Indian Prime Minister Dr. Manmohan Singh is quite familiar with Beijing by now. Where he needs a guiding light is India China trade. The disproportionate skew towards China, is so dismal that it has the Chinese worried. In order to create inroads and persuade productivity, China has now upped the ante in increasing Indian exports and India has conceded. This means that soon, India will create five Special Economic Zones within her territories which she will lease to Chinese firms flush with funds and machinery to build her infrastructure within her borders. This grand plan of boosting trade seems on the outset to serve the purpose of both nations, India to gain infrastructure at Chinese prices and China a market almost as big as hers, which is almost saturated. The plan however could come with several divots and might not be as smooth sailing as expected. Although India is nowhere close to agreeing to China’s proposal of creating a large SEZ herself within Indian territory, by allowing a majority of Chinese companies to establish themselves in India, the South Asian nation is bartering away her bargaining power.
New Delhi has already taken measures towards easing pressure on Chinese companies, an issue which was a major bone of contention two years ago when domestic Indian companies couldn’t compete with Chinese infrastructural imports and revolted. Now, the Indian cabinet has recently cleared a proposal to sign a memorandum of understanding (MoU) with China that allows Chinese power equipment manufacturers to set up service centers in India. A day earlier, assuaging concerns of power equipment manufacturers, the Indian power ministry informed the corporates of the relaxation granted in the new bidding norms. “The total capital cost requirement, in order to qualify for setting up the plant, has been brought down to five per cent. Also, keeping the economic slowdown in mind, the expenditure incurred by the companies on projects in the past seven years will be counted,” said a senior power ministry official on the sidelines of the conference, organised by Power Finance Corporation (PFC), the nodal agency that conducts bidding for UMPPs.
By reducing the capital requirement and easing entry norms, New Delhi is literally eating out of Beijing’s hands. Unable to motivate her own domestic companies to participate actively and build the nation her own infrastructure, India will soon become dependent on Chinese infrastructure and will have to accept quality given.
Further, Indian companies are already borrowing heavily from Chinese banks to fund infrastructure projects in India, by allowing Chinese power equipment manufacturers to set up service centers in India, China will be able to complete the cycle of from cradle to grave within India, meaning that Chinese companies will soon have complete control over the raw materials they procure, the equipment they use, the tenders they bid for, the price they want to be paid and the quality they wish to supply in India.
Its a heavy price for the nation to pay – especially one which takes pride till today for building the cities of Mohenjo Daro and Harappa!