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China's Debt Trap Diplomacy: Impact on India



  May 09, 2024

China's Debt Trap Diplomacy: Impact on India



Understanding Debt Trap Diplomacy:

Debt trap diplomacy refers to a situation where a powerful lending country or institution extends significant loans to a borrowing nation. When the borrowing nation is unable to meet the repayment terms, the lender may extract economic or political concessions. China has been often accused of engaging in this practice by offering substantial loans to developing countries for infrastructure projects under terms that are difficult to meet.

 
Numerical Insights:

Pakistan: External debt owed to China increased from $7.6 billion in 2016 to $26.5 billion in 2022.

Sri Lanka: Debt to China almost doubled from $4.6 billion in 2016 to $8.8 billion in 2022.

Bangladesh: Debt rose from $0.97 billion to $6 billion in the same period.

Maldives: Increased from $0.3 billion to $1.2 billion.

Nepal: Grew from $0.07 billion to $0.26 billion.


Implications for India:

India needs to be vigilant about the rising indebtedness of its neighboring countries to China, as it poses several risks:

1. Strategic Risks: Increasing indebtedness can lead to China gaining strategic assets or influence in countries around India, potentially encircling India geopolitically.

2. Economic Stability: The financial instability in neighboring countries, exacerbated by high debt levels, could lead to economic spillovers affecting India.

3. Political Alignment: As neighboring countries become more indebted to China, their political alignment might shift more towards China, potentially at the expense of their relations with India.


 Conclusion:

The growing trend of debt accumulation under China's debt diplomacy poses significant challenges for India, both in terms of regional stability and strategic autonomy. Understanding these dynamics is crucial for India to formulate effective foreign policy responses.



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