Over the last two decades, numerous analysts have hailed India as the next global power. This resulted partly from the marked acceleration in India’s economic growth rate following reform process initiated in 1991. India’s GDP grew at 6% per year for most of the 1990s, 5.5% from 1998 to 2002, and soared to nearly 9% from 2003 to 2007, before settling at an average of 6.5% until 2012. The brisker growth pulled millions out of poverty, put Indian companies even more prominently on the global map, and spawned giddy headlines about India’s prowess in IT. The attention to India has endured even though its economic boom has been stymied, partly by the 2008 global financial crisis, with growth remaining below 5% for eight consecutive quarters from early 2012 to early 2014.
During April-June 2014 quarter, Indiaâ€™s economic growth ticked back up to 5.7%, but it is too soon to tell whether or not this represents the beginning of a more sustained expansion. The persistent interest also stems from analyses that portray India’s and China’s resurgence as part of a shift of global economic power to Asia. Yet even those who dismiss the proponents of this perspective as â€œdeclinistsâ€ are drawn to the â€œIndia risingâ€ thesis, in part because of the transformation in US-India relations during the last two decades and the allure of democratic India as a counterweight to authoritarian China.
But is India really ready for this prime time?
India has many of the prerequisites for becoming a center of global power. It is capable of playing a major part in transforming a world in which American power is peerless into one marked by multi-polarity because it has a vast landmass and coastline and a population of more than one billion. But the elemental problems produced by poverty, an inadequate educational system and pervasive corruption still remain. For now, the ubiquitous reports of India’s emergence as a great power are premature at best. There’s no denying India’s ambition and potential, but as for its quest to join the club of great powers, the road is long and bumpy too. Prime Minister Narendra Modi may seek to be a reformer, and he enjoys a reputation as a charismatic leader and skilled manager. But he will face daunting obstacles in his bid to push India into the front rank of nations.
Despite its many blemishes, India’s democracy has increased the country’s appeal in Europe and America and has prevented quarrels over human rights from complicating the expansion of economic and security transactions with the West. This is in stark contrast to the intermittent skirmishes over human rights that have marred the West’s relationship with China and Vladimir Putin’s Russia. Barack Obama â€” who hosted Modi in September 2014 â€” pledges to back India’s bid for a permanent seat on the UN Security Council.
Yet in East and South Asia â€” two regions in which India has been most active on the diplomatic and strategic front â€” its democratic model hasn’t yielded it much influence. India, weighed down by the compromises, delays and half measures necessitated by its democratic structure, comes across as a lumbering, slow-motion behemoth that’s never quite able to sustain whatever momentum it manages to gain.
The Indian government, for its part, has crafted sundry soft-power slogans and strategies, like â€œIndia Shiningâ€ and â€œIncredible India.â€ The latter was not simply rhetorical excess â€” though it was that â€” or even solely a catchphrase to capture additional tourist revenue. It was also part of a larger effort to increase transactions between India and the West and to recast India’s image. Yet there’s scant evidence that India is seeking to use culture as a means to create a transnational bloc in Asia, or anywhere else. Samuel P. Huntington listed â€œHindu civilizationâ€ among the cultural-religious blocs whose rivalry would supplant the competition and conflict among states, but there are no signs that India plans to mobilize that form of soft power, or that it could if it tried. Hyping Hindu discourse in a multi-confessional country, one with more than one hundred million Muslims, would amount to jeopardizing internal security to road test a quixotic theory that emanated from Harvard Yard.
The heyday of central planning and import-substitution-based economic policy, which had extraordinary influence in India, is over. The coming of Modi at the helm by defeating the Congress Party, which itself initiated economic reforms in the 1990s, betokens an even stronger push toward privatization and foreign direct investment (FDI). While the principal aims of India’s economic strategy will naturally be growth and prosperity, the country’s leaders understand the strategic benefits that are to be gained from having the business community of important countries like the US, UK, Japan, etc., acquire a strong stake in India’s market.
Still, to gain substantial economic influence, India’s leaders will have to implement many politically unpopular reforms that are required to restore and maintain high rates of growth, to boost trade and to attract greater sums of FDI. These include â€” but are not limited only to â€” cutting subsidies for basic commodities, revamping entrenched and rigid labour laws, opening protected sectors to foreign competition, and stamping out tax evasion.
Take the example of education. While India’s progress in educating what fifty years ago was a largely illiterate society has been impressive, there’s much more that needs to be done on this front to boost Indiaâ€™s economic power. The countries that are already front-rank economic powers achieved near-universal literacy long ago. China, Indonesia and Malaysia have a literacy rate of more than 90%, but in India, it is only 74 %. While that’s a massive increase compared to the proportion in 1947, the quality of Indian schools is uneven because problems such as moribund curricula, substandard classrooms and widespread absenteeism among teachers abound.
