India China Net Assessment DSSC

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And so these men of HindustanDisputed loud and long,Each in his own opinionExceeding stiff and strong,Though each was partly in the rightAnd all were in the wrong. - John Godfrey Saxe (1816-1887)

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Predicting the future.

MOHAN GURUSWAMY

WITH MILITARY AND SECURITY INPUTS FROM

BRIG. ARUN SAHGAL (RETD.)

China: A Net Assessment

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How the world stacks up in 2015.

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IMF Projections for China & India PPP GDP’s

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Year China India

2020 $29 trillion $13 trillion





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China’s GDP growth 1980-2011 & growth forecasts for 2012-2030.

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The coming economic transitionThe coming economic transition.(GDP PPP)

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The coming economic order.The coming economic order.

2010: 1,330,141,000

2020: 1,384,545,000

2030: 1,391,491,000

2040: 1,358,519,000

2050: 1,303,723,000

China’s population projections.

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What happened to Japan.

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Age & Population structure 2000-35Age & Population structure 2000-35

Sustained low fertility means that the number of young workers will decline more sharply than projected. In 2010, there were 116m people aged 20 to 24; by 2020 the number will fall by 20% to 94m.

But the actual number of workers will be considerably lower than 94m, thanks to rising participation in higher education.

Annual higher-education enrollments tripled from 2.2m to 6.6m in 2001-10, while the number of college students (mostly aged 18 to 21) rose from 5.6m to 22.3m.

The size of the young population aged 20-24 will only be 67m by 2030, less than 60% of the figure in 2010.

Losing workers to education.Losing workers to education.

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As the share of young people falls and the share of elderly people rises, Chinese society will age - rapidly.

China already has 180m people aged over 60, and this is set to reach around 240m by 2020 and 360m by 2030. These are minimum numbers, which will only increase with rising life expectancy. Less certain are how fertility rates will affect the population age structure.

Should China’s currently low fertility of 1.4 children per couple be sustained, the population share of people aged over 60 could reach 20% by 2020 and 27% by 2030.

Using the more conservative international definition of elderly—people aged 65 plus—one in five Chinese citizens will be elderly by 2030.

An aging country.An aging country.

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Workforce projectionsWorkforce projections..

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Ratio of working to non-working age population, Ratio of working to non-working age population, China & IndiaChina & India

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India’s late surge!

Fiscal imperatives brought about by demographic changes are also set to change the political landscape.

Over the next 20 years, the ratio of workers to retirees will drop precipitously from roughly 5:1 today to just 2:1. Such a drastic change implies that the tax burden for each working-age person must rise by more than 150%, assuming that the government maintains its current level of tax income.

In addition, mounting expenditure on social entitlements—especially pensions and health care—will put the CPC in a difficult position. If the government demands that taxpayers pay more, the public will demand better scrutiny of how their dollars are collected and spent.

No more business as usual.

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Japan, South Korea and Taiwan all grew close to 9% annually for about two decades and then started to slow.

Many think that China’s fate will be like that of Japan, which crashed and slowed down in the 1990s and has yet to boom again.

But the more realistic scenario is Japan in the 1970s, when the original Asian tiger’s growth slowed from 9% to about 6%.

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Is China now following in Japan’s footsteps?

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The importance of being China.The importance of being China.

The importance of exports to China’s growth.

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Why the USA is so important to Asia?Why the USA is so important to Asia?

The smallest bite of the Apple!The smallest bite of the Apple!

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• Each iPad sold in America adds $275, the total production cost, to America's trade deficit with China, yet the value of the actual work performed in China accounts for only $10.

• Using these numbers, The Economist estimates that iPads accounted for around $4 billion of America's reported trade deficit with China in 2011; but if China's exports were measured on a value-added basis, the deficit was only $150m.

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The present realities of India vs. China till 2035The present realities of India vs. China till 2035..Growing economic asymmetries.Growing military asymmetries.Gaps expected to start closing only around 2035-40Is this a period of vulnerability?Will China be tempted to “teach a lesson?”Is it in India’s interest to get too cozy with the USA?China, Japan, ASEAN & USA great trading partners.

