisms for expanding regional cooperation. These include the Shanghai Cooperation Organization, ASEAN+1 (China), Asia-Europe Meeting, Asia Cooperation Dialogue, Asia-Pacific Economic Cooperation, China-Arab States Cooperation Program and more. All these forums include China.

However, the maritime initiative vision document does not so far mention other important non-Chinese regional bodies such as the South Asian Association for Regional Cooperation and the Bay of Bengal Initiative for Multi-Sectoral and Technical Economic Cooperation. By including more regional bodies that are active in Asia, the Belt and Road Initiative can acquire greater multilateral character. It will also help countries like India to look at the initiative more enthusiastically.

India's perspective till now is uncertain mainly because it is not clear about the impact on existing trade rules and frameworks. One possible reason is the lack of information on the project in India, where the public preoccupation, to a large extent, is with domestic issues. In addition, it has problems with its own infrastructure. The progress from the forum in Beijing might provide more clarity on these issues over time.

The author is a senior research fellow at the Institute of South Asian Studies at National University of Singapore

Copyedited by Sudeshna Sarkar

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