Rivals? India seeks bigger Chinese role in infrastructure

October 9th, 2011 - 5:32 pm ICT by IANS  

New Delhi, Oct 9 (IANS) Even as security hackles are raised in New Delhi over alleged Chinese muscle-flexing over disputed territory, whether land or sea, India does not appear to be averse to a greater Chinese role in its own infrastructure development, including building of power plants or high-speed rail networks.

With the Indian government here planning to spend around $1 trillion on infrastructure projects, India “will like China to play an important role” in this sector over the next few years, say well-placed sources.

Chinese companies have already completed and are in the process of executing infrastructure projects worth $40 billion in India, said the sources who did not want to be identified.

The upsurge in trade and investment is happening despite attempts to project India and China as military and economic rivals by a section of the West and a part of India’s own security establishment seeing Beijing as a major threat to its territorial sovereignty.

“With India’s growth ambitions and a change in its industrial policy to raise the share of manufacturing to 29 per cent of GDP, India has to build massive infrastructure. China, with its $3 trillion foreign exchange reserves, can play an important role,” Srikanth Kondapalli, a China expert at Jawaharlal Nehru University, told IANS.

“Even if the Chinese channel three per cent of their forex stock (about $100 billion) into a 30-year fixed return investment into India’s infrastructure, that would be a win-win proposition,” said Ajit Ranade, chief economist with Aditya Birla Group.

Already active in sectors like power, telecom and roads, Chinese companies are often seen to outbid competition in cost and duration, sometimes completing projects in record time.

Chinese power equipment manufacturers, according to an estimate, have procured almost 18 per cent of the 12th plan capacity addition target in India.

In fact, experts say a large chunk of India’s $100-billion worth power sector equipment will be sourced from China in the next five years.

Anil Dhirubhai Ambani Group (ADAG)’s Reliance Power struck an $8.29-billion deal with China’s Shanghai Electric last November for the supply of 36 coal-fuelled power plants.

In the telecommunications sector, where there have been some security concerns, the switches and hardware are increasingly Chinese. “In fact, Huawei has become an Indian telecom brand,” said Ranade.
Expanded cooperation in infrastructure was a dominant theme of discussion at the first strategic economic dialogue India and China held in Beijing last month. Sources said India is keen to tap Chinese expertise and technology in building high-speed rail corridors.

Even as India welcomes China’s greater role in building low-cost infrastructure, it has voiced its concerns about the growing trade deficit, a sticky issue that figured prominently in the economic dialogue.

Last year, trade deficit in favour of China was estimated to be around $20 billion. In the first eight months of this year, trade deficit has already reached $17 billion. India has conveyed to China the need for a level playing field, specially in those areas in which it has competitive strengths like pharma and IT-enabled services.

With China’s economic muscle growing and moves in some quarters to make Chinese currency reminbi a global currency, New Delhi is seeking a more nuanced relationship with Beijing and hopes not to let some strategic divergences on issues like the border dispute come in the way of building a stronger economic relationship.

In an important policy shift underlining the primacy of economics over politics, the government has even allowed Indian companies to access loans in yuan (RMB), (equivalent to 1 billion). “If you can use cheaper Chinese capital for development, why not?” said one source with access to high level thinking.

Recently, Reliance Communications sealed a $1.33-billion loan facility underwritten by Chinese banks for refinancing its purchase of 3G spectrum assets.

(Manish Chand can be contacted at manish.c@ians.in)

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