Economically integrated.India is least integrated with any region.India is the only country with a long un-demarcated land

border with China, and major territorial disputes.

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Satellite view of Aksai Chin.Satellite view of Aksai Chin.

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Arunachal Pradesh or Lower Tibet?Arunachal Pradesh or Lower Tibet?

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PLAAF airbases in Tibet, Xinjiang & Yunnan

Some distances from PLA AFB’s to IAF AFB’s

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Tezpur 325 kmsGauhati 355 kmsBagdogra 381 kmsJorhat 430 kmsChabua 455 kms

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Major ethnic groups in Xinjiang.Major ethnic groups in Xinjiang.

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Ethnically divided Xinjiang.Ethnically divided Xinjiang.

New spiritual head -Karmapa. A minor Dalai Lama incarnate.

The role of Lobsang Sangay. Increasing militancy among youth.

A Chinese Dalai Lama. Two of them. Legitimacy battle.

Tibetan protests in Western capitals. Unrest in Tibet.

Tibetan community in India becomes militant.

Post Dalai Lama Tibetan scenariosPost Dalai Lama Tibetan scenarios..

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The sea lanes in the Indian Ocean are considered among the most strategically important in the world.

According to the Journal of the Indian Ocean Region, more than 80 percent of the world’s seaborne trade in oil transits through Indian Ocean choke points.

With 40 percent passing through the Strait of Hormuz,

35 percent through the Strait of Malacca

and 8 percent through the Bab el-Mandab Strait.

The geo-strategic importance of the Indian Ocean.The geo-strategic importance of the Indian Ocean.

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China’s crude oil imports in 2015 by source.China’s crude oil imports in 2015 by source.

Oil is now the single most important driver of world economics, politics and technology.

The rise in importance was due to the invention of the internal combustion engine, huge expansion of private and public transportation and the rise in commercial aviation.

And the importance of petroleum to industrial organic chemistry, particularly the synthesis of plastics, fertilizers, solvents, adhesives and pesticides.

Oil is now the basis of about half the World GDP of over $85 trillion.

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A vivid graphic of oil shipping volumes.

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Why the odd man out needs the status quo?Why the odd man out needs the status quo?

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WHAT DO THE CHINESE THINK OF INDIA? - 1WHAT DO THE CHINESE THINK OF INDIA? - 1

Apart from a palpable awe of the USA, it is near impossible to know what the Chinese are thinking about anything. Even Chinese commentators are unable to do so or commit themselves to any sense of it. The only way to probably understand what they are thinking is analyze their questions. These conclusions emerge out of an analysis of questions and comments recorded by groups of scholars over a period of time.1.Indians are noisy and disorganized. CWG, Infrastructure, dirty surroundings etc.etc. 2.Highly excitable. Post 26/11 reactions. Depsang la and LOC incidents.3.Indians lack community values. Lack strong nationalist values.4.India’s economy will never be able to reach Chinese growth levels, nor will it be able to compete with Chinese industry.5.Indians are neither innovative or industrious.

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WHAT THE CHINESE THINK OF INDIA?- 2WHAT THE CHINESE THINK OF INDIA?- 2

6. India will not become a US ally. It has a certain notion about itself. It also believes that the Indian bureaucratic/military elite is inherently hostile to it.7. China does not believe that India’s interest in Afghanistan is benign. It subscribes to the Pakistani notion.8. China does not believe that India will support the Tibetans beyond a point.9. China does not believe that India will have a leader or arrive at a consensus in the foreseeable future, who/which can accept a border compromise, even on a standstill basis.10. China does not believe that India will ever repudiate the McMahon Line and settle for a new alignment even if it is the same as where the LAC is now.

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Five Economic scenarios: PPP GDP’s China & India in 2025.Five Economic scenarios: PPP GDP’s China & India in 2025.

