India and China have the opportunity to develop strategic commercial interests that are mutually beneficial
|Shyam Ponappa / New Delhi August 05, 2010|
The opportunities and threats relating to China are an unending source of discussion and debate. How do we move beyond, to grasp the nettle of practical considerations and undertakings? What emerges is India’s need to strategise its commercial interests and execute projects in terms of clear objectives. One aspect is related to internal coordination: getting our act together, e.g., in domestic manufacturing. A second aspect has to do with external orientation, and engaging with China.
In a previous article*, I had suggested the need to orchestrate supportive policies for domestic manufacturing, to capitalise on India’s growth. The central idea: emulate China’s approach in areas where it has successfully established policies that yield scale economies with appropriate financial and commercial linkages, to result in high-quality products delivered at low cost. An instance discussed was the power sector, where China has coordinated its state and central taxes, picked favoured locations which have good infrastructure (energy, transport, communications…), subsidised land, managed favourable exchange and interest rates (i.e., cheap finance), given preferred access to its domestic markets, and deployed barriers to unfair competition, like import tariffs not below the WTO floor.
Although more opportune several years ago, it is still possible that there is scope for an aluminium smelting joint venture in India because of the availability of bauxite, coupled with back-to-back joint ventures in India and China for finished products. The potential benefits to Indian companies such as Nalco are access to substantial capital for expansion, as well as increased access to markets. A Chinese partner like Chinalco would also gain significantly by access to its share of low-cost raw materials as well as to a more diversified market, in return providing access to Chinese and international markets to its Indian partner.
Other potential areas for participative ventures could include logistics and transportation, including airlines and freight/shipping. While the possibilities are open-ended, the actual unfolding of promising pathways may require success with simpler “asset-plays” like metals or energy projects, to establish what is pragmatic and feasible. These could provide substance to what is currently just talk of a strategic partnership with China.