India’s Economic Relevance in the Indo-Pacific

The concept of the Indo-Pacific was first introduced by an Indian naval officer (Khurana 2007, 2019) and later proposed by Japanese prime minister Shinzō Abe in 2007 (Ministry of Foreign Affairs of Japan 2007) in the context of peace and prosperity for all through a dynamic coupling of the Indian and Pacific Oceans and the emergence of a broader Asia. It was recently revived by US president Donald Trump at the Asia-Pacific Economic Cooperation (APEC) summit in 2017 and has since garnered much interest and significance. Though presented as a strategic construct, with major players including the Association of Southeast Asian Nations (ASEAN), Australia, Japan, India, and the United States, it is really the economic dimension that accords the regional construct its significance. In addition to the fact that the Indo-Pacific includes some of the largest and fastest growing economies of the world, it is at the nexus of global trade and commerce with nearly half of the world’s 90,000 commercial vessels and two thirds of oil trade traveling through its sea lanes. Nine of the ten busiest seaports in the world are in the Indo-Pacific (World Shipping Council).¹

As envisioned by the United States, the free and open Indo-Pacific is aimed at establishing a rules-based regional order with an undeniable underlying motivation toward the containment of China. China has been both expansionist and assertive in its behavior in the Indo-Pacific and in its economic and strategic subregion, the South China Sea. This has been evident in increased Chinese territorial claims, military activity, and land reclamation in which China has either physically increased the size of the islands or created new artificial islands² with military installations and outposts in the subregion. India, with its impressive growth trajectory over the last decade, is perceived as having the potential economic heft to act as the key regional counterpoise to China in the regional construct (De 2020; Madan 2019; Brookings Institution 2018).

This commentary considers whether India’s economic weight in the region is sufficiently comparable to that of China for it to be able to fulfill the role expected of it. The essay proceeds by highlighting, first, the economic dimension of the Indo-Pacific, followed by a discussion of ASEAN’s centrality to the Indo-Pacific. This essay emphasizes the strong China-ASEAN interlinkages, through the Belt and Road Initiative (BRI) and regional value chains (RVCs) as major contributory factors to China’s ability to exercise its dominant regional power status and overtly assertive behavior in the region, as well as to the limited resistance shown, in response, by the ASEAN nations. In contrast, as this essay describes, the economic interlinkages between India and ASEAN are relatively much weaker. This weakness, I argue, is a significant limiting factor in India’s ability to fulfill its expected role of serving as a balancing force to China in the region. This comparison of the nature and extent of economic interlinkages between China and India illustrates the inherent contradiction in the underlying premise of the Indo-Pacific strategic construct. This essay thus concludes that the strategic goal of the Indo-Pacific regional construct is insufficiently supported by its economic contours at present. Enhanced and an accelerated pace of India’s economic integration with the Indo-Pacific countries and in particular the ASEAN would therefore be a necessary prerequisite to successfully establish the regional construct.

South China Sea: Economic Significance and Chinese Dominance

The South China Sea (SCS) has been at the heart of Chinese expansionist activity in the Indo-Pacific. The waterway is critical to global trade and is an essential maritime crossroad for many large economies of the world and for China, in particular. Globally, 80 percent of trade by volume and 70 percent by value is transported by sea (UNCTAD 2018).³ Of that, 60 percent passes through Asia, with the SCS carrying an estimated 33 percent of global shipping.⁴ With over 64 percent of its maritime trade transiting the waterway, China accounts for the largest proportion of total trade through the SCS...