India's Global Tech Alliance Choices Will Reduce Its Relevance In Its Own Neighbourhood

Two critical decisions taken at the recent Quad summit will increase the gulf between India and other countries of South Asia.

The overarching belief in India is that under Prime Minister Narendra Modi, the country has emerged as a global balancer amidst the ‘great changes unseen in a century’ – as Chinese President Xi Jinping calls the reshaping of the twin global geopolitical and economic orders. The reality, however, is that India is headed towards strategic isolation and irrelevance in its own neighbourhood by 2030.

This is because of two strategic tech-centric decisions taken at the recent Quadrilateral Security Dialogue (Quad) leaders’ meeting held on the margins of the G-7 summit in Japan. 

The first decision is to collaborate with the US-led drive in telecommunications including 5G and 6G, and in developing ‘standards’ for critical and emerging technologies, especially in Artificial Intelligence (AI), and cybersecurity. ‘Standards’ in technology relate to commonality in hardware, software, and platforms for interoperability to work together. 

Different tech standards will disrupt the global supply chain and force global companies to develop two sets of technologies: one to meet the US and developed nations’ standards for the Global North, and another with Chinese standards supported by Russia for those which have joined the Belt and Road Initiative (BRI), the Shanghai Cooperation Organisation (SCO),  the BRICS  and, more generally, a major section of the Global South. Ironically, India – as part of the Quad and BRICS/SCO – will be caught riding two horses.

Consequently, Global North consumer nations – especially the US and European Union (EU) but also Japan and Australia – will face compatibility problems on the technology development front. It will thus become increasingly difficult for the US and EU to continue with their present policy of ‘de-risk’ from China – the pragmatic version of the impulse to ‘de-couple’

‘De-risk’ refers to China’s exclusion from select technologies like advanced chips, while ‘de-couple’ means the end of trade and commerce. Moreover, as China is the primary trading partner with 138 nations, digital logistics systems built on Chinese tech will make traditional trade and commerce with nations following US digital trade standards difficult or, at the very least more expensive.

Second, as part of their ‘partnership for cable connectivity and resilience’, the Quad will leverage its expertise in the design, manufacturing, laying and maintenance of subsea cables to secure and diversify critical networks. This will result in a “splinternet”: the separation of the global internet into two sets of subsea cables developed and maintained, respectively, by the US and China. 

Together, these two Quad decisions – tacitly endorsed by the G-7 nations – will fragment globalisation by 2030 as far as the free flow of data, trade, capital, and human resources is concerned, and adversely impact the third and fourth industrial revolutions – concerned with the mobile internet economy (hardware digital connectivity in cyberspace) and the industrial internet economy (software digital connectivity in cyberspace).

At the core of the Quad decisions is a cross-border governance debate on two issues: cybersecurity and cyberspace governance, or rules regarding who will control data, which properly handled, will enhance a nation’s innovation power.

Meanwhile, China’s Digital Silk Road (DSR) was announced by Xi Jinping in 2017 as part of the Belt and Road (BRI)’s second phase. Since the DSR is about hardware and software cyberspace connectivity, it encapsulates both the third and fourth industrial revolutions (or the robotics age), and hence can shift the global geopolitical balance of power. 

China’s hardware cyberspace connectivity comprises subsea cables, and fibre optic cables. The BeiDou Global Navigation Satellite System (GNSS) – which, with a total of 35 satellites, surpassed the US’s Global Positioning System and was completed in 2020 – is commonly referred to as the Space Silk Road. It will help in monitoring the BRI. 

Software cyberspace connectivity, while building upon the third industrial revolution, is distinctly different since connectivity is replaced by autonomy undergirded by AI, 5G, big data, cloud computing, and blockchain technology. The US does not have any dynamic structure comparable to the DSR which offers prosperity to nations through advanced information technology such as broadband networks, e-commerce hubs, smart cities, efficient ways of doing business and so on.

Obama’s pivot towards the Asia-Pacific region

Before discussing India in South Asia, let’s understand the genesis of the tech war between the two big tech giants. Conscious of China’s rise, which had shifted global geopolitics and geoeconomics from Europe to the Asia-Pacific region, the Obama administration in 2011 announced a ‘rebalancing’ strategy aimed at Beijing. 

This ‘pivot’ had two components: the Trans-Pacific Partnership (TPP), a huge trade and investment agreement with 12 Pacific rim nations, and a military repositioning, aimed at shifting 60% of US naval assets under its Pacific Command (PACOM) in Hawaii to meet the growing challenge of the People’s Liberation Army (PLA) and Navy (PLAN). 

To China’s delight, the Trump administration withdrew from the TPP upon entering office in 2017. It instead focused only on deterrence (military power) and renamed the Asia Pacific as the Indo-Pacific. PACOM became the Indo-Pacific Command (INDOPACOM) to give centrality to India’s role in this US-led deterrence system. This left the field open for China to further economic cooperation with the Asia-Pacific nations.

