He called as "excellent" India's response to the aggressive posturing by China in eastern Ladakh, saying the Indian troops are much better trained than their Chinese counterparts.
"Having suffered economic reverses, to retain his hold on the party and people, Xi Jinping had to show gains somewhere. A successful military adventure in eastern Ladakh would have bolstered his image domestically. However, it possibly did not work as per plan due to the firm Indian response," Gen Kapoor told PTI.
Noting that the West has extended support to India on Ladakh, he said in South China Sea even the smaller nations are raising their voice against Chinese expansionism and insisting on rule of law.
"Covid-19 has made the world distrustful of China. World opinion is gradually turning against them. This would affect their global production and supply chains, resulting in severe economic downturn. At the regional level too they do not want a competitor like India. Thus the adventurism in Ladakh."
China is facing intense global criticism over the origin of the coronavirus pandemic that has killed nearly 600,000 people globally besides wrecking the world economy.
The former army chief said there would definitely be economic and geopolitical costs due to China's belligerence.
Echoing Gen Kapoor's views, Lt General (retd) DB Shekatkar said the aim of the Chinese military's aggression along the Line of Actual Control(LAC) in eastern Ladakh was to divert attention from growing global criticism against China over the origin of coronavirus.
"Chinese President Xi Jinping is facing a lot of domestic pressure for a variety of reasons including due to global criticism over the origin of Covid-19 in China's Wuhan province. The military misadventure was a ploy to divert attention from internal anger," Shekatkar said.
He said Chinese military resorted to aggressive behaviour in eastern Ladakh to help the Chinese president gain some lost ground.
Gen Kapoor, who was Chief of the Army Staff from October 2007 to March 2010, said there has been growing criticism against China over its Belt and Road Initiative (BRI) as well as its 5G technology.
The BRI is being opposed by a sizeable number of countries as it is being seen as a "debt trap".
The BRI proposed by China in 2013 seeks to develop a large number of connectivity projects linking Asia, Africa and Europe with an investment of billions of dollars.
"The Chinese will definitely have an economic cost. It's going to cost it big time. Their production line is bound to get affected as people would say we do not want your stuff and if that happens it will have a huge impact on the Chinese economy," said Gen Kapoor.
He also saw collusion between China and Pakistan to corner India and said the number of ceasefire violations in Jammu and Kashmir have witnessed an upswing following the eastern Ladakh faceoff.
"China and Pakistan always work in tandem. We have to be prepared to deal with them," he said.
Asked about India's response in eastern Ladakh, he said: "We responded excellently. We have excellent troops, much better trained than the Chinese and who can perform very well."
Gen Kapoor also pitched for increasing the country's defence budget as the security matrix in India's neighbourhood is changing rapidly. In a marginal hike, the defence budget was increased to Rs 3.37 trillion for 2020-21 against last year's Rs 3.18 trillion.
The Indian and Chinese armies are locked in a standoff in multiple locations in eastern Ladakh since May 5. The tension escalated manifold after the violent clashes in Galwan Valley in which 20 Indian Army personnel were killed.
However, following a series of diplomatic and military talks, the two sides began a mutual disengagement process on July 6 envisaging withdrawal of troops from most of the friction points.
On Tuesday, the two countries held a fresh round of Corps commander-level talks during which the Indian delegation conveyed a "very clear" message to the Chinese army that status quo must be restored in eastern Ladakh and China will have to follow all mutually agreed protocols for border management, according to people familiar with the developments.
During the course of the 15-hour-long intense and complex negotiations, the Indian delegation apprised the Chinese Army about the "red lines" and conveyed that the onus was largely on China to improve the overall situation in the region, they said.