Greater cooperative federalism in India a must to push economic thaw with China

Both Xi Jinping and Narendra Modi have, since coming to power in Beijing and New Delhi respectively, driven a strong trend towards centralisation of power away from the provinces/states

Tensions in India-China relations as far as the boundary dispute is concerned are here to stay. However, there is the belief — at least on the Indian side — that the economic relationship can and needs to be promoted. If so, one major prong of this effort will be through engagements between India’s states and China’s provinces.

During his January visit to China, Foreign Secretary Vikram Misri did not only meet the Chinese Ministry of Foreign Affairs (MOFA) leadership, he also met with the head of the CPC’s International Department, Liu Jianchao. The latter holds no formal role in the Chinese State, but his department represents the Communist Party of China, including its provincial and other local-level officials, in their external relations.

The Misri-Liu meeting, therefore, offers an idea of how the two countries are thinking of promoting economic engagement at a time when India-China ties remain complicated by tensions on the boundary as well as those at the regional and global levels.

Reaching out to CPC

It is not the first time that Indian officials, including Misri, have met with CPC officials. Earlier, during his stint as ambassador to China during the Galwan crisis, Misri reached out to the Central Military Commission (CMC) rather than relying simply on MOFA to convey India’s views.

The CMC has a dual identity in that it serves both the CPC and the State, but it is the CPC identity that is primary and Xi Jinping is its chairman. This position as CMC chairman is, in fact, next in importance only to his position as General Secretary of the CPC and more important than the one he holds as president of the People’s Republic of China.

Indian interactions with CPC bodies, thus, underline a long-present sophistication in India’s China policy — there is a clear understanding that the locus of power in China is the party and its institutions.

In recent years, the International Department has been in the news for organising training sessions for foreign political parties on ‘Xi Jinping Thought’. It has conducted such sessions for the ruling communists in Nepal as well as engaged with Sri Lankan political parties on the CPC’s 100th anniversary in 2021. It should not be surprising then that the International Department interacts regularly not just with India’s communist parties but also with major parties like the Bharatiya Janata Party and the Congress.

From Cooperative Federalism…

As Gujarat’s chief minister, Narendra Modi visited China several times and the state became a major investment destination for Chinese capital. It was, therefore, not surprising that during Modi’s first State visit to China in 2015 as prime minister, the Ministry of External Affairs (MEA) and the International Department signed an MoU, “[desiring] to further develop and strengthen cooperation between India and China”. The principal focus of the MoU was to facilitate visits between sub-national leaders — chief ministers from India and party secretaries of Chinese provinces — and it specifically stated that arrangements had to be made for the visiting delegation “to travel to at least one more city besides the capital”.

The MoU was building on a recent history of formal agreements between the two countries on sister-states/provinces and sister-cities partnerships aimed at facilitating direct investment opportunities among other things. Gujarat and Guangdong, for example, became sister-provinces during Xi’s visit to India in September 2014, while their capitals, Ahmedabad and Guangzhou, became sister-cities.

A State/Provincial Leaders’ Forum was also created during Modi’s visit, which the prime minister called the result of “a serious conviction, born from my experience, that states have a vital role to play in the national development”.

These developments appeared to acknowledge the reality that the economic growth stories of both India and China were being written at the level of their states and provinces.

… to Centralisation

However, both Xi and Modi have, since coming to power, also driven a strong trend towards centralisation of power away from the provinces/states. While the trend has been underway in China for several decades, it has picked up pace with Xi’s anti-corruption campaign. In India, a large majority for the ruling BJP in Parliament and the limited nature of Indian federalism has allowed New Delhi to deploy fiscal tools to undermine the agency of the states.

Yet, as both the Chinese and Indian governments have discovered over time, and particularly since the pandemic, there are limits to running the economy by central diktat and costs to limiting or reigning in provincial/state governments by devolving welfare responsibilities to them but not tax revenues.

If Indian states have to play a role

The 2015 MoU and Misri’s meeting with the International Department head appear intended to revive economic engagement — including the flow of investment, technology, and skills — between the two countries, and, perhaps, to push the states/provinces to take the lead at a time of difficult relations between the central governments.

However, states in India cannot be expected to bail out New Delhi on economic engagement with China without adequate agency and resources of their own. Regular confrontations between the Union and various state governments on multiple issues — share of tax revenues, education policy, delimitation of seats in Parliament, etc.  — indicate a fraying federal compact.

Despite promises to the contrary, successive Union governments have tried to constrain India’s states for political reasons.

Consider, an instance from July when the Kerala government created the position of a ‘secretary in charge of matters concerning ‘external cooperation’’. The MEA spokesperson declared “that State governments should not intrude into matters that are beyond their constitutional jurisdiction.” However, the Kerala government appointment was aimed at dealing with the state’s large diaspora and to promote foreign investment and the MEA statement was criticised even by former diplomats who pointed out the MEA itself has a division for the states to address these purposes, and has asked states to designate officers to deal with international cooperation.

No one would bat an eyelid at such appointments in Chinese provinces, which have extensive, well-oiled and active foreign affairs offices down to the prefectural and county levels.

In a federal system, there must be a degree of political flexibility, including in matters impinging on foreign policy, if states in India must learn to be creative in foreign economic engagement and create opportunities elsewhere for the Union government.

It is true that local dynamics in Indian border states have complicated Indian foreign policy in the past, but blanket constraints are a losing battle. Note how China has promoted economic and commercial linkages with the outside world even in its troubled peripheries of Xinjiang and Tibet.

Instead of suspicion as a default position, India’s national authorities need to be able to partner with states and city governments in order to achieve foreign policy goals like the central government in Beijing has with Chinese provinces since the reforms and opening up era started in 1978.

(Jabin T Jacob is Associate Professor, Department of International Relations and Governance Studies, and Director, Centre of Excellence for Himalayan Studies, Shiv Nadar University, Delhi NCR. X: @jabinjacobt.)

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.