Answer: Debt-trap diplomacy is an international financial relationship where one creditor country consciously extends excessive credit to another country with the intention of extracting economic or political concessions from the debtor country when it is unable to honour its debt obligations. China’s debt-trap diplomacy with respect to India’s neighbouring countries has gained significant attention in recent years. For example, China took Sri Lanka’s Hambantota port on a 99-year lease, on account of Sri Lanka’s failure to pay Chinese debt. Further, Myanmar has 40 percent of its total debt to China with high interest rates. Its impact on India’s interests in the neighbourhood:

• Undermining India’s sovereignty and autonomy: China-Pakistan Economic Corridor (CPEC) passing through Karakoram challenges India’s sovereignty as it tends to bolster Pakistan’s illegal claims over it.
• Security threats: China has strategically acquired the ports in the countries around India by pressuring smaller nations to comply with its demands using its own model of “strategic investments.”
  • These include the Hambantotta port in Sri Lanka, Gwadar port in Pakistan and Kyaukpyu port in Myanmar as part of China’s String of Pearls. When the ports are fully developed, China can easily have access to Indian territory. This also gives access to China to bring in its military base whenever conflict arises and affects India’s security and sovereignity.
• Increased Chinese Influence: By extending loans and investments, China gains considerable leverage over debtor countries. This influence allows China to shape the political and economic decisions of these countries, often at the expense of India’s interests. It goes against India’s desire to emerge as a net security provider in the region.
  • Chinese ‘spy ship’ Yuan Wang 5 docked in Sri Lanka’s Hambantota port raised concern for India.
• Challenge to Indo-Pacific Strategy: China’s debt trap policy will lead to increase in China’s assertiveness, which is a direct challenge to the open and peaceful Indo-pacific region.
• Impediments to Conflict Resolution: China’s economic influence through debt-trap diplomacy can complicate conflict resolution processes in the region.
  • For example, in the context of India-Pakistan relations, China’s close economic and military ties with Pakistan may impede efforts to resolve the longstanding disputes, such as the issue of Jammu and Kashmir.

India is looking to maintain its influence in the region and counter the growing debt-trap initiatives of neighbouring China via cooperative strategies and humanitarian aid. India has also been advocating for transparent and sustainable lending practices and promoting regional cooperation mechanisms that uphold principles of sovereignty, inclusivity, and respect for international norms.