India has officially rejected being any part of the Belt and Road Initiative. However, Chinese capital is still being put into the country's infrastructure projects. Stefania Palma reports.

AIIB 2017

India’s relationship with China’s Belt and Road Initiative (BRI) is an unusual one. On the one hand, New Delhi is resistant to the programme because it argues that China is financing projects on land claimed by both India and Pakistan. On the other hand, some analysts argue China-led projects in India exist anyway and even match BRI criteria.

India’s finance minister, Arun Jaitley, believes the BRI violates India’s sovereignty. “[There are] sovereignty issues. We are not a part of the project. And the proposed [BRI] road passes through what we regard as Indian territory,” says Mr Jaitley, referring to the China-Pakistan Economic Corridor, a flagship BRI project that crosses the Gilgit-Baltistan area of Kashmir. Both India and Pakistan claim the entire Kashmir region.

Would India consider joining and endorsing the BRI if this road project were to change in a way that did not infringe upon Delhi’s sovereignty? “I cannot answer hypothetically,” says Mr Jaitley.

India overview

Sovereignty is all

Asked if he thinks Indian corporates and banks are missing an opportunity by not actively participating in the construction or financing of BRI projects, Mr Jaitley says: “I think for India at the moment the sovereignty issue is of prime importance and therefore that is our focus.”

In May 2017, India refused to attend the Belt and Road Forum in Beijing. A spokesperson at India’s Ministry of External Affairs released a statement explaining the absence, saying: “No country can accept a project that ignores its core concerns on sovereignty and territorial integrity.”

Aside from the Kashmir question, India might also be concerned with BRI projects of potentially strategic value. “For example, the docking of a Chinese submarine at the port of Colombo in 2014 is one reason why the handover of a port at Hambantota in December 2017 raised alarms in Delhi. The nature of the Hambantota transaction, a debt-for-equity deal, also raised concerns,” says Jonathan Hillman, director of the Reconnecting Asia Project at the Center for Strategic and International Studies, referring to China signing a 99-year lease on the Sri Lankan port.

Chinese projects in India

Though Delhi is keeping its distance from the BRI, this does not mean China is not involved in any infrastructure projects in India. Some of these may not be officially BRI branded, but could arguably fit the initiative’s remit. For instance, China Development Bank – which as of August 2017 had provided Rmb421bn ($66.5bn) in capital to BRI projects plus $36bn-worth of loans – signed a memorandum of understanding with the Gujarat government to invest $1bn in an industrial park near the city of Sanand. Chinese state newspaper Global Times even referred to this park as a BRI initiative.

“If this was being done in Pakistan, it’s tough to imagine it wouldn’t be branded as a Belt and Road project. So again, formal membership in the Belt and Road isn’t a prerequisite for doing related business with China. Nor is membership a guarantee of more business,” says Mr Hillman.

What is more, at $26bn, aggregate Chinese foreign direct investment into India between 2014 and 2017 towers over figures for all other countries featured in this report. Additionally, India is a founding member of the Asian Infrastructure Investment Bank, which is broadly interpreted as one of the BRI’s funding vehicles, and to which India made a capital contribution of $8.37bn, second only to China, the founder of the bank.

India’s relationship with the BRI is a delicate and perhaps ambivalent one. If anything, it highlights the malleability of what constitutes and defines the initiative so far. “Participation in China’s Belt and Road is often in the eye of the beholder. Some countries have signed up to the [initiative] but have yet to receive any tangible benefits. Others have not endorsed the Belt and Road but have done business deals that would otherwise fall under the Belt and Road’s broad and ever-expanding banner of activities,” says Mr Hillman.

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