Xiopolitics poses a tough question

India and China have agreed to revert to the pre-2020 level of mutual wariness and patrolling along their disputed border, setting aside overtly hostile troop interactions. PM Modi and President Xi Jinping have met each other on the sidelines of the Brics summit, with the warmth normal at a meeting of international leaders, if not quite with the fervour displayed by long lost brothers who reunite in Bollywood.In the eyes of many, that leaves the one-sided bilateral trade heavily in China’s favour as the remaining concern to fret over.Trade figures not key concern | China is now India’s largest trade partner, outstripping US. We exported $16.7bn worth of goods to China last fiscal, and imported goods worth $101.7bn, including all the components that Indian companies slap together and proudly export to the world as India-made phones, while pocketing millions doled out as production-linked incentives.That $85bn trade deficit with China isn’t really the major problem it strikes many as being. What matters for a country is the overall trade balance, not bilateral trade deficits. China imports massive amounts of stuff from resource-exporting countries, creating fresh purchasing power in these places, a portion of which gets spent on imports from India, to elevate India’s overall exports.Thanks to robust service exports and the world’s highest remittance inflows, India’s current account deficit remains small. In 2023-24, it was just 0.7% of GDP.Real issue with China trade | The trouble with India’s China trade is twofold. One, direct and indirect state subsidies on a massive scale make Chinese products unfairly ultra-competitive, and stunt entire Indian product lines. Two, even in sectors with strategic dimension, India relies on Chinese imports, compromising national security.National security is compromised in two ways. In an operational sense, it is because of data vulnerability via the use of Chinese electronic components in communications, CCTV cameras and software. And in the strategic sense, it’s through dependence on imports, which, should they stop, would stall Indian missiles, eviscerate Indian exports of electronics and drugs, and push back renewable energy targets.Chinese kit powers SCADA systems that control the sluice gates of dams, and boilers in thermal power plants, besides CNC factory equipment. Complex combinations of software and hardware permit embedding of spyware, besides sabotage bugs, in routers, servers, police control rooms, wherever. Make-in-India based on Made-in-China components is not just any old delusion, but suicidal delusion.High cost of strategic dependence | How do we get out of this China dependence for electronics, active pharma ingredients and essential chemicals? The goal of strategic autonomy demands insulation from dependence on not just China but any source of tech that might shut down at an inconvenient time for India.Consider US-imposed tech sanctions on China. Dutch maker of semiconductor-fab equipment, ASML, is barred from exporting to China, because its advanced laser lithography machines embody American tech. Huawei is barred from accessing advanced silicon, besides Google’s Android operating system.Suppose Washington decides to ban export of American tech and products to India. This is unlikely, but not impossible. India could find its missiles grounded, its submarines missing vital parts and its space programme crippled.Indigenous capacity a must | India must achieve self-reliance in vital components, not in sanskritised Hindi. That calls for massive upgradation of, and investment in, tech, industrial capability, and corresponding trade, human resource, and inward investment policy.The first step would be to identify sectors and product lines in which India needs to have its own supply chains, end-to-end. The next would be to create homegrown capability to make these, including in machines and chemicals that go into their production.These product lines, call them Strategic Autonomy List (SAL), must receive massive R&D support, be protected from trade competition, and insulated from external investor control.Back startups | Funding startups, say five for each of the identified product lines, might be the easiest way to get this done.India’s established big business is happy to diversify from steel to paint, from cement to jewellery marketing, from poor imitations of Jeeps to better iterations of Jeeps. India Inc’s collective investment in R&D is a fraction of what any one of American or Chinese tech giants spends on R&D. Leave these gormless leviathans to waddle in their imagined world of corporate grandeur.India’s startup world today is full of talent and hunger, raring to break fresh ground in mapping the brain, space propulsion, AI, and solving other hard tech challenges.Use funds being wasted to subsidise foreign-owned chip foundries in India to feed that hunger. Give subscribers to NPS and EPF the option to allocate 10% of their savings to venture capital that seeks to fund the startups that would build India’s indigenous strategic muscle.Employ the ₹1L cr R&D corpus announced in Budget to help build Indian Capability Centres that would gather Indian talent to carry out the research work that SAL startups contract out, to supplement inhouse effort.India and China can be allies in reconfiguring the world order to wrest the elbowroom emerging powers need to spread their wings. Standing shoulder to shoulder is a job for equals, which India and China aren’t. India must leverage SAL, to change its weight category.