Some Future Drivers and OutcomesSome Future Drivers and OutcomesDemographic Comparison

Chinese population peaks in 2016. Begins to decline. Aged cohort increases . GDP growth slows.

Or one child policy reversed. Growth continues, but at a slower pace. Ageing delayed .

Economic Growth Differential

Growth reduces to 7 % . Domestic consumption increased. Reforms passed.

Or growth reduces to 5% or less. Reforms not passed. Exports decline, as wages increase.

Political Internal Dynamics

Reformists regain strength. Resumption of decentralization trend; rebalancing strategy prioritizing non-state and foreign capital. Non-antagonistic approach to West/Japan.

Or leftist faction entrenches itself. Reforms pursued to strengthen state sector. Provinces emasculated. Centralized/great power foreign policy.

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Post Dalai Lama Tibet

Differences on Post-Dalai Lama Tibet is escalated by China owing to internal disturbances in Tibet. Forces inducted into Tibet. Border becomes active.

Or differences exist on Dalai Lama’s successor. Situation does not escalate. Tibet restive but peaceful.

US China Power Differential

US industrial strength spurts owing to energy exports. GDP growth is 3.5%. US becomes stronger. China does not overtake US.

Or US industrial strength does not increase. Chinese growth continues at 7%. Overtakes US in 2025.

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Geographical Expansion South

China establishes corridors through Laos to Thailand and through Pakistan and Iran to Arabian sea. Builds pipelines to Myanmar. Nepal and Sri Lanka come under Chinese influence.

Or establishes limited corridors southwards. Relies on SLOCs.

Political Reform and Civil Society

Civil Society agitates for political reform and multi party candidates during elections. Communist Party challenged.

Or civil society agitates only for economic reform. Is satisfied with Communist Party primacy. No internal instability.

Sino–Indian industrial detente

Indian leadership post 2019 elections invites China to participate in Indian infrastructure such as high speed rail network. Huge investments flow & political relationship thaws.

Or China not invited to participate in Indian growth. Relations remain frosty.

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India - China Military Balance

China increases military expenditure. R&D projects deliver results. 5th generation aircraft. Chinese military and air superiority of China in Tibet becomes overwhelming. Three carrier battle groups in operation

Or China’s military expenditure continues at present rate. Fewer R&D projects are successful. Continues import from Russia. Carrier aircraft not successful. Only two carrier battle groups with doubtful air capability.

Sino Indian Maritime Balance in the Indian Ocean

Deployable Chinese forces in Indian Ocean, taken as 20% Chinese naval strength, amounts to 3 destroyers 8 frigates, 2 nuclear attack submarines. Indian forces remains superior on the surface owing to carrier and land based aviation. Vulnerable to nuclear attack submarines.

Or Chinese Navy increases due to massive building program. 20% deployable forces amount to one carrier battle group, 6 destroyers and 14 frigates with 4 nuclear attack submarines. Still balance decidedly in Chinese favor.

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Aerospace Technology Breakthrough

China achieves breakthrough in both military aircraft and space technology. Deploys full range of military aircraft and satellites including ASAT, low earth crisis and ELINT satellites.

Or China just successfully manufactures a civil aircraft for passenger and military use. No other technological breakthrough. ELINT satellite and ASAT capability.

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The three possible futures.The three possible futures.Scenarios outline three possible futures emerging from

driver outcomes; Strong and assertive China. China mired in internal contradictions on account of

politico – economic transition gone awry. Steadily growing China vs. growing India.

Scenarios define outline of possible futures that impact Indian security.

Ostensibly there are no manifest reasons for conflict. Chinese great power ambitions could be a catalyst - if it believes geo-strategic balance shifting against it.

Similarly Peripheral Security an important issue– attempts to undermine could result in strong Chinese reaction.

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Scenario 1: Fragile China Scenario 1: Fragile China

This scenario outlines Chinese future marked by declining economic growth; political – economic transition gone awry.

Leads to large scale economic, social and ethnic consequences.

