This is a Policy Brief by Mohammed Afsal K H   
Edited by Harshita Prashar


Depiction of China's Belt and Road Initiative


Since China launched the Belt and Road Initiative (BRI) in 2013, the world's infrastructure has experienced significant transformation. BRI was originally defined by large-scale, continent-spanning mega-projects, but it has since evolved in response to international criticism, implementation challenges, and China's changing economic ambitions. In 2021, President Xi Jinping unveiled the "Small and Beautiful" (S&B) model, which prioritises sustainable, medium-sized investments that meet the developmental objectives of partner nations while preserving Chinese influence through technological collaborations as opposed to debt-based leverage.

For India, China's strategic recalibration presents both challenges and opportunities. India, the second largest economy in Asia with aspirations to lead the region, has created extensive connectivity projects, such as the International North-South Transport Corridor (INSTC) and the India-Middle East-Europe Economic Corridor (IMEC), to counterbalance the influence of the Belt and Road Initiative (BRI) while pursuing its own strategic and economic goals. These corridors not only alter regional economic trends but also offer crisis resilience frameworks to reduce geopolitical and environmental concerns.

This study investigates how India negotiates China's updated Belt and Road Initiative using three interconnected mechanisms: connectivity corridors, crisis management frameworks, and diplomatic pragmatism. By examining diverse replies to BRI's S&B model, the study contributes to our knowledge of how medium powers might compete with great powers while maintaining strategic autonomy. The findings shed light on how crisis management and infrastructure geopolitics are evolving in a multipolar world.

China's BRI Evolution: From Mega-projects to "Small and Beautiful"

The BRI's initial conception represented China's most ambitious international initiative, combining the land-based Silk Road Economic Belt and the sea-based 21st Century Maritime Silk Road. Large-scale infrastructure development through state-driven finance was given priority in the early BRI projects, which involved investments totalling more than $1 trillion across 151 countries. However, this approach encountered significant issues; by 2021, worker abuse, excessive debt, and corruption were issues in nearly 35% of projects. Prominent examples such as the $4 billion Ethiopia-Djibouti railway, which required a 20-year loan extension, and Sri Lanka's Hambantota Port, which was leased to China after financial defaults, fuelled accusations of "debt-trap diplomacy." Environmental concerns were also raised by the fact that by 2019, 42% of BRI energy investments came from coal-fired power plants.

In response to these challenges, China introduced the "Small and Beautiful" concept in 2021, marking a significant change in its strategy. The S&B approach prioritises smaller, easier-to-manage businesses in profitable sectors including technology, renewable energy, and healthcare. Examples include solar microgrid projects in Africa and smart city upgrades in Pakistan's Gwadar Port. China has promoted increased involvement from the private sector, with major players in BRI investments including businesses like Alibaba (technology) and CATL (battery production). By 2023, 52% of BRI engagements were led by private companies, undermining the dominance of state-owned enterprises. In 2023, green energy investments reached $7.9 billion, and for the first time, renewable energy sources dominated BRI's energy portfolio. Environmental sustainability is the focus of about 35% of new projects.

The S&B model embeds Chinese influence through digital connectivity and green technology integration, emphasising knowledge transfer and capacity building above pure infrastructure construction. Through more nuanced, sustainable methods, this strategic recalibration seeks to reduce risks while preserving global influence. The S&B approach uses technological alliances to cement Chinese influence in key sectors while lowering exposure to debt issues.

India's Strategic Reaction:

India-Middle East-Europe Economic Corridor (IMEC)

IMEC, which was announced during the 2023 G20 Summit, is India's most ambitious connectivity initiative, with the objective of connecting Asia, the Arabian Gulf, and Europe via a multimodal network of rail, maritime routes, and digital infrastructure. As a member of the Partnership for Global Infrastructure and Investment (PGII), IMEC promotes transparency, sustainability, and multilateral funding as alternatives to the BRI's state-centric approach. The corridor is divided into two sections: the Eastern Corridor, which links India and the Gulf by maritime and rail networks, and the Northern Corridor, which connects the Gulf to Europe via Jordan and Israel.

Studies show that IMEC has the potential to lower Asia-Europe transit costs by 40% and improve trade efficiency through initiatives such as the Virtual Trade Corridor with the UAE, which uses blockchain technology to automate customs operations. IMEC stands out due to its financing structure, which consists of EU grants (30%), Indian infrastructure banks (30%), and UAE sovereign funds (40%). This hybrid strategy seeks to maintain project profitability while avoiding debt traps. Furthermore, IMEC's focus on digital integration and corridors for renewable energy is in line with international sustainability objectives, establishing India as a green energy partner for Middle Eastern countries moving away from their reliance on fossil fuels.

