Panelists

• Amb. TCA Rangachari, Former Ambassador to France and Germany and Director, AIS, Jamia Milia Islamia
• Prof. Madhu Bhalla, Professor, Chinese Studies, Department of East Asian Studies, University of Delhi

TCA Rangchari
The Chinese economy has overtaken the Japanese economy to become the second largest economy in the world. China’s global trade in addition to its foreign exchange reserves are now around US$3 trillion. China’s exports to Europe are US$7000 billion and the bilateral trade between the two is increasing. China has taken a conscious decision to invest in the European debt; the Governor of the People’s Bank of China said they would increase investments in 2012 up to around 1.2-1.3 trillion Euros.

The volume of trade between India and China is US$75 billion; the Indian investment in China is around US$430 million and the Chinese investment in India is around US$330 million. Today, a large number of Indian students - about 7000 - are studying in China. As far as Sino-Indian bilateral trade is concerned, China has an upper hand in most sectors. India is worried that the Chinese are not providing a level playing field for Indian companies in China, especially in the pharmaceutical, and information and technology sectors. Chinese markets are flooded mostly with local products, which are also domestically consumed, and therefore the need for extensive foreign investment is much lesser. But for India, good and continued foreign investments in the Chinese markets are required to sustain economic relations. The current global economic and political scenario with the debt crises in major parts of the world, along with political power transformations (including elections) in many countries, will affect the Sino-Indian economic dialogue. The significance of the Sino-Indian economic relationship should be underscored and the opportunities for the economic relationship should be augmented. There is a vital need to lessen risks, promote independence and build a mutually beneficial strategy.

Only low volume trade takes place via the Nathu La as it’s still just a border trade and caters only to the local markets. The communication and transportation systems are not convenient for any kind of large-scale trade to take place. The nearest port is Kolkata and the nearest airport is Bagdogra. Therefore, as far as connectivity goes, not much development is happening. China has attempted to develop its connectivity with Nepal which could extend to India in the long run. India should use its power potential in Nepal. If a direct rail-route has to come up between China and India, China would have to construct the route till Nathu La, and India would have to construct a route up to Kathmandu. Ironically, one cannot say how feasible this proposition would be given that consumption level is very low.

Chinese suspicions on the Tibet issue have an impact on the trade issues as well. The access to Tibet is crucial for India. But Tibet is still a very sensitive political issue and India’s interference in Tibet might not generate a positive response from China. The question in consideration is:  how important is the Nathu La border trade and how significant is it in the Sino-Indian economic relationship? If these are answered, the government will be able to determine how much to invest in building infrastructure for promoting trade at Nathu La.

Prof. Madhu Bhalla
The Sikkim conference organised by IPCS gave an insight into the concerns of the people of Northeast India through a wide range of papers presented by scholars. The security concerns of the scholars and policy makers in Delhi are different from the people of Northeast India. The perception of threat is much lesser in the minds of people from the Northeast than what is calculated by the scholars and policy makers in Delhi. The Sikkim conference dealt with a range of issues - social issues, problems relating to the Nathu La border trade, women and trade, the burning issue of what federalism in India really means and whether the local stake holders are engaged into the decision-making process. There was a sense of frustration among the people about the disconnect between the national capital and Northeast India. The realities of the region are often ignored, while too many restrictions inside the region hamper trade.

There was also a sense of state parasitism. The states of Northeast India are not functioning well among themselves and the lack of inter-state responsibility has further contributed to the slow growth of trade in the region. The Nathu La trade is gripped with problems like who will trade, how many passes are being issued every day and what are the conditions for giving those passes? Another huge concern is the absence of infrastructure for which mostly the Union Government of India was held responsible by the scholars at the conference. It must, however, be noted that the Northeast states also have a responsibility towards their infrastructural growth. The extent of infrastructural development that is actually taking place in the region is not meant for the promotion of trade, but for military and security purposes. This highlights that Delhi was not co-opting Northeast in its economic liberalization plan.

As per data furnished in many papers presented at the conference, the bilateral trade has been dismal and has increased from INR 2 million in 2006 to a meagre INR 9.85 million with zero imports in 2010. However, one can see that in the markets in Gangtok many items, which are not listed are being traded. Thus, the trade in these items was unaccounted for due to which the revenue generated by this trade was also unaccounted for. This also indicates that there is a political-trader nexus. All these issues are very important when we create structures and institutions for border or regional trading in the Northeast. In an interaction with the media in Gangtok, most of the questions were deflected and no one was able to give a clear answer as to why the Nathu La trade had not taken off. The papers presented on the second day of the conference gave answers as to why the media was unable to respond to the questions posed. Pictorial evidence showed that researchers have to put on a disguise to get past the security guards. This has raised questions regarding the seriousness of the Union Government of India on the issue of border trade. The trade figures of the border trade across India are very low. Although the trading list of Nathu La was revised and new items were added, the intentions of the Union Government of India is somewhat suspect in terms of their policy on border trade. There is a lack of political will to make provisions that can make border trade beneficial for border communities or promote cross-border economic engagement in addition to border trade.   


Discussion

• There is a huge concern regarding the lack of infrastructure in India’s northeast region. The Union Government of India cannot solelybe blamed for this problem. Two actors are mainly responsible for connectivity and road infrastructure in Sikkim- the local contractors and Border Roads Organization (BRO). Local contractors in the bid to renew contracts every year, construct under-quality tarmac roads. This brings employment opportunities for the local labour. The BRO roads are well-maintained and usually strong. However, State governments must take an equal initiative to develop the region.

• Local study groups are important for planning a region’s infrastructure development. These groups are better equipped and well aware of the realities of the region as compared toany foreign group. Monetary groups and businesses should be encouraged to participate as investors. The government should give adequate incentives to persuade traders to get into an institutionalised set up. The confidence building measures should be backed by business interests. Frequent dialogues should be encouraged between the Northeastern states and the neighbouring countries. The traders’ role is very important in this regard.

• Sikkim is a biodiversity hotspot; the region specializes in herbal raw materials. This industry could be encouraged to cater to the Chinese and Tibetan market. This will help the economic development of Sikkim.

• There is a difference between border trade and trade between countries. The trade through the Nathu La pass is still a border trade and does not contribute much to the economy as such. There are major institutional differences between India and China and these hinder trading activities. On the Indian side, there is a lack of political will to developing cross-border trade and to improve it from the present condition, whereas China is better prepared with regard to its infrastructural development.

• Closer attention to Beijing's policy of xibu da kai fa (great western development campaign) and zhoubian waijiao (neighbourhood diplomacy) could lend insights into China's perspective and seriousness on the Nathu La border trade. China is looking into a multi-connectivity model with focus on continental connectivity and trade.

• Due to the high political and economic risks involved, traders show reluctance in investing into resources and capital in the Northeastern region, Bangladesh and Myanmar.  The Inner Line Permit in the Northeastern region makes mobility very difficult in the region. There are many restrictions with regard to trade and tourism in the region owing to the unstable political situation and security issues.

• Government regulations are not only hampering trade but also giving space for smuggling and black marketing. The majority of the trading items in the Nathu La border trade are unlisted items and therefore there is a need to regularize the trade. The trade at Nathu La, which takes place in local currencies is illegal.

• Practicality, viability and feasibility are three aspects that should be taken in to consideration before calculating adequate investments required for infrastructural development. Geography and political boundaries should be considered to avoid any future territorial dispute as the question of territoriality is very crucial in Sino-Indian relationship.

Report drafted by Namrata Hasija, Research Officer, China Research Programme, IPCS