The movement towards de-dollarization is reaching a critical juncture, particularly as speculations arise over potential interest rate cuts in SeptemberThis process is deemed essential, and concurrently, we witness a surge of discord within the BRICS nations, as some countries are reportedly considering replacing ChinaIt's worth analyzing the implications of these developments, especially when India has unexpectedly proposed a rather perplexing requirement.

India as a Replacement for China?

Reports indicate that while the Modi administration is open to exploring the idea of replacing China, they stipulate that any new settlement system must be non-mandatoryFurthermore, India insists on its autonomy to engage in trade with any nation of its choice, particularly those reluctant to use the Renminbi for transactions

This reveals a misalignment in India’s perception of its global standingAs is widely acknowledged, China is not only the world's second-largest economy but also a pivotal founding member of the BRICS allianceWithout China’s leadership and initiative, establishing a currency settlement system and a joint currency among BRICS nations would be nearly impossible.

Moreover, this initiative is something many emerging economies, including Russia, have long envisioned as a trend that reflects a collective shift in global economic dynamicsIt seems that India, fresh off the heels of becoming the fifth largest economy, has indulged in excessive self-promotion, perhaps believing it is in a position to rise to the status of a superpower, with the narrative of being the next China gaining traction among its populace.

Is India truly poised to assume the position that many, including American allies and Indian netizens, anticipate?

However, India’s self-assessment is flawed, especially in defining China solely as an adversary rather than a potential ally

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This is a grave miscalculation on India’s part, considering China has successfully achieved technological breakthroughs even amidst intense blockades and has developed a complete industrial system.

In contrast, India is only just beginning to draw foreign investment and has yet to carve out its distinct pathIn this context, the ambition to supplant China appears rather unrealistic.

Prime Minister Modi even articulated a vision during his campaign of competing on an equal footing with China, which an Indian scholar criticized by highlighting China's comprehensive and advanced industrial chains that foster trade relations with over a hundred countries, consequently casting a long shadow over global manufacturing.

Therefore, India is unlikely to reach the same echelon of manufacturing prowess that China has achieved, nor can it merely replicate the Chinese model of success.

India’s Misjudgment and Lost Direction

The global manufacturing environment currently wrestles with the looming threat of trade protectionism, particularly from developed nations in Europe and North America, who appear unwilling to permit robust competitors to rise, as it undermines their profit margins

Since 2014, India has become a veritable "desert" for many foreign businesses, prompting a significant exodus of companies either temporarily leaving or completely retracting from the Indian market.

Data indicates that over the past seven years (through 2021), 2,783 foreign enterprises, including behemoths like Carrefour and Ford, have withdrawn from IndiaThe nation has thus garnered a reputation as a challenging environment for international business.

Standard and Poor's, a prominent American rating agency, places India's credit rating at a mere 3B minus, the lowest category in the investment grade spectrumIn stark contrast, China boasts an A+ rating.

While Modi has consistently expressed an open-door policy toward foreign investment, many companies continue to adopt a wait-and-see approach, primarily due to a recent well-publicized incident.

Not long ago, following a guarantee from Modi, American capital deployed $35 billion to acquire a 49% stake in a premium steel corporation in India

However, it was later disclosed that this company was encumbered with a staggering 130 billion yuan in government debt, thus making the U.Sone of the major stakeholders liable for a portion of this debtThis revelation shocked American investors, necessitating emergency discussions with Modi.

Modi responded by asserting that the U.Swould have to shoulder this debt, or face hefty penalties for default, alongside freezing Citibank's assets in IndiaThe fallout from this event has tarnished India’s investment reputation further, exacerbating challenges within its business environment.

As China's manufacturing capability becomes increasingly refined and its production costs remain competitive, India's aspirations in this sector might be severely hindered.

India has strived for localized manufacturing yet struggles against the firm foothold Chinese products maintain in its market

In New Delhi, many local manufacturers are simply unable to compete with the lure of China’s cost-effective, high-quality goods.

Undoubtedly, trends at a global macroeconomic level cannot be reversed merely by India's effortsIn recent years, an increasing number of countries have recognized the necessity of transitioning away from the dollar-centric framework.

For instance, Russia's experience with financial sanctions post the Ukraine crisis illustrates the hazards of excessive reliance on a singular settlement mechanismMoreover, the U.Shas weaponized its oil-based dollar dominance, exporting inflation that afflicts nations worldwide.

Consequently, many countries are keen to establish a diversified currency settlement system to minimize exposure to the dollar's fluctuationsAs the largest victim, Russia is proactively leading efforts within BRICS to promote local currency settlements and the establishment of independent financial systems, achieving notable progress.

Currently, approximately 99% of transactions between China and Russia utilize local currencies, while the share of local currency settlements in trade involving BRICS nations and Russia has surged to 85%, up from just 26% two years ago.

For Russia, spearheading a currency settlement system through BRICS is crucial in the overarching strategy of de-dollarization.

India Risks Being Left Behind by These Trends

Should India persist in overlooking China's strides in favor of its own self-interest, disregarding the collective benefits of BRICS, along with the sentiments of foundational nations like Russia and Brazil as well as the five recently joined members, it begs the question of which nation can claim true global responsibility

The answer becomes self-evident.

In summary, if India fails to make significant strides towards resolving pivotal issues, it risks squandering its demographic advantagesThe dream of ascending to the ranks of developed nations may fade, potentially leading to an 'income trap' scenario where it could be relegated to the status of an economy that collapses before it fully matures.

However, the notion of whether India could supplant or eclipse China is perhaps beside the point:

India and China's developmental trajectories are inherently differentGiven India's current circumstances, the transformation into an industrial powerhouse is fraught with challengesAlthough India may tap into benefits from global production trends, the rewards will remain limited.

From a purely business standpoint, China’s market and enterprises have showcased considerable strength amidst stiff competition, as China's manufacturing sector stands robust.

For China, the paramount challenge lies in ensuring that its enterprises can thrive in a fair international competitive landscape, largely determined by its strategies in navigating Sino-American friction and competition, thereby mitigating the possibilities for India to capitalize on such tensions.

We should place greater emphasis on maintaining robust connections with the global market, fostering a stable external environment, and promoting technological innovations.