(Analysed and summarised by IDC.. For full text of foreign researcher's article Click Here)
the first decade of the new millennium, India dreams of becoming a
regional and possibly a world power. In this decade, it is entirely
possible that the US economy may experience a period of decline
accompanied by an increasingly isolationist and protectionist stance. This
will create the opportunity in Eurasia for other powers to establish
themselves as regional powers or alternatives to the US ĖĖ China,
Russia and Japan would appear to be the likely contenders.
likely scenario for at least the first part of the decade seems to be that
Russia will have to devote most of its effort to pulling itself together
and China will have to focus on keeping itself from coming apart. Japan,
if it can make the systemic changes in its economy that are required,
would seem well positioned to increase its influence in the region and the
world. India must solve the problem of Kashmir before it does anything
else. Even with that, it lacks the resources and internal strength to
become a regional power in this decade. For India, the dream must wait.
Concept of Power
has a dream. It aspires to become a regional power on par with Russia and
China and even to become a world power. Power, in the international
context, is projected in three ways - economically, politically, and
militarily. The three legs of power are usually, but not necessarily,
inter-related. Political power is required to forge economic ties.
Military power is required to protect political and economic interest. If
one or more pieces of the power equation are missing, they need to be
compensated for in some other manner. The United States projects power
around the world in all three areas. Japan projects global economic power
and regional military power. The Soviet Union, before its demise,
projected global military and political power. It is still a military
power. Its demise was linked to its inability to develop the economic leg
of the equation.
examine the plausibility of the Indian dream, one must look at how India
might address the power equation during this decade. To accomplish this,
we must, in turn, include the direction of and relationships between,
China, Russia, Japan, Pakistan and the United States.
has been on a roll. It has enjoyed at least a decade of rapidly expanding
economy and has become the unipolar super-power of the world. The big
question is, of course, can the US continue this type of economic growth
and how will other countries and regions react if the US political and
economic climate changes? All of the factors for continued, long term
growth appear to be present with the USA. It is blessed with a low
population density so it has land area on which to grow. It is blessed
with abundant resources. Its military might can provide expeditionary
force in multiple theaters as well as preclude any thought of invasion.
Its economic might is felt around the world. The USA has led wave after
wave of change, cultural, political, and economic. America was at the
forefront of mass production, it was at the forefront of the technology
revolution, it has led the computer revolution and appears well set to
lead the knowledge revolution. Through all this, worker productivity
continues to increase. America has a culture that not only lends itself to
quantum change but also seems to thrive on it. Nothing, however, continues
uninterrupted forever. At the moment, the metrics of growth still seem
positive. Capital formation continues. Productivity continues to increase.
Interest rates and inflation rates appear to be contained. Some pessimists
argue that the stock market boom is fueled by an irrational market in
dotcom issues. These same people argue that this is very similar to the
irrational rise in real estate values in Tokyo in the 1980s. But is it?
Real estate is unchanging. It has useful but non-technical utility. The
emerging knowledge wave has touched and transformed every facet of
society, culture, politics, and economics. Investors are anticipating a
change in the essence of the economic model, in the underpinning of the
economy. The valuation of knowledge based technology is new and evolving.
It can be reasonably argued that revenue will, at some point, follow. As
recent perturbations in the market might forewarn, there will doubtless be
corrections and shake-outs. Companies will flare to brilliance only to
consume their fuel and die. As long as there is money from a growing
economy and growing capital formation to pump into the markets, it is not
difficult to see continued growth.
