China and India urged to forge closer economic bonds

Tata Group's former chairman says the two countries' governments need tighter economic ties in order to build a superpower bloc

PUBLISHED : Monday, 21 April, 2014, 1:23am
UPDATED : Tuesday, 22 April, 2014, 12:58am

Government-level talks between China and India are needed in building a complementary economic relationship to unlock the Asian giants' full potential to create an economic superpower bloc, says an Indian business leader.

"We both have large population, we both have tremendous economic disparities, which also give us great market potential," Ratan Tata, former chairman of India's salt-to-steel conglomerate Tata Group, told the South China Morning Post on the sidelines of the Boao Forum for Asia.

But achieving business synergy would depend on how well the Chinese and Indian governments manage the relationship, said Tata, who was recently appointed to the board of the forum.

Former Vice-Premier Zeng Peiyan, former Japanese prime minister Yasuo Fukuda, former Singapore prime minister Goh Chok Tong and former US secretary of the treasury Henry Paulson are among the other members of the 15-member board.

"We [China and India] can create an economic superpower," Tata said. "China has developed technology that India could use, while Chinese investment in industries such as infrastructure and telecommunications would help create jobs and boost India's economic growth. This requires the endorsement of both governments.

"But there is no great desire for the two governments to work together. For example, there is no trade agreement to intensify bilateral traffic."

India's trade deficit with China in the first three months of this year totalled US$5.9 billion, according to China's customs data. Figures released by India's ministry of commerce and industry showed the trade deficit in March widened to a five-month high of US$10.5 billion as exports contracted.

Economic growth in China and India has been slowing, though to a much greater extent in India. China's current annual target is about 7.5 per cent while India's growth rate has slumped to about 5 per cent from double-digit figures of past years.

"If we can join forces and make [China's economic growth rise to] 8 per cent or 8.5 per cent, and [India's economic growth rise to] 6 or 7 per cent, that would be a win-win situation for us," Tata said.

"Can we do that with Europe? I doubt it. Can we do that with the United States? Maybe, more than with Europe, but still, compared with China, [the opportunity is] very low."

There is no market barrier between the two countries in policy terms, but Tata said some Indian companies fear Chinese competition.

"I believe India fears China will overrun India's economy [if more Chinese business is allowed in]," Tata said. "But it would help India to have China as an investor. Having the Chinese build telecoms or other infrastructure would create jobs. It would be a threat to competing Indian companies, but to the country, it would be a growth issue."

Tata Group's presence in China includes a joint venture with Chinese carmaker Chery Automobile, with which it produces the premium car brand Jaguar Land Rover that the Tatas own. It also sources equipment from Chinese telecommunications giant Huawei.

"Our experience with Huawei is excellent," said Tata, who was impressed by a recent visit to Huawei's China headquarters.

Greater co-operation between Chinese and Indian companies cannot take place without the support of the two governments, said Tata, adding that a free-trade treaty is needed to boost economic relations between the two countries.

Border tension between the two has hindered an economic and political relationship between the neighbours, which fought a brief war in 1962 in the high Himalayas over conflicting territorial claims.

"For historical reasons at the government level, relations are not as friendly as they should be between India and China," Tata said.

With a new government expected to take charge in New Delhi after the five-week parliamentary elections that started on April 7, Tata said he could not comment on whether there would be any changes in Sino-Indian ties.

"I would hope the two governments sit together" and address each other's importance, he said.