No resting on laurels for Asian giants

Friendly relations between India and China have endured for millennia. "Is there anyone in any part of India who does not admire China?" asked seventh century Chinese scholar Yi Jing on his return from India.

Hiuan Tsang, another well-known name in the long list of Chinese scholars who visited India, had gone to study at the famous Nalanda University there. He came to be revered so highly that students and teachers at Nalanda pleaded with him to stay when he decided to return to his homeland.

On the other hand, Indian scientist Gautama Siddhartha had even become president of China's official Board of Astronomy in the eighth century.

While Buddhism was carried from India to China, ideas in science, mathematics, astronomy, literature, linguistics, architecture, medicine and music were carried back and forth between the two countries over extended periods in the first millennium.

Along with the trade in ideas and thoughts flourished mercantile trade. Sanskrit literature contains detailed descriptions of such exchanges. For instance, in Banabhatta's Harshacharita, the Princess Rajyasri wishes to be clothed in elegant Chinese silk for her wedding.

In an essay on India-China contacts in his book "The Argumentative Indian", noted Indian economist and Nobel Laureate Amartya Sen makes the following observation: "India and China learned a lot from each other in the first millennium, but the significance of that epistemic process has not dried up even at the beginning of the third millennium".

If anything, Sino-Indian collaboration in the 21st century will be critical not only for the two countries themselves, but also for providing a new direction to the world of the future, the contours of which are just becoming visible.

If the 21st century is widely perceived to belong to Asia, two nations are poised to give shape to that century - India and China. In this new Asian age, the economic performance of both countries, ever since they embraced bold economic reforms programs, has been nothing less than spectacular.

China registered an average annual GDP growth rate of 9.5 percent during 1978 to 2007. India's current annual GDP growth rate is 9 percent. When compared to the growth registered by other major world economies like the United States, the European Union and Japan, these figures capture the essence of the changing world economic dynamics.

There has been a shift in the fountainhead of world economic growth - a shift seen as permanent at least in the foreseeable future.

Increased bilateral co-op

Against this backdrop, Sino-Indian collaboration and cooperation can take place on three distinct levels.

First, at the multilateral level, which will give shape to the new world order; second, at the bilateral trade and investment level; third, in the emerging areas of knowledge-based industries, which will have global implications in future technology development.

Multilateral cooperation - The outcome of the Cancun, Geneva and Hong Kong Ministerial meetings are a case in point for what can be achieved through closer cooperation between India and China at the multilateral level.

Issues raised by the developing countries at these meets had more than just an economic case supporting them. But what ensured that these were not overlooked by the developed West was the united stand taken by India and China, with adequate support from Brazil and other developing countries.

The trade regime as it exists today is replete with similar such impediments, but a concerted and coordinated effort by both India and China could go a long way in removing these inequities.

With regard to RTAs (Regional Trade Agreements), India's interface with China under the system of RTAs is through the ASEAN (Association of Southeast Asian Nations). The two countries are strengthening their ties with the ASEAN countries. While interactions as members of a common regional trade agreement can prove to be beneficial, there can be no substitute for a direct and freer trading agreement between the two Asian giants.

Work on this proposition has already commenced and faster and greater strides are expected on the road toward a preferential trade arrangement.

Bilateral trade and investment flows - The second step that will strengthen economic relations between India and China is enhanced bilateral trade and investment.

The two nations have already created a record by increasing bilateral trade manifold. While India-China trade stood at a modest $2.5 billion at the beginning of the century, it topped $37 billion in 2007. Having achieved this astounding growth in a very short period of time, they are now targeting the $40 billion mark by 2010.

However, achieving this requires far greater exposure for the mutual core competencies and opportunities available in each country. This would help diversify trade, which at present is restricted to a few select items.

Further, the two countries need to move up the value chain in bilateral trade to achieve the target they have set for themselves.

Research by the Federation of Indian Chambers of Commerce and Industry (FICCI) shows that India can make a beginning by focusing on chemicals, plastics, drugs and pharmaceuticals, electrical equipment and machinery, and, most important of all, agricultural products.

On the Chinese side, products like audio-visual equipment, electrical machinery, optical & medical instruments, and transportation equipment should find a good market in India.

While a strong push to trade is an absolute must, the two countries need to simultaneously focus on promoting mutual investments. A beginning has been made in this direction with some Indian companies in sectors like pharmaceuticals, IT, electronics, auto components and engineering goods making their foray into the Chinese market. However, Chinese investments into India have not been forthcoming.

India today is very different from what it was about 10 to 15 years ago. It has a liberal investment regime with up to 100 percent FDI allowed in most sectors.

FICCI is committed to engaging the Indian government and partnering with them to increase the comfort level of Chinese companies and draw them into the country. These companies are expected to enhance their investments in India, particularly in sectors like infrastructure, food processing, electronic hardware, plastic products and IT.

Knowledge driven areas - Another area where both India and China can collaborate and gain from each other's experience and expertise is leading-edge technology and services.

Both countries have centers of excellence in high technology that easily compare with the world's best. These areas of excellence should be at the core of future Sino-Indian collaboration in knowledge-driven industries. They are supposed to develop a structured cooperation machinery and collaboration strategy in areas like biotechnology, IT and IteS (IT enabled services), healthcare & drugs, and space technology.

China is already a leading player in the field of biotechnology, with Shanghai emerging as a premier R&D hub. The biotech industry of China is all set to capture a major share of the world market.

Its Indian counterpart, on the other hand, has proven its superiority around the world in handling specialized work. The diverse nature and expertise of their biotech industries call for greater synergy between India and China in this field.

India has an acknowledged strength in IT and IteS, with all major IT multinationals already having set up back offices there. It is a win-win situation where India can also gain by collaborating with China, and expand its market presence in other regions such as Japan, South Korea and the ASEAN nations.

Healthcare is another area where China can gain immensely from India's experience. India's healthcare infrastructure has developed significantly over the last decade, with the country now boasting a number of state-of-the-art healthcare service facilities.

India is a preferred destination for low-cost, high-end healthcare services for a number of people from neighboring countries Pakistan, Bangladesh and Sri Lanka.

While China can make use of India's experience to establish and develop high-end healthcare facilities, India's private sector players can venture out to set up private hospital and diagnostic facilities in China.

The other area where India and China can tie up profitably is space technology, in which the latter has proven expertise. Although India has its own set of achievements in this area, it can learn from the Chinese experience and implement the same in its future efforts in the field of space technology and research.

However, identifying potential is one thing and harnessing it quite another. For a long time now, much has been said and written about the possible areas of synergy in Sino-Indian economic ties and how both countries stand to gain from such collaboration. The time has now come to put those words into action and transform willingness into actual cooperation.

In this new age of Asia's emergence, India and China must cooperate for mutual prosperity. From where we stand today, we see several development opportunities.

It is imperative that business communities from the two sides take a broad and long-term view to actively expand mutual cooperation in various fields, some of which I have highlighted.

The author is president of FICCI

(China Daily 01/14/2008 page16)