India has historically remained unaligned geopolitically but we made the case last year that, in a fracturing global economy, it was more likely to lean towards a US-led bloc and away from a China-led bloc. Events over the past month have strengthened our view. In December, skirmishes between Chinese and Indian forces broke out on the border of Arunachal Pradesh (India’s easternmost state) and Tibet. This month, India held joint military drills with Japan – a bona fide rival of China. Perceptions on the ground speak volumes too: China was ranked the biggest military threat to India in a recent poll, even ahead of neighbouring Pakistan. The macroeconomic benefits of tilting towards the US are also compelling. The US is economically much more important to India than China is both in terms of trade and investment. And India would also be among the candidates to benefit from the “friend-shoring” of manufacturing supply chains given its large labour supply and relatively low costs.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services