The Trump administration’s Sputnik Moment came when China, in July 2017, released its super ambitious ‘New Generation Artificial Intelligence Development Plan’ to become a global leader in AI by 2030. 

Since all emerging technologies converge into AI, it has a dual use for ushering in prosperity through the fourth industrial revolution and changing the character of war. Thus, progress in and management of AI ecosystems will be the main issue in determining global polarity. It remains to be seen whether the world remains multipolar – since it is no longer unipolar – or moves towards bipolarity by the end of the decade, when progress in AI ecosystems by major powers becomes clear. The new bipolarity will, of course, be vastly different from the Cold War years since there would be no Iron Curtain but a fragmented globalisation led by the US and China. And once again, contours of unipolarity could emerge in the second half of the century.

China’s 20/30 vision

Interestingly, the Trump administration failed to comprehend that the Sputnik Moment in China had come at the turn of the century itself, when the Chinese started using smartphones at a mass level. Unlike the rest of the world, China moved directly from a cash payment norm to mobile payment without a developed credit card system. 

By 2013, some 900 million Chinese were using mobile internet (smartphones connected to 4G wireless internet), which is more than the population of the US and Europe combined. Thus, in 2017, when China announced its AI plans, its mobile internet companies had an unrivalled consumer data pool which made it easy for them to convert from mobile internet for consumers (third industrial revolution) to industrial internet for enterprises (fourth industrial revolution).

Alongside, China’s foray into international cyberspace connectivity started in 2009 as a junior partner in the joint venture for subsea cables with the UK-based Global Marine. By 2019, China’s Huawei Marine Networks had completed over one hundred projects involving shorter and longer trans-Atlantic distances using indigenous advanced subsea cables where the Chinese acquired expertise in laying them. China became the fourth largest supplier of subsea cables in the world and required no further assistance from foreign partners.

When Xi Jinping announced the Digital Silk Road, the worldwide demand for subsea cables with greater bandwidth had increased. China was among the nations making advances in material sciences, optics, and data processing to enable higher capability in submarine-grade fibre. 

It was conscious about investing heavily in advanced subsea cables, terrestrial fibre optic cables, and other standalone infrastructure for the Huawei 5G wireless network that would allow data flow at greater speed, higher volumes, and minimal latency when compared to existing 4G networks. 

Unlike the US, where subsea cables are in the private sector, the Chinese government is backing its strategic cyber connectivity plans with policies, timelines, resources, subsidies, and loans. Since subsea cables carry over 95% of all international data, and with demand for data having increased exponentially, high-speed internet is expected to spur innovation, increase employment opportunities, exploit 5G potential, and prepare the world for 6G connectivity which is expected to be commercialised by 2030.

Four things that China got right

Starting in 2017, China took four important steps which have left the US wondering if it has been left behind in the fourth industrial revolution. One, it ushered in the industrial internet by converting internet companies into technology companies which have also helped launch start-ups. To optimise digital technologies, Alibaba, Baidu, and Tencent among others started cloud services for users to rent and remotely access a range of computing services including servers, data storage, network, analytics, and databases. Realising that data was a strategic resource, the Chinese built industrial data centres for manufacturing and producing data to help further the capabilities of traditional industries.

Two, Xi, in October 2019, attested that blockchain technology was an important breakthrough for the next round of technological innovation and industrial transformation. Blockchain is a distributed digital ledger which is open for anyone to join. As the name suggests, it has a number of connected blocks, with each block having three items: data, hash (like a fingerprint, it is unique to a block), and the hash of the previous block. 

When any data is added or deleted in a block of this digital ledger, changes get automatically made in all blocks of the chain and the hash also registers it. With many checks in the system, tampering with data becomes impossible. This makes transactions quick, convenient, controlled, traceable, secure, and stable since all the people in the chain get to know the changes made in a block. In 2020, China launched the Blockchain Services Network (BSN), which is an overarching framework wherein various blockchains for different services are brought under one framework for each of digital monitoring.

Three, China launched the world’s first Central Bank Digital Currency (CBDC), e-Yuan or e-Renminbi in April 2020. Digital renminbi is the world’s first digital currency issued by any country’s central bank, which is not the case with cryptocurrency. 

Unlike the digital wallet system of Alipay and WeChat, digital renminbi is a representation of an actual amount in a bank, and not in some digital wallet. China, thus, has created a new monetary transfer pathway which is independent of the existing ones dominated by the US like the SWIFT system. 

So, on the face of it, the reserve currency (usually in US dollars) will not be affected by an alternate Chinese money transfer system. But once the BRI nations find out that the Chinese payment system is faster, cheaper, and more efficient, the importance of systems like SWIFT will diminish.

