The Political Economy of India and Its Strategic Choice under USA–China Power Rivalry and Hegemonic Competition: A Defensive Hedging Policy

Abstract This paper explores hedging in a theoretical thinking and applies it to the foreign policy of India in an era of growing USA–China power rivalry. In this regard, hedging is defined as insurance seeking strategy under situations with high uncertainty, where rational actors (both middle and small states) will try to avoid taking sides and to pursue room for autonomy in decision-making. While Washington and Beijing dislike middle and small countries’ hedging, they both overlook that it is the uncertainties stemming from their own behaviors that push middle and small states to hedge. As uncertainties deepen, most countries in Indo-Pacific region will prefer to use hedging policies to reduce their possible losses. For India, unless USA–China rivalry escalates into a direct military conflict, or unless Washington retreats its commitment to regional security in Indo-Pacific, then India will stop hedging and moving to bandwagoning with China; or if Beijing’s actions directly undermine India’s vital interests in security, then India’s hedging will be replaced by balancing against China. In short, hedging is a passive response, not an active choice; India’s hedging strategy is very likely to persist on making ambiguities in the USA–China–India strategic triangle and entanglement.