Image source: Deccan Herald
‘Greater cooperative federalism in India a must to push economic thaw with China’, Deccan Herald, 13 March 2025.
Tensions in India-China relations as far as the boundary dispute is concerned are here to stay. However, there is the belief — at least on the Indian side — that the economic relationship can and needs to be promoted. If so, one major prong of this effort will be through engagements between India’s states and China’s provinces.
During his January visit to China, Foreign Secretary Vikram Misri did not only meet the Chinese Ministry of Foreign Affairs (MOFA) leadership, he also met with the head of the CPC’s International Department, Liu Jianchao. The latter holds no formal role in the Chinese State, but his department represents the Communist Party of China, including its provincial and other local-level officials, in their external relations.
The Misri-Liu meeting, therefore, offers an idea of how the two countries are thinking of promoting economic engagement at a time when India-China ties remain complicated by tensions on the boundary as well as those at the regional and global levels.
Reaching out to CPC
It is not the first time that Indian officials, including Misri, have met with CPC officials. Earlier, during his stint as ambassador to China during the Galwan crisis, Misri reached out to the Central Military Commission (CMC) rather than relying simply on MOFA to convey India’s views.
The CMC has a dual identity in that it serves both the CPC and the State, but it is the CPC identity that is primary and Xi Jinping is its chairman. This position as CMC chairman is, in fact, next in importance only to his position as General Secretary of the CPC and more important than the one he holds as president of the People’s Republic of China.
Indian interactions with CPC bodies, thus, underline a long-present sophistication in India’s China policy — there is a clear understanding that the locus of power in China is the party and its institutions.
In recent years, the International Department has been in the news for organising training sessions for foreign political parties on ‘Xi Jinping Thought’. It has conducted such sessions for the ruling communists in Nepal as well as engaged with Sri Lankan political parties on the CPC’s 100th anniversary in 2021. It should not be surprising then that the International Department interacts regularly not just with India’s communist parties but also with major parties like the Bharatiya Janata Party and the Congress.
… to Centralisation
However, both Xi and Modi have, since coming to power, also driven a strong trend towards centralisation of power away from the provinces/states. While the trend has been underway in China for several decades, it has picked up pace with Xi’s anti-corruption campaign. In India, a large majority for the ruling BJP in Parliament and the limited nature of Indian federalism has allowed New Delhi to deploy fiscal tools to undermine the agency of the states.
Yet, as both the Chinese and Indian governments have discovered over time, and particularly since the pandemic, there are limits to running the economy by central diktat and costs to limiting or reigning in provincial/state governments by devolving welfare responsibilities to them but not tax revenues.
If Indian states have to play a role
The 2015 MoU and Misri’s meeting with the International Department head appear intended to revive economic engagement — including the flow of investment, technology, and skills — between the two countries, and, perhaps, to push the states/provinces to take the lead at a time of difficult relations between the central governments.
However, states in India cannot be expected to bail out New Delhi on economic engagement with China without adequate agency and resources of their own. Regular confrontations between the Union and various state governments on multiple issues — share of tax revenues, education policy, delimitation of seats in Parliament, etc. — indicate a fraying federal compact.
Despite promises to the contrary, successive Union governments have tried to constrain India’s states for political reasons.
Consider, an instance from July when the Kerala government created the position of a ‘secretary in charge of matters concerning ‘external cooperation’’. The MEA spokesperson declared “that State governments should not intrude into matters that are beyond their constitutional jurisdiction.” However, the Kerala government appointment was aimed at dealing with the state’s large diaspora and to promote foreign investment and the MEA statement was criticised even by former diplomats who pointed out the MEA itself has a division for the states to address these purposes, and has asked states to designate officers to deal with international cooperation.
No one would bat an eyelid at such appointments in Chinese provinces, which have extensive, well-oiled and active foreign affairs offices down to the prefectural and county levels.
In a federal system, there must be a degree of political flexibility, including in matters impinging on foreign policy, if states in India must learn to be creative in foreign economic engagement and create opportunities elsewhere for the Union government.
It is true that local dynamics in Indian border states have complicated Indian foreign policy in the past, but blanket constraints are a losing battle. Note how China has promoted economic and commercial linkages with the outside world even in its troubled peripheries of Xinjiang and Tibet. Instead of suspicion as a default position, India’s national authorities need to be able to partner with states and city governments in order to achieve foreign policy goals like the central governments in order to achieve foreign policy goals like the central government in Beijing has with Chinese provinces since the reforms and opening up era started in 1978.