International North-South Transport Corridor

The INSTC provides a 7,200-kilometer multimodal route that connects India to Russia via Iran and Central Asia. It has been in service since 2000 but has recently gained increased importance. Compared to conventional Suez Canal routes, INSTC lowers transit times from 40 days to 25 days and prices by 30% by integrating rail, road, and maritime networks. India's $500 million investment in Iran's Chabahar Port acts as a strategic counterweight to China's development of Pakistan's Gwadar Port, allowing access to Afghanistan and Central Asia while avoiding Pakistan. The corridor's connectivity with Russia's Northern Sea Route and Caspian Sea ports improves India's trade diversification, which is especially vital given the Western sanctions against Russia. INSTC exemplifies India's "multi-alignment" approach, which allows for cooperation with Iran, Russia, and Central Asia while maintaining Western partnerships. However, the corridor has significant challenges, including Iran's weak rail infrastructure, sensitivity to US sanctions, and a lack of private-sector participation in logistics networks.

Geopolitical Risk Mitigation

To lessen dollar dependency and protect against currency volatility, India has built rupee-based trading channels with countries such as the UAE and Russia. These agreements assist to buffer remittance flows during crises and increase economic resilience to sanctions. The proposed cooperation on undersea cable protection seeks to oppose BRI's Digital Silk Road extensions in Nepal and Sri Lanka, thereby strengthening India's ability to secure crucial communications infrastructure. In reaction to the semiconductor vulnerabilities exposed by China-Taiwan tensions, India has created partnerships with Japan and South Korea to reduce reliance on a single supplier.

Diplomatic Pragmatism and Strategic Autonomy

What academics refer to as "Non-Alignment 2.0" or pragmatic multi-alignment is shown by India's diplomatic strategy for containing the influence of the BRI while preserving regional stability. Modern Indian diplomacy uses strategic autonomy to interact with adversaries without formal affiliations, as opposed to the traditional Cold War-era neutrality. This strategy enables India to work with the Quad countries on cybersecurity while maintaining a balance with Israel, a $15 billion defence partner, and Iran, which is vital for INSTC. India maintains its freedom in making decisions while pursuing alternative connectivity frameworks by declining to join the China-led Regional Comprehensive Economic Partnership (RCEP) or the Belt and Road Initiative (BRI). During the 2024 Iran-Israel crisis, India's measured response—avoiding condemnation of either side while calling for de-escalation— exemplified this pragmatic balancing. Despite criticism of incoherence, this posture preserved both energy imports and defence partnerships essential to India's strategic interests.

Economic Partnerships and Risk Mitigation

India's economic statecraft employs positive incentives (grants, technical aid, trade pacts) to build resilience against coercion. The India-UAE Comprehensive Economic Partnership Agreement, which facilitated $115 billion in trade by 2024, demonstrates this approach by streamlining labor mobility and digital payments to create interdependencies that deter conflict. This mechanism reduces dollar dependency in UAE trade, which reached $84 billion in 2023, including direct settlement for oil purchases and integration of payment systems. Agreements with Argentina reduce dependency on Chinese-controlled supply lines by securing critical minerals for renewable energy development. India's role in Middle Eastern development is formalised through collaboration with Israel, the United Arab Emirates, and the United States, which coordinates technological investments in food security and water management. Through the diversification of dependencies and the development of alternative frameworks to the BRI's connectivity monopoly, these economic alliances strengthen India's strategic autonomy.

Implementation Gaps and Vulnerabilities

Despite comprehensive planning, India's strategic response faces significant challenges. Houthi attacks in the Red Sea have increased shipping costs by 25% and introduced 20-day delays, undermining IMEC's viability as a Suez Canal alternative. India's 60% oil import reliance on Gulf states persists despite diversification initiatives, limiting its economic sovereignty amid regional conflicts. Planning for multimodal logistics becomes more difficult and synergies are diminished when IMEC and INSTC don't coordinate well.

Conclusion

India's strategic adaptation to China's recalibrated BRI demonstrates a multifaceted approach balancing connectivity ambitions with crisis resilience and diplomatic pragmatism. Through initiatives like IMEC and INSTC, India has positioned itself as a democratic counterweight to BRI's "Small and Beautiful" model, emphasising transparency, sustainability, and multilateral partnerships over debt driven infrastructure development. The success of this approach hinges on India's ability to harmonise strategic autonomy with coalition-building, accelerate implementation of renewable energy corridors. While challenges persist—particularly in navigating Middle Eastern instability and energy dependencies—India's connectivity initiatives offer a blueprint for democratic alternatives to BRI's influence model. As geopolitical competition heats up across Eurasia, India's ability to integrate non-alignment principles with pragmatic partnerships will determine whether it can effectively compete with China's more agile, localised approach to infrastructure development. The results of this strategic conflict will have a considerable impact on regional power dynamics and connectivity paradigms in the multipolar Asian century.

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