Eventually, all BRI countries that do business with China will realise that e-Renminbi is not just China’s central bank issued currency but also a ticket to China’s new digital payment system which would be supported by a secure and transparent BSN. For example, if a customer in a BRI nation buys physical containers from China, all he or she needs to do is make the payment in digital renminbi. Everything else, from customs clearance to shipment to exact delivery date will happen automatically and they will be able to trace and monitor the progress.

Lastly,  China announced the dual circulation policy in September 2020. This had two aspects. The first was to strengthen the domestic economy by supply chain structural reforms and distribution of wealth with the aim to bring more Chinese people into the middle class. This involved more medium companies working on digital industrial economy rather than a few big corporations like Alibaba, Weibo, and Didi Chuxing technologies. 

The second aspect of dual circulation policy was that foreign investments, free trade agreements, and free trade ports for engagement with the outside world were encouraged but not actively sought. The dual circulation policy came in for global criticism—that the Communist party did not want more power centres in the shape of huge Chinese corporations. This may not be entirely untrue, but the point was that this policy was to sharpen Chinese fourth industrial revolution at home before it was sold to the BRI nations. 

India’s impending isolation in South Asia

Against this backdrop, let us consider India and its neighbourhood by 2030. India has rejected the ‘China fix’ as foreign minister, S. Jaishankar recently said at a book launch. According to him, ‘Indian growth cannot be built on Chinese efficiency (technology).’ 

This was evident in 2021 when China’s Huawei 5G was denied participation in India’s 5G telecom trials not for technical reasons (it passed the technical tests in India), but on political grounds. While India declared it will have indigenous 5G, the reality is that 100% of 5G electronics have been imported. 

There is a truism in telecom: first class companies set standards, second class companies provide services, while third class companies make products; Indian companies fall in the last category. To be sure, 5G is the backbone of the industrial internet.

Moreover, the reality of India’s poor manufacturing was conceded by Jaishankar when he said India’s ‘focus on services was actually an excuse for being incompetent in manufacturing.’ Since India invests a pittance in research and development, its manufacturing growth will be built and supported by the US and allied developed nations.

Thus, India which has signed up for its emerging technology needs with the US-led tech ecosystem may face future difficulties in deepening trade and commerce with South Asian nations that have joined the BRI – and, consequently, the China-led tech logistics system. 

India is likely to face similar problems with BRICS and SCO nations. Russia is, at present, already having a payment problem with India. Under US sanctions, it wants India to pay for its military hardware and energy either in rubles  or yuan, which India is unable to do. Since China is the first nation with CBDC e-renminbi that is likely to go global by end-2023, all other BRI, BRICS and SCO nations will be comfortable with transactions in it.

This will impact geopolitics in South Asia, which India had traditionally considered its backyard or an area of influence. To India’s horror, at the 2014 South Asian Association for Regional Cooperation (SAARC) summit in Kathmandu, three member states, namely Pakistan, Sri Lanka, and Nepal, proposed that China’s observer status in the group be elevated to full membership. India managed to sidestep the proposal by saying nations with disputes would complicate the functioning of SAARC, which works on consensus. The Uri attack of 2016 gave India the perfect reason to boycott the SAARC summit in Pakistan the same year, leading to the regional grouping going comatose.

The challenge for India in 2014 was how to regain influence in aa South Asia which had come under the BRI spell. For example, land-locked Nepal, with access to the world through India, said that while India was a brotherly nation with a shared religion, it needed Chinese money for progress. China had no problem with the pendulum diplomacy of South Asian nations since it was confident it could always outcompete India.

This happy state of co-existence was disrupted when the Trump administration decided to back India to build closer ties with littoral nations that were on China’s Maritime Silk Road (MSR) in the Indian Ocean Region. 

Since the MSR was physically close to the traditional sea lanes of communications, the US was concerned about the impact it would have on its ‘free and open’ Indo-Pacific strategy. Meanwhile, the high-profile visit of US secretary of state, Mike Pompeo to Sri Lanka and Maldives in October 2020 where the US accused China of exercising ‘debt trap’ diplomacy got a sharp rebuttal from China. The US believes that China could seek ports along the MSR that could be converted into naval bases once small nations get into China’s ‘debt trap’.

The picture will become clearer by 2030 when South Asian nations on the DSR bandwagon realise that prosperity and security are indivisible. Thus, the PLA will not require additional military bases for power projection, as the US believes. It would instead seek cooperative security with BRI nations to protect its assets, infrastructure, and people in their nation using the MSR for PLA Navy’s (PLAN) friendly visits to BRI nations. 

By indulging in geopolitics against its geography, India could end up being economically isolated (by following US-led tech logistics system) and geopolitically irrelevant in its neighbourhood (by piggybacking on the US power to regain influence). From isolation to irrelevance is a short distance.

Pravin Sawhney’s recent book is The Last War: How AI Will Shape India’s Final Showdown With China. He tweets at @PravinSawhney.