Scenario marked by declining growth of exports, internal demand slowing leading to weak consumption, declining household incomes.

Internal party rumblings emerge between liberal economic and pro-social reform lobbies.

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Scenario 1: Fragile China (contd.) Scenario 1: Fragile China (contd.)

Inner party factionalism intensifies.By 2020 these tensions begin to sharpen –

growing frustration and disenchantment within CPC.

Draw down in economy, declining incomes and hinterland vs coastal divide sharpen societal tensions.

Large scale unemployment & floating population creates a new underclass, angry and frustrated.

Large scale unrest. Flows on to streets as state tries to curb violence with repression. Clamp down on social media exacerbates societal tensions.

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Unrest spreads to ethnically sensitive Tibet and Xinjiang exacerbated by induction of radicalized Af–Pak elements. Number of underground movements spurt.

Post 2020 period is marked by large scale attacks on Chinese garrisons, fiber optic networks, and blowing up of gas pipelines, railways etc. Incensed state apparatus ruthlessly cracks down.

Loud protests erupt in India. PLA leadership accuses India of inciting Tibetans, decides to escalate border tensions. Result is heightened stand.

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Simultaneous tensions erupt along the Myanmar border with Kachin and Wa groups attacking Chinese pipelines & highway projects.

Major standoff between Vietnam and China in South China Sea. US wars China not to exacerbate tensions. Japan sets up installations on Senkaku and intimidates China on EEZ.

Beleaguered leadership see these as an attempt by inimical interests to restrain and contain China.

Internal party acrimony allows ruling faction to whip up anti-India hysteria, leads to border clashes and tensions. India responds by resolute posturing.

Chinese leadership concerned about internal troubles, happy to externalize tensions, secure in belief of ability to manage escalation.

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Eclectic scenario, set in post 2020, whose pathways signify situation of drift with profound impact on external geo-political environment. Defining parameters: Sino–American competition continues for primacy in Asia–Pacific.

Both attempting to exert influence in Asian core zone of power play. US tightens up on trade deficits with China, pushing mfg. to Vietnam,

Indonesia and India. In terms of military balance China is catching up; US military and

technological power remains at least two generations ahead. Japan is beginning to assert itself; radical departure from existing

pacifist security mindset. More tensions with N Korea & China. Competition for energy is becoming intensified, with China cornering

majority oil and gas resources in Asia and Africa. America is indifferent toward Middle East oil.

Scenario 2: Steady China Scenario 2: Steady China & Meandering India& Meandering India

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Scenario 2: Steady China Scenario 2: Steady China & Meandering India (contd.)& Meandering India (contd.)

Af–Pak region continues to smolder. Pakistan grapples prospects of incremental state failure, no change in military mindset about Kashmir, anti India stance or strategic depth.

Radical Islamic shadows shifting to Central Asia - emerging as new center of Al Qaeda activities.

Russia becoming more assertive player seeking to partner China to balance US dominance in Asia–Pacific.

China perceives Indian economic interests and growing military relations with US inimical to its interests.

A heady mix of Sino-Pak collusion supported by Indian insurgent groups creating tough situations in J&K & NE.

Chinese make major gains in Nepal, Sri Lanka, Myanmar and IOR littorals.

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India too economically sturdy but indecisive, unable to assertively configure strategic power, to meet Chinese challenge.

Increasing internal security contradictions and challenges. Leadership remains internally focused.

In prevailing mood, defence reforms losing steam, minimal restructuring to drive new technologies and doctrines. Little modernization and transformation.

Lopsided strategic planning and acquisition process not conducive to addressing obsolesce. All major projects are behind schedule

By 2018 single SSBN & SSN is in service. MRCA project is delayed. FGFA not yet on horizon.

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Indian Army remains heavily committed in counter insurgency operations, its modernization too is behind schedule.

Strategic road development program along Eastern and Western borders makes little progress. Mountain strike corps is mired in controversy over structures & organization.

In terms of attributes of military capability, only marginal at best 20% improvement. Services remain fragmented by continuing turf battles.

