Deciding the agenda for the recent G20 meeting of finance chiefs was always going to be a little tricky. The US and its allies wanted to discuss new sanctions against Russia and security guarantees for Ukraine.
Moscow and Beijing preferred to criticise Western “blackmail and threats”.
Indian officials hosting the meeting of the world’s largest economies in Bengaluru were busily working behind the scenes to try and avoid using the word “war” in any joint statement. Ajay Seth of India’s finance ministry had even suggested Russia’s attack on Ukraine was beyond the mandate of finance ministers and central bank governors.
Other attendees pointed out it was quite hard to argue Vladimir Putin’s illegal invasion of a neighbouring country almost exactly a year ago hadn’t had an impact on the global economy. It was probably, therefore, worth at least a passing mention.
In the end, they agreed to disagree: no joint communique was issued.
The world will probably find a way to survive without the usual bland diplomatic tropes and empty verbiage. But India’s discomfit is emblematic of how the war in Ukraine is driving a wedge between the world’s most powerful economies.
In a motion at the United Nations General Assembly earlier this month calling for an end to the fighting and Moscow’s immediate withdrawal from Ukraine, Russia voted against, while China, India and South Africa abstained. Everyone else was in favour.
But, whereas Beijing has repeatedly been called out for its tacit support of Moscow, New Delhi, which has increased its imports of Russian crude oil by 33 times since the war started, has avoided censure.
That’s because, in the increasingly complicated three-dimensional chess of global geopolitics, India is seen by Western governments as an important potential bulwark to Chinese aggression in the Indo-Pacific region.
As an increasingly muscular China prompts businesses to rethink their reliance on the country’s factories, and as defence policies are redrawn around the world in the face of a bellicose Russia, India is becoming increasingly important politically, economically and militarily on the world stage.
It probably helps that the country boasted the second fastest growing large economy behind only Saudi Arabia last year. For years, countries around the world were more or less forced to hitch their wagons to the Chinese engine of global growth or risk being left behind.
But Covid, an increasingly authoritarian regime in Beijing and retreating globalisation have all led to a recalibration of the political and economic calculus.
There are two other reasons that leaders are rethinking their approach to China to the benefit of India, though they are less likely to be mentioned out loud by Western diplomats: ongoing efforts to ensure that Beijing continues to struggle in its attempts to achieve technological parity with the US; and the fact that China’s own economic growth appears to be plateauing.
These trends are all fast reshaping the world’s approach to relations with Beijing.
Hawks in the West have long argued that China policy should be shaped by the character of the regime rather than economic self-interest. It is much easier to make their case when growth is in the low single digits.
But this presents another problem: where should the world now turn for fresh economic impetus?
At first glance, India is a good candidate. Its population has just overtaken (or, depending on how you calculate it, is just about to overtake) that of China. Crucially, its working age population is still growing unlike China, which continues to be hobbled by the disastrous one-child policy.
The median age in India is a full 11 years younger than in China. According to Shilan Shah at Capital Economics, India’s working-age population will exceed China’s by an astounding 235m by 2040, roughly the population of Pakistan today.
Internal reforms mean that the Indian economy is on a tear. Morgan Stanley has predicted that India will be the world’s third largest economy by as soon as 2027 and that the country’s gross domestic product will more than double from $3.4 trillion to $8.5 trillion over the next decade.
The UK, with its long history of cultural ties and a shared language, should be in prime position to benefit from the shifting geopolitical axis.
Yet an attempt to agree a bilateral trade deal by Diwali in October last year was torpedoed when Suella Braverman, the home secretary, expressed concern about a potential increase in Indian migration to the UK.
A reciprocal migration deal was finalised a month later ahead of Rishi Sunak’s first face-to-face meeting with Modi in November. Sunak, a practising Hindu with strong family links to India, has said a trade deal is “just one part of a broader relationship” with New Delhi and stated he doesn’t want to “sacrifice quality for speed” in trade negotiations.
However, while talks progress, concerns about Prime Minister Narendra Modi’s efforts to undermine democracy and marginalise Muslims are raising red flags.
Gauging the best approach to managing relations with India, the rising superpower, will be a delicate balancing act.