India, China should work to form Asian Union: Initiative to re-gain past glory and success

By Prasoon Sharma
India can trace its history back to the rise of the Indus Valley Civilisation which flourished between 3500 BC and 1800 BC. The economic system of the Indus Valley was based predominantly on trade which became more sophisticated through improvements of maritime routes. From agriculture to tools, copper, bronze, terracotta, gems, spices and textiles, India had much to offer the world. Ships from Greece and Rome came laden with gold to buy goods from Indian merchants. It was the glory of the Indus Valley that attracted many sailors to visit India and also to gain domination in trade. Between 1526 and 1858 India experienced a period of affluence. It was one of the largest economies of the ancient and medieval worlds controlling one third and one fourth of the worlds wealth respectively. The British systematically sucked the wealth out of India by importing cheap raw materials, and exporting expensive finished goods back to India. By 1950 India's contribution to world GDP had fallen to a mere 3%, compared to 27% in 1700 AD, according to British economist Argus Maddisson.
It was only after 1947, that the process of rebuilding started. The nation's foreign exchange reserves is now more than USD $300 billion compared to just USD$2 billion at the time of independence. The economic trends of India show how the country's service sector is gaining strength. In 1950-51 the major share of India's GDP was provided by the primary sector, which included agriculture and other primary sector activities. By 2012 India's tertiary or service sector accounted for 59% of the nation's GDP.

Chinese President Xi Jinping meets with Indian Prime Minister Narendra Modi in Tashkent, Uzbekistan, June 23, 2016.[Photo: Xinhua]

Although India has come a long way in the last 67 years, it has faced many hurdles in its efforts to maintain a good pace of growth and development. To highlight just a few;
• Lack of capital formation
• Cold war politics
• Expenditure on defence
• Population increase, and;
• Inadequate infrastructure.
However, against all the odds economists still show great faith in Indian economic growth, and project that its contribution to the World's GDP by 2040 will reach 20.8%.
In last 50 years India has established 250 universities, 1500 research institutions and 10,428 higher education institutions. By 2012 India had become the 3rd largest economy by GDP size after USA and China.
China in the past three decades, exhibited exemplary economic growth by demonstrating an outward looking approach. Since 1980, China's GDP per capita had increased from US$205 to US$6075 in 2012. Its openness to the world helping it to accumulate foreign exchange reserves of US$3.3 trillion. Among all the developing nations China has grabbed the largest amount of FDI's in last two decades. And, very recently it had achieved 5th place among exporting countries judged by outward FDI. Like India, economists are confident of China's economic growth in coming years, and speculate that by 2040 it could account for 37.4% of the world's GDP in PPP, with India being second in the list. The impressive and sustained growth of China is not a miracle, but a fruitful outcome of a sustainable development path. Through fiscal, financial and exchange rate reforms put forward post 1992, the Chinese economy has experienced positive marketisation. China's entry into the WTO in 2001 served as a milestone with China and the rest of the world benefitting from one another. Another two keystones that have contributed to creating an improved economic structure for China are industrialisation and urbanisation. While witnessing significant growth in past three decades, since 2012 China however has experienced a slow-down in economic growth.
India and China are the two fastest growing economies and also the two biggest developing countries. The hour has come perhaps for these two nations to work together to create a progressive path, forming a union extending to other Asian countries. The formation of an Asian Union would collectively help Asian nations show a stronger side to the rest of the world. The trade associations among Asian countries could pave the way towards a regional block and compete with the European Union. A report from the National Intelligence Council of the US says that global economic growth in coming years would be governed by India and China but not Western countries. China being the world's largest economic power though, would remain ahead of India but by 2030 the gap could be closer. This report adds to the worldwide expectations on these two nations. It is imperative for both countries to set aside their boundary clashes and shift to a more strategic lane of growth.
In the last few years, China has taken strong initiatives in the Asian region, such as the One Belt One Road, Asian Investment Infrastructure Bank and New Development Bank. Its reforming call to the world has attracted a following among other Asian countries. The constructive approach has created the environment for the smooth flow of commerce, connectivity and the upholding of security in the region. Asian nations should unite to form a Union which works in a similar way to the European Union. A single currency, free trade and travel, and global trade policies helping to protect the interests of all Asian countries.
The Asian union is vital for several reasons:
• It has the world's most significant sea lanes, through which a large percentage of the world's trade passes.
• The cultural ties among Asian countries are getting ever closer.
• Its gigantic population and growing market makes the Asian nations significant on the world map.
India's Act East policy is perhaps a stepping stone towards Asian collaboration. Conceivably, a significant step forwards could be taken with the invitation to all 10 ASEAN nations to India for the celebration of Republic Day in 2018. It should be kept in mind that most of the World's sea borne energy shipments pass through Asian waters. It's time to build cohesive and tenet based security structures where differences of opinion are resolved through dialogue and diplomacy but not a show of force. This comparable vision would help protect the interests of all Asian countries.
With the cooperation of China and India, both being economically strong, it's possible to rebuild the marine traditions of Asia. This, cooperation would enhance security, affluence, cooperation and safety from nature's ferocity for all the countries connected by the seas around us.
European countries like Germany and France forgot and buried much of the prejudice and their troubled mutual history to embrace power and success through unity by actively contributing to the growth and success of the EU. Apart from a few incidents and events, India and China have co-existed and have grown successfully for thousands of years. Both India and China currently have very strong leaders – President Xi and Prime Minister Modi. Thus, now is the most appropriate time for both nations and leaders to initiate the concept of an Asian Union
(Prasoon Sharma is a fellow at India Global, a think tank formed by US and UK-based Indians)