An uncertain India with steadily declining strategic configuration of power. Competition with China becoming increasingly asymmetric.

A period of grave strategic vulnerability prevails.

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Scenario 3: Sino-centric Asia Scenario 3: Sino-centric Asia This scenario is built around China continuing to

grow at a sustained 7 – 8 %. By 2025 Chinese real GDP crosses $15 trillion.

Commensurate increase in its defence budget - around $450-500 billion backed by robust indigenous defence industrial base.

China has completed Phase II of its modernization and is in position to field RMA based net centric force over critical theatres.

Upgraded its strategic forces by induction of JL-2 SLBM and DF-41 ICBM both with MIRV capability.

Large asymmetry has developed between China and India in both conventional and strategic capability.

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Scenario 3: Sino-centric Asia (contd.) Scenario 3: Sino-centric Asia (contd.) These developments come in the backdrop of

relative decline of American economic power. Still a dominant military power but with reduced propensity to use force.

US remains engaged in Asia coalescing regional allies to put up united front.

Aware that US had lost stomach to contain China, they balance relations with China carefully hedging economic and security policies.

Its sphere of influence encompass SE, East and Central Asia. Inducing ASEAN and Korea to bandwagon rather than balance Chinese power.

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India too grows at robust 7-9 %. Real GDP grows to $ 8 trillion. Share of global trade increasing.

Military capability grows as defence budget touches $ 150 billion.

Number of current programs in pipeline have fructified including induction of five squadrons of MRCA, two SSBN’s , two SSN’s and indigenous carrier. FGFA induction.

Mountain strike corps is operational. Infrastructure in Ladakh is finally upgraded. An armored brigade located in Ladakh.

India had made substantial upgradation of its C4ISR, providing near real time “look and lock” capability both over TAR and IOR. It also fields a rudimentary GPS.

Successfully tested ASAT and ASBM weapons.Indigenous defence industrial base begins to develop.

Scenario 3: Sino-centric Asia (contd.) Scenario 3: Sino-centric Asia (contd.)

Scenario 3: Sino-centric Asia (contd.) Scenario 3: Sino-centric Asia (contd.) With both countries growing, availability of energy

resources becomes decisive. By 2024, China energy import dependency increases.

Perceived vulnerability of SLOC’s rising. Availability issues too becoming critical. Forces PLAN to step out into IOR.

China acquires repair and refueling facilities in Gwadar and Hambantota (?), and establishes earth stations. Facilities on East African coast. Kisimayu or Socotra or Comoros?

China clearly upgrading its presence and deployments in IOR, even as Indian Navy remained dominant force.

In late 2024 Myanmar, Bangladesh, Sri Lankan, Pakistan and Chinese navies carried out joint exercises in Bay of Bengal.

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Scenario 3: Sino-centric Asia (contd.) Scenario 3: Sino-centric Asia (contd.) Period marked by major Chinese inroads in Nepal

where it is involved in upgrading both communications & defence infrastructure. Military training team also located. Friendship treaty?

Similar influence was noticeable in Bangladesh and Myanmar, where China has developed an energy hub at Sitwe.

Sino – Pak relations marked by greater bonhomie. China providing HN9 AD systems, J–10’s and access to Beidou navigation system.

These were in addition to infrastructural projects being undertaken in Northern areas including economic corridor from Xinjiang to Makran.

Rumblings had once again started in Tibet and Xinjiang. PLA and Central Leadership is worried?

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Consequences : Fragile ChinaConsequences : Fragile China

Unrest increases in China. Visible on social media.China actively censors internet.Reasserts dominance over ASEAN over South China Sea dispute.Raises stakes against Japan over territorial

dispute. Increases patrols in South China Sea. Enhances force strengths in Xinjiang & Tibet.Task group visits Karachi.

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Consequences of Fragile ChinaConsequences of Fragile China

Chinese President makes provocative speech against foreign interference in Chinese core interests in Tibet.

