Modi Is Getting Ready To Stop China, As The Indian Economy Booms

Panos Mourdoukoutas

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India won’t be encircled by China. And it won’t let China make the South China Sea its own sea. That’s a dual message India has been sending these days, as its economy leaped ahead of China’s to become the world’s fastest large economy—and as investors grow wary over the rising geopolitical risks in the Asia-Pacific region.  To deliver the first message, New Delhi has been hosting multi-nation naval exercises in the Indo-Pacific region, like the one in Malabar in the Bay of Bengal last year with Japan and Australia. And it is hostinganother this month that will include 23 nations. To deliver on its second message, India has joined forces with Vietnam to provide support for freedom of navigation, a position held by the United States and its Asian allies, and rejected by China.

The Indo-Pacific region has always been a strategic waterway for trade between Africa and the Middle East on the one side, and Asian countries on the other. But it has grown in significance in recent years with the rise of China—as a major trade competitor of Japan, and a challenger to America’s dominance in both the Indian Ocean and the South China Sea.

In fact, China’ dominance in the South China Sea depends on its presence in the Indian Ocean for a simple reason: A blockade of the Strait of Malacca by the U.S. and its alliance will cut China off from Middle East oil supplies and from its “Second Continent,” Africa.

India’s recent efforts to contain China come at a time when the Indian economy is getting stronger, growing at 7.2%, well ahead of China’s 6.8%.

To be fair, these growth rates should be interpreted with caution, as the two countries are at different stages of growth. India is still at an early growth stage, where it can grow by employing excess resources trapped in the primary sector, while China is in an advanced growth stage, where growth comes with innovation.

Meanwhile, India must deal with a host of other problems, including widening income inequalities, and corruption and cronyism that support and re-enforce it.

Still, a fast-growing economy will help India accumulate the resources to match China’s economic and military might.

That’ something that should certainly worry China. And it should worry investors, too, as a growing antagonism between the two old enemies could raise the geopolitical risks for investment in the region.