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The New Silk Route and the effects on Indian Economy

For the aspirants of UPSC IAS Exam, here, we have provided a complete analysis of The New Silk Route and the effects on Indian Economy.

Apr 5, 2016 12:16 IST
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In terms of Civil Services IAS Prelims Exam as well as IAS Mains Exam, the current issues are very important. Here, we have provided we have provided a complete analysis of The New Silk Route and the effects on Indian Economy.

The New Silk Route and the effects on Indian Economy

The Silk Route derives its name from the lucrative trade in Chinese silk carried out along its length, during ancient era. This trade was prominent on ancient network of trade routes that were central to cultural interaction through regions of the Asian continent connecting the West world to the East from China to the Mediterranean Sea. However, the trade was not limited to trade in Silk only and it was flourishing in other goods as well, along with the spread of religion, culture and philosophies.

The New Silk Route has been envisaged to bring the world, and especially Eurasian Continent closer to emulate the ancient Silk Route. The New Silk Road program consists two routes, known as “One Belt, One Road”. The land route is called “the Silk Road Economic Belt,” linking central Asia, Russia and Europe. The sea route has an odd name: “the 21st Century Maritime Silk Road,” and goes through the western Pacific and the Indian Ocean. Thus, “One Belt, One Road.”

According to the map, the land-based “New Silk Road” will begin in Xi’an in central China before stretching west through Lanzhou (Gansu province), Urumqi (Xinjiang), and Khorgas (Xinjiang), which is near the border with Kazakhstan. The Silk Road then runs southwest from Central Asia to northern Iran to Syria, Turkey, and finally to North Western Europe, where it meets up with the equally ambitious Maritime Silk Road.

The Maritime Silk Road will begin in Quanzhou in Fujian province, and also hit Guangzhou (Guangdong pronvince), Beihai (Guangxi), and Haikou (Hainan) before heading south to the Malacca Strait. From Kuala Lumpur, the Maritime Silk Road heads to Kolkata, India then crosses the rest of the Indian Ocean to Nairobi, Kenya to Horn of Africa and moves through the Red Sea into the Mediterranean and meets the land-based Silk Road.

Following can be the visions and strategies of China in order to push its very ambitious New Silk Route:

• China wants to build the roads and pipelines into these countries to smooth trade access and secure more resources.

• Beijing hopes that economic development will pacify the riots in the traditionally troubled wester region. The New Silk Road program could be Beijing’s silver bullet to solve the ethnic conflicts in the region and prevent Xinjiang from breaking away to become a renegade state.

• Like the Marshall Plan, the New Silk Roads will help boost China’s soft power and establish greater influence in Asia and Africa.

• Through its omnipresence, it can dilute the hegemony and power of countries like US, Europe and even India in and around the regions of Silk Route.

• China also plans to influence and impact the countries enroute Silk Route through its culture, philosophy and political ideas, assuring its indirect diplomacy, which ultimately will help China establish its hegemony in the region.

Effects on Indian Economy

India was perhaps the most prominent and critical factor for the success of ancient silk route, owing to its rich civilisation, proximity to China and as a geographical link to the east. India, in present times is a fast emerging biggest market, a powerful democracy to take on board and is placed geographically in a strategic position. These reasons are too catchy for China to lure a stalwart like India to join its new initiative of New Silk Route.  However, from Indian perspective, it becomes too tricky to join it, which can be analysed form following paragraphs. India falls in the MSR branch of the New Silk Route, hence Indian context will be discussed vis-a-vis MSR.

Positives:

1.China seeks to address its economic slowdown by outsourcing manufacturing to its Silk Route partners. For India – given its advantages in terms of the relatively low cost of labour and raw-material – this presents an opportunity to strengthen itsmanufacturing base, propagate its ‘Make in India’ campaign, and generate employment opportunities.

2.Considering that China’s industrial capacity is at least two decades ahead, Indian industries could leapfrog in the same way that the Southeast Asian economies did in the 1980s on the back of outsourcing.

3.If New Delhi opts to stay out of the MSR, India’s industrial growth will lag behind its Asian neighbours – most of which are China’s avowed MSR partners – thereby adversely affecting India’s economic growth and developmental plans.

4.The MSR could be an effective maritime supplement to the land-based Bangladesh-China-India-Myanmar (BCIM) Economic Corridor under active consideration by New Delhi.

5.India’s own ‘Sagarmala’ project can be integrated to MSR and thereby contribute to the nation’s efforts to enhance sea-trade connectivity, while also progressively leading to ‘port-led development’ of the hinterland, and the SEZs.

Negatives:

1.Amidst highly uncertainties about how the MSR will be implemented, along with concerns as to whether it will have a geoeconomic rationale or a security orientation, India may fall in Chinese trap by joining it, thereby surrendering its economic liberty to China.

2.MSR has also been perceived as a counter tool to balance US pivot, TPP etc. India, by joining it will only support China to establish its hegemony in the region.

3.The MSR may be nothing but an economic disguise for the ‘string of pearls’ theory, which concerns the build-up of Chinese commercial and military facilities, and relationships in the India Ocean. Port Hambantota, Gwadar etc.

4.MSR will bring more South and Southeast Asian economies coming under China’s sphere of influence would mean a serious setback to India’s traditional conception of the subcontinent as its privileged sphere of influence.

5.By MSR, Dumping of goods in Indian market may further enhance due to new production units in Western regions of China and greater accessibility in Indian market.

In the above backdrop, it is imperative to put in ample thoughts before joining the New Silk route. On the one hand, India is situated at such a prominent location that it can’t miss out on the opportunity to be part of MSR. The new Silk Route will be passing through close vicinity of India. India’s desire to attract Chinese investments can very well be fulfilled by joining MSR. It would also help India to develop its northeast and further its Act East Policy of prioritizing relations with East Asia. With the help of MSR, Indian investment in neighbouring countries could help in reducing China’s sphere of influence and dominance in South Asia to some extent.

However, as the true motives, ways, processes etc are far from being trustworthy and certain, India’s apprehension to join MSR is well justified. In the ambitious aspiration to scale new economic heights, India must not forget the repercussions like heavy dumping, massive trade deficit, security concerns, Chinese hegemony and dominance etc.

More than anything, If India refuses to be a part of MSR, it may stand isolated. India must be very cautious while choosing the right path so as to preserve its dignity, dominance and keep rising on the development path.

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