China tests anti-carrier ballistic missile at sea. Increases offensive patrolling on Tibet border.

Begins a major Air-Land exercise in Southern China.

Leadership visits Pakistan to reiterate military and economic aid.

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Consequences of Steady China Consequences of Steady China & Meandering India & Meandering India

•China commences series production of military aircraft and heavy lift helicopters

• Retrofits long range cruise missiles in naval vessels.

• Lays keel for 3rd aircraft carrier (2020).

• Increases investments in Africa for minerals and oil.

• Deploys one Brigade of 2nd Arty corps with conventional missiles in Tibet.

• Conducts naval exercise with Pakistan Navy in Arabian sea, including nuclear submarines.

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Consequences of Sino-centric AsiaConsequences of Sino-centric Asia

China overtakes US in GDP by 2025. Has defence budget of $ 450 billion.

Is primary trade partner of all SE Asian and Central Asian countries.

Operates 3 carrier battle groups and 10 SSN’s. Has finished testing JL–2 from Jin Class submarines.

Has 3 air cavalry divisions and 4 para divisions. Cumulative lift of one corps by air assets . One air cavalry division with Chengdu Theatre Command.

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Consequences of Sino-centric AsiaConsequences of Sino-centric Asia• • Is primary user of Indian ocean SLOCs.

Operates one CVBG in Indian Ocean part of the year.Conducts naval exercises in Indian ocean with South Africa, Kenya, Saudi Arabia, Pakistan, Bangladesh & Indonesia.Matches Indian Navy in Indian Ocean.Entire Pakistan, Bangladesh & Myanmar naval

hardware is Chinese. Leases one SSN to Pakistan.Tibet living standards superior to India. Very little

unrest.Chinese Taikonaut does moon walk. Has strong

anti-satellite capability. Launches foreign satellites.Holds debt of all declining European nations.

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PRC: Three Principles for the management of political-military crises.

• Do not attack unless attacked. Never attack others without provocation, but once attacked, do not fail to return the blow. It also implies a stress on reciprocity and symmetry in evaluating when and how to escalate.

• Do not fight decisive actions unless sure of victory. Never fight without certainty of success, unless failing to fight would likely present a worse outcome. This conveys the selective and political approach to the use of force and other forms of escalation.

• Be pragmatic and aware of the limited nature of objectives and strength. With a strong power, set appropriate objectives; do not exceed capabilities. Know when to stop, when to counter, and when to bring the crisis to a close. Stop once the goals are attained; rethink if you cannot obtain your objectives.

DeductionsDeductionsA prolonged and sustained Sino-Indian war with a political decision enforced by the military is unlikely in next 20 years.

However a short sharp conflict with limited aims and duration is quite possible following escalation of border incidents - leading to a ‘teaching a lesson’conflict.

1.Tensions arising out of Tibetan turmoil post Dalai Lama and a messy succession.2. A general ‘teaching lesson’ conflict by a rising China against an aspiring India, to underscore its world power status.3.To reassert Chinese maritime power in the Indian Ocean to protect its SLOCs.

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Policy RecommendationsPolicy Recommendations1.Make a strategic national decision to maintain an indigenous asymmetric capability against China on the border and the Indian ocean. Build capacity for swift, decisive and even disproportionate escalation.

2. In pursuit of that decision create national industrial capacity, with or without foreign collaboration, for following urgently –

• medium lift aircraft• heavy lift helicopters• nuclear attack submarines• precision attack long range cruise missiles• fighter aircraft

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Policy Recommendations.Policy Recommendations.Acquire military hardware to preserve military asymmetric edge on Tibetan-Xinjiang border and the Indian Ocean. Assure asymmetric response.

Strategic decision to escalate to an offensive trade war against Chinese SLOCs in case attacked on the Tibetan border. Obtain US acquiescence for trade war in IOR if forced to escalate.

Preserve air superiority edge on Tibetan border by further acquisitions.

Develop credible nuclear deterrence.

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Jai Hind!Jai Hind!

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