Global fracturing: India tilts further away from China

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.