Wednesday, September 19, 2012

India in the world power ladder

Here's a short OpEd of mine on where India stands in the world power game, published by Bombay-based News Bharati on August 16, 2012.

India is an emerging great power but whether it will emerge successfully or not will depend on a range of challenges at the domestic and international levels. Of these, the domestic challenges are of far greater consequences. Internal challenges range from poor infrastructure to coalition politics and external challenges include managing great power relations and ensuring a stable South Asia.

Some of the serious economic challenges that India faces include its economic growth. India traditionally had the Hindu growth rate of 2-3 percent for decades where the economy was dominated by a strong state that remained closed to international interaction. It also had put serious restrictions on its private sector and the market-driven growth. Starting in the late 1980s, India did slowly liberalise its economy but it took the 1990s economic crisis for liberalization to pick up the pace. The liberalization process that followed led to much higher growth rate, reaching levels of 8-10 percent. In fact, over the last three years, this growth rate has begun to suffer. India did successfully deal with the global financial crisis but nevertheless its economic growth rate has begun to slow down, nevertheless high by global standards. However, India starting from a lower base, (even though its growth rate is higher than most other countries)and if India has to catch up to the more developed economies, it has to sustain its 8-10 percent growth rate annually but domestic politics is coming in the way of faster growth.

One of the factors for slow growth rate is India’s poor infrastructure. The recent double blackout is only one indicator of that. India’s power sector suffers from both lack of capacity and poor distribution. The US-India nuclear deal was supposed to help India in this regard by increasing the nuclear component in the energy basket but the nuclear liability bill is preventing progress in the nuclear energy sector. Additionally, the Fukushima nuclear disaster has led to greater concern in India about the nuclear safety, leading to further slow down.

Situation is not much better in another area of infrastructure – highways and transportation links. Land acquisition troubles, inadequate attention preventing highway and other transportation hub developments at a fast-enough pace are big enough issues but the more serious problem is politics!! Coalition governments and differences between the centre and state governments are preventing the much-needed market reforms as a number of international agencies have already pointed out. There is also increasing objection to faster economic growth because of the assumption that faster economic growth leads to greater economic inequality. While income inequalities are a problem, the assumption that GDP growth rates will lead to inequality is wrong. The GDP-led growth needs to lead to better distribution but the government has to push for greater economic growth as well. These are not mutually incompatible.

Maoist violence is another serious domestic issue. While India has always faced domestic rebellion, the Maoist violence is a qualitatively different problem. Lack of coordination between state and central forces, inadequate trained personnel available for combatting the violence has meant serious blows to India.

Yet another issue is corruption. Corruption is not only a political issue but also an economic issue. Unfortunately, none of the major political parties are paying any serious attention to it other than pointing fingers at each other. Corruption makes not only an incompetent economy but also makes it an unattractive option for foreign investors, affecting further India’s growth story.

A final domestic issue is the state of the intellectual infrastructure. India’s educational system, especially at the school level, is going from bad to worse. But since education at the school level is a responsibility of the state government rather than the central government, there are huge problems at that level. Some states do perform better than the other but the situation overall is quite abysmal. There is lot of tinkering going on at the higher education level, but unless the school education is taken seriously, reforming higher education is not going to matter much. The effect of the educational weakness can be seen already in the shortages in some sectors of the industry, in terms of quality manpower.

One of the major international challenges is managing the rise of China. While rise of China is a challenge to the whole world, India faces a particular challenge given the history of relations including the 1962 border war. In addition, China’s border infrastructure, its support to Pakistan in the military and non-military arena is of concern. For that matter, China’s South Asia relations areno different!

India has also problems with relationship with the United States. Although US-India relations have improved dramatically, India is afraid of being caught between the United States and China. Therefore, India has to play the complicated game of trying to balance its relations with these two powers.

Meanwhile, what affect us most are the developments in our neighbourhood and India’s position is nothing to envy about. We are faced with new challenges all around India, with many having serious issues of instability that has the potential to spill over. On our Western front, the situation in Pakistan and Afghanistan are sliding from bad to worse. With the US plan to exit Afghanistan in 2014, it opens up new challenges and opportunities for India and the region.

Meanwhile, Pakistan is going through serious internal turmoil although the geopolitical importance of Pakistan will come handy for Islamabad with neither the US nor China letting it slide to become a “failed state.” This may be the only hope we have of preventing the worst from happening in Pakistan. While a stable Pakistan may be in the interest of India and the region, an unstable Pakistan with nuclear weapons is going to be a greater concern for the West, particularly the US. For India, the issue has not been really the growing size of the Pakistani nuclear arsenal or its safety (this is important by all means) but Islamabad’s sponsorship of cross-border terrorism.

Coming to Afghanistan, India has played a critical role in the development and reconstruction efforts despite the Pakistani effort to keep India out on a sustained basis. However, with the US exit plan being readied, India has to take the lead in formalizing a large coalition of nations including its immediate neighbours such as Pakistan, Iran, China, if Afghanistan is to witness any long-term peace and stability.

These are no easy challenges and how India manages all these will determine its position in Asia and the world.

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