The Need For Chinese-Indian Innovation Pact

As civilizations with historical legacy of scientific and technological achievements spanning centuries, India and China have been engaged in pursuit of scientific and technological achievements and innovations, both individually as well as bilaterally and multilaterally. Towards this direction, the India China Strategic and Economic Dialogue (SED) has been a major initiative to boost technical and economic cooperation and scientific advancements in both the countries. The SED brings with it the prospects of an India – China Innovation Pact.

The India-China SED mechanism is a reflection of the two countries’ wish to deepen and elevate the current levels of exchange and interaction. In the past there had been mechanisms such as the India-China Joint Economic Group (JEG) on Economic Relations and Trade, Science and Technology (ministerial-level; established in 1988); a Joint Study Group (set up in 2003); a Joint Task Force (report completed in October 2007); apart from Joint Working Groups on Trade, Agriculture and Energy. However, clearly, the current dialogue format widens the ambit of interaction. The SED also comes as an acknowledgement from both sides to correct the growing burden of trade deficit that India carries (US $20 billion for 2010) in its trade relationship with its largest trading partner, China, and address issues relating to market access for Indian companies in China in competitive sectors such as pharma and IT, as also the hurdles Chinese companies face in expansion of operations in India.

The third round of the India-China SED is being held in March 2014. The working groups have covered areas such as infrastructure, mainly the railways, and operational zing agreement for service centers to be set up in India for Chinese power equipment, environment and resources protection, water management and policy coordination, collaboration on planning and urbanization, and cooperation in high technology, including the IT sector. The two sides will also discuss collaboration in heavy haul of rail stock and re-development of railway stations. The present global economic situation, cooperation in international monetary and financial systems, global commodity markets, sustainable development and climate change will also figure in the talks.

An Indo-China Innovation Pact is important from an Indian point of view. India had a large $39 billion trade deficit with China last year. India cannot bridge this gap through traditional commodities exports. With the ushering of an Indo-China innovation deal, India will have a greater access to services and this in turn would substantially increase Indian exports thereby bridging the trade deficits.

However this objective could be fraught with some conditionality. There are strong chances that China will make any access to its markets condition to even greater access to Indian markets. China is interested in bigger share of hardware and electric goods market. India on the other hand is keen to develop its competence in these areas. Currently China accounts for 52% of its electronic imports largely responsible for the skewed trade deficit. Moreover Investment from China has traditionally been regarded with suspicion related to security concerns. It contributed just $313 million, or 0.15%, of India’s total foreign direct investment (FDI) inflows between April 2000 and December 2013.

Developed economies are re-thinking long established rules of engagement. The ongoing regional and global norm-setting in the economic sphere makes it imperative for India and China to work closely as we share intersecting regional and global interest. The signs look promising for this cooperation keeping in mind that China has offered to help India’s infrastructure. It can bring in funds and expertise having invested huge amounts itself. India should be willing to take help in the areas where there are no security concerns. India and China, two of the fastest growing economies in the world, can gain further mileage from each other provided the two neighbours explore various possibilities of cooperation in sectors ranging from software to manufacturing.


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