New Delhi: Economic diplomacy is a core component of India’s foreign policy, but those involved with managing it need to astutely identify both challenges and risks, notwithstanding the large development cooperation programmes that have linkages with trade and investments. 

India must look towards forging an equal and collaborative economic partnership with China in South Asia rather than adopting a tit-for-tat approach, as it currently does not have the financial wherewithal to do so, Indian analysts told Sputnik on Thursday.

According to Sanjeev S Ahluwalia, an adviser with the Observer Research Foundation (ORF), a New Delhi-based think tank, China has accumulated both resources and technology and its international reach is much longer.

“They [China] are far ahead of us. There is an enormous differential between China and India in terms of economic endowments’,” he said.

Referring to how budget proposals for 2020-2021 could effectively facilitate India’s ongoing economic diplomacy in its immediate neighbourhood, given China’s huge footprint in the region, Ahluwalia, said though everyone wants a higher budget, including the Ministry of External Affairs (MEA), the focus should be what and how the external world can do to improve India's domestic economy.

India has fiscal constraints. Any massive increase in MEA’s budget is not going to change anything, he said. “In the last fiscal, I am told the MEA had a budget of over $2.3 billion (Rupees 170 billion). Will India’s standing in and around its neighbourhood and beyond rise further because it has more funds? I don’t think so.”

Ahluwalia suggested: “Make your own economy strong first, get rid of poverty and socio-economic inequalities. There is no need to be policemen or gatekeepers of the world.”

He said the MEA can never hope to have the same resources as Chinese diplomats. “My world view is that resources are instruments that come with their own disabilities. Having large resources and investment prowess as China has now allows for overconfidence and laziness to creep in. India should not be creating problems of its own.”

Ahluwalia added that Pakistan is an outstanding example of being over dependent on “sugar daddies” like China and the US. This was not the case with India, he said, adding that the latter has an envious record of standing on its own feet and showing countries that collaboration is not and can never be a top-down exercise.

Gautam Chikarmane, an international and Indian economic policy analyst, said: “In the 2020s India needs a new way to look at and think about the Union Budget as a compendium of national economic aspirations. Finance Minister Nirmala Sitharaman’s Budget 2020 will be unable to address the biggest problem of the 2020s – economic growth.”

He added that as an accounting exercise, the budget will deliver more of the same… “Whatever she (Sitharaman) does, it will not change anything in the short term in the real economy…”

“Allow the budget to balance expenditure and revenue but make all other policy announcements keeping an impact factor of 12 to 18 months in mind. The real challenges to the Indian economy can no longer be addressed by the Union Budget. We need to go one or two levels lower,” said Chikarmane.

“The government needs to identify administrative hurdles before doing business,” he added.

While the analysts differ in their perspectives, they all agree that there is an urgent need for economic rethink and course correction before time runs out for India. 

Since 2013, New Delhi has been watching China’s huge scale of investment in South Asia, be it Pakistan, Bangladesh, Sri Lanka, Nepal, or Myanmar, with a growing sense of unease.

Bangladesh is currently the second-biggest recipient of money from China in South Asia, despite being New Delhi’s biggest trade partner in the region.

China has a plan to spend more than $30 billion on infrastructure schemes in Bangladesh, while India’s exports to Bangladesh for 2018-19 stood at just $9.21 billion with imports at $1.22 billion.

In Pakistan, China is widely acknowledged as Islamabad’s “all weather friend”. Beijing has already invested $62 billion in the China-Pakistan Economic Corridor infrastructure and connectivity project that is a part of the much more ambitiously conceived Belt and Road Initiative that crisscrosses 152 countries and involves collaboration with international organisations in Asia, Europe, Africa, the Middle East and the Americas.