India's race to overtake China will intensify after Modi's reelection because they have the same obsession, analyst says

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  • India and China's rivalry will likely intensify in the Indian prime minister's third term in office.

  • Both countries have self-reliance as a policy priority — which means they will both go big into manufacturing.

  • India aims to boost manufacturing, competing with China for economic leadership.

Indian Prime Minister Narendra Modi this week secured a historic third term in office — and it's likely to intensify India's economic rivalry with China.

As David Lubin, a senior research fellow at London-based think tank Chatham House, wrote on Thursday, the rivalry is likely to heat up because Modi and Chinese leader Xi Jinping have the same obsession for their country: self-reliance.

Modi has a vision for Viksit Bharat, or "Developed India," that sets a pathway for the South Asian giant to become a developed economy by 2047.

Meanwhile, Xi's vision for China is global dominance by 2049.

"Competition for economic leadership in Asia is in the air," wrote Lubin.

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Both India and China will be focused on manufacturing

To reach its goal, Modi's India will likely be going big on manufacturing.

"The pursuit of national greatness is, essentially, a relative game, and for India, the comparison that matters is with China," wrote Lubin.

Since self-reliance is a policy priority for both India and China, "an obsession with manufacturing is likely to accompany it," Lubin wrote.

India's GDP of $3.9 trillion is far behind China's $18.5 trillion GDP. And China has served as the world's factory floor for the last four decades — but the tides are changing.

Companies are diversifying their operations outside China to avoid over-relying on one country, and India is aiming to be the new China.

Given that India is now the world's most populous nation — with 65% of its population under the age of 35 — there are huge opportunities for the South Asian nation.

However, with Modi's party losing its parliamentary majority, this means it will be much harder for his adminstration to push through much-needed land and labor reforms to supercharge growth.

In addition, as Raghuram Rajan, a former head of the Central Bank of India, told NPR's "Planet Money", India is wading into a crowded space with other emerging nations such as Vietnam, Bangladesh, and Malaysia with their skin in the game.

Rajan said India would do better to focus on the service industry, since the country already has a large English-speaking population.

But Delhi is throwing big money to catch up with China, including over $20 billion worth of incentives and subsidies to encourage output in 14 key sectors including electronics, automobiles, and EV batteries.

It's also provided another $10 billion for the semiconductor chip industry — a hot strategic sector that Taiwan has an outsized presence in.

India has been trying to woo Taiwan's chip plants to invest in the country and has had some success.

India's rocky relationship with China

Given India's ongoing rivalry with China and the Modi government's eagerness to attract Taiwan investments, the Delhi-Beijing relationship is also off to a rocky start as the Indian leader kicks off his new term.

On Tuesday, Modi angered China — which claims Taiwan as its own territory — when he accepted Taiwanese President William Lai's congratulations following India's elections.

"China opposes all forms of official interactions between the Taiwan authorities and countries having diplomatic relations with China," Mao Ning, the spokesperson for China's foreign ministry, said at a scheduled press conference on Thursday.

India's foreign policy toward China is unlikely to change following Modi's re-election, Ivan Lidarev, an Asian security scholar at King's College London, told Channel NewsAsia.

"India has pursued a very active foreign policy of kind of getting closer with the West and counterbalancing China for many years," he told the network. "There is a very strong consensus within India about this."

China, meanwhile, will try to limit India's influence on the global stage, he said.

"I think India has strived to position itself as a leader of the global south, and of course, China wants this position," added Lidarev. "So we think that this competition is going to increase and I think that Beijing will do a lot to limit any Indian attempts to be seen as the natural leader of the world."

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