Moreover, India’s schools are not producing the skilled labour needed by local and foreign firms at anywhere near the required rate, and too many of those with degrees in science and engineering are not readily employable on account of the poor quality of their training. Though Indian higher education has a history that spans centuries and boasts some venerable institutions, yet even its elite engineering and management schools don’t make the â€œtop 200â€ list in global surveys.
Likewise, vast sums will have to be mobilized to modernize and expand India’s antediluvian infrastructure. The long list of pressing needs includes building or revamping water-management and sanitation systems; bridges, railways and roads; harbours and airports; and power plants. Fixing India’s infrastructure won’t be cheap: the price tag is estimated to be $1 trillion. But sans a colossal effort, the drag on India’s growth could amount to 2% a year.
Despite the publicity India’s prowess in IT receives, society-wide access to information technologies remains unimpressive. In 2008, according to the World Bank, India had 7.9 Internet users per 100 people. That number had grown to 15.1 by 2013. But by then Guatemala had 19.7, Haiti 10.6, Kyrgyzstan 23.4 and the Dominican Republic 45.9. The figure for China was 45.8, in Germany and France and the United States it was over 80, and in Denmark it was 94.6. Even allowing for India’s mammoth size and population, this dismal comparison speaks for itself.
India faces an even more fundamental problem â€” one that makes prognostications about its impending ascent to great-power status sound surreal. Simply put, the country still lacks the human capital required for acquiring the power and influence commensurate with its leaders’ aspirations. India’s per capita income in 2013 was $5,350. By comparison, China’s was $11,850, Japan’s was $37,630 and â€” tellingly â€” South Korea’s, which was comparable to India’s in the early 1950s, was $33,440. Nearly one-third of Indians still subsist on $1.25 a day or less. India places 135th out of 187 on the UNDP’s Human Development Index. Similarly, it ranks 102nd out of 132 on the Social Progress Index, which assesses countries’ records in meeting people’s essential social and economic needs. In UNICEF’s rankings, India (with 48 %) places fourth in the proportion of children who are stunted and second (43 %) in the percentage of those who are underweight (â€œsevereâ€ or â€œmoderateâ€).
As wages in China have risen, multinational corporations haven’t relocated to India to the degree one would expect given the size of the Indian market and cheap Indian labour. Instead, they have gone elsewhere â€” not just because of India’s inadequate human capital and infrastructure, but also because of bureaucratic barriers that hinder business and investment and persist despite the reforms of the past two decades.
It’s often said that India, unlike China, has the advantage of a relatively young population and will therefore not face labour shortages. What often goes unmentioned is that the largest population increases are occurring in some of India’s poorest states that have been the best at meeting basic economic needs and in increasing literacy.
These same deficiencies have prevented India from establishing a significant position in global trade. While it does rank fifteenth on a list of the top twenty economies in the dollar value of merchandise trade, its exports and imports combined in 2012 totalled $784 billion. Several countries with smaller GDPs and much smaller populations, including Singapore, Belgium and the Netherlands, outranked it. China’s trade, valued at nearly $4 trillion and about on par with that of the United States, accounted for 10.5 % of the value of all international trade in 2012.
Apart from the quantity and complexity of the problems that have to be addressed, India’s democratic system is not conducive to enacting controversial economic changes quickly. Because of their authoritarian political systems, China, as well as Taiwan and South Korea in their non-democratic phases, could push through sweeping reforms that helped establish the foundation for rapid industrialization and economic growth. India’s raucous, vibrant democracy is rightly admired, but it impedes the implementation of deep economic reform. Though Modi, who faces the challenge of overcoming such obstacles, is well placed to do so given his economic track record, his popularity and the BJP’s massive electoral mandate, he won’t be able to demolish these deep-rooted impediments to reform without a tough struggle. Running Gujarat was one thing. Acting as India’s CEO will be quite another.
India has been active on a variety of fronts in East Asia. It has been training Myanmar’s naval officers and selling the country maritime surveillance aircraft. It has provided Vietnam loans for buying Indian arms and has signed a deal, despite profuse Chinese protests, to tap Vietnamese oil deposits in the South China Sea, adjacent to islands claimed by Beijing. While specialists on Indian foreign policy tally these and other triumphs with care, what’s sometimes missing from their analyses is a comparative perspective, which would show that China’s presence in East Asia, and the resources it has deployed to gain influence there, far exceed India’s on every dimension that matters, and that to by a wide margin.
It’s unclear whether Modi will be able to overcome these problems. The BJP, while generally seen as more favourable to private enterprise than the Congress Party, still contains constituencies committed to economic nationalism. They view globalization as a recipe for deindustrialization, foreign domination over key economic sectors, and impoverishment for small businesses and farmers. Their views, though sidelined in the 2014 campaign, could regain influence if Modi’s economic policies falter or cause pain without producing visible gains for ordinary Indians.
India the superpower? Don’t bet on it.
By: Raja Menon