India's Strategic Adaptation to China's BRI Recalibration: Connectivity and Diplomatic Pragmatism

The strategic response of India to China's redesigned Belt and Road Initiative (BRI), which has shifted  from debt-driven mega-projects to the "Small and Beautiful" (S&B) model that prioritises sustainable,  localised investments, is examined in this paper. To counter the BRI's  nimble effect and maintain strategic autonomy in an increasingly multipolar Eurasia, the research  suggests that India should accelerate corridor integration, institutionalise rupee-based trading systems, and  leverage multilateral cooperation. 

Policy Brief by Mohammed Afsal K H | Edited by Harshita Prashar | Research & Publications Division

Depiction of China's Belt and Road Initiative

Introduction: 

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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