however, has an interesting demographic development in store that one must
be aware of. Somewhere about the mid-point of this decade the baby
boomers, the 1945-1950 babies, will reach retirement age. They, for the
most part have done, and are doing, well. They are pumping large amounts
of money into the market through 401k and retirement plans. The market is
supported by a large and patient corpus. This has helped to restrain
interest rates during a period of rapid expansion. These same boomers,
however, are looking forward to enjoying the fruits of their labors in
retirement and at some point will cease to provide input to the capital
market and start to withdraw. As the boomers retire and sell their houses
and take money out of the market, the impact has to be negative. When
large negative forces appear, market investors tend to liquidate
vulnerable assets and lock in value. This seems to be to be very ominous
for the second half of the decade. When the market and the economy enter
periods of possibly very steep decline, the impact ripples outward to many
other areas of society. As we begin to look at what might change between
America and the rest of the world, let us look at the political dimensions
of a steep retreat of the economy in the US. American politics tend to
follow some repetitive patterns. One of those patterns is that when times
are good, people are relatively unconcerned with politics and political
issues. In this yearís fall elections there are few, if any, core level
issues that have caught much voter interest. The election is shaping up as
more of a contest between personalities. State and local primaries earlier
this year drew record low turnouts in many places across the country. Conversely, when the economy is not in
good shape, interest in politics and political issues is high and voters
are willing to consider alternatives.
are good right now but we have seen in the past that when the US economy
goes into decline, calls for protectionism raise to crescendo levels. In
2008, when it seems entirely possible that the economy will be in worse
shape than it is today, protectionism will have a much more receptive
audience. It happened in the late 1980s. It would seem entirely possible
that in the latter part of this decade the US may move toward a much more
protectionist/isolationist position. This will have many ramifications
the US were to withdraw from its current economically dominant position in
Europe and Asia, some destabilization would have to follow. This would
provide an opportunity for other great powers to attempt to challenge the
USís position. When major powers compete amongst themselves and with the
US, a very fluid and unstable situation is created. It is hard to imagine
that the US economy would suffer serious or long lasting damage but, for
some period of time, a dangerous environment may well exist.
decade forecast for the US, then, is for continued expansion and political
stability for several more years with the potential for relative economic
contraction and more volatile politics in the latter part of the decade.
This may well be manifest in a more protectionist posture which will
provide opportunity for other powers to attempt to establish their
positions, particularly in Eurasia This will, in turn, create an unstable
and potentially dangerous environment. The list of combatants in the
potential regional and global tug of war later in this decade certainly
includes Russia, China, and Japan.
First Decade of the Millenium
the decade ahead, as the US becomes increasingly isolationist, Russia
asserts its sphere of influence to the borders of the former Soviet Union,
friction increases with the US and with China. As Japan tries to build its
place as the central Asian power in terms of both trade and political
influence, it will increase friction with the other wannabes, China and
Russia. The first decade of the new millenium, then, is likely to see the
US as the still dominant force in the world with Russia trying to rebuild
itself, China trying to keep itself from blowing apart, and Japan assuming
a major role in Asia as an alternative to the US. Friction between the US
and all three as well as friction between the three would seem a good bet
to steadily increase as areas of interest overlap.
of the Indian Dream
this potentially tumultuous backdrop, where and how does India pursue its
India wants to become a regional economic, political, and military power.
Toward this end, politically, India is again pursuing what it calls its
"Look East" policy. This is not a new concept, having been
developed in the early 1990s when "Non-aligned" India found
itself aligned with a suddenly collapsed Russia. Under the "Look
East" policy, India is seeking to establish closer relations with
such countries as Vietnam, Cambodia, Thailand, Indonesia, Singapore, and
Myanmar. Leaders of Singapore, Indonesia, and Cambodia have recently
visited Delhi. India has offered aid to Vietnam and Cambodia.
Economically, India is trying to leverage its $6 billion global presence
in the IT industry along with a few other export industries such as gems
and pharmaceuticals into regional economic power. India has also been
exploring ways to increase economic cooperation with Singapore and
Thailand. The idea is to present a regional alternative to the US, China
Militarily, India is expanding its Navy and attempting to increase the
navyís operational area as well as continuing development of its Air
Force and land and sea based missile delivery systems.
There are, however, some major stumbling blocks along Indiaís route to
becoming a regional power. Foremost among these are - the on-going
conflict with Pakistan over Kashmir, insurrection in Assam, an economy
that is crawling forward at best, a fiscal deficit that there seems to be
no political will to contain, itís own internal problems with poverty
and illiteracy, rampant corruption and the latent political threat of the
inwardly focused RSS agenda of Hindutva and Swadeshi.
situation in Kashmir is very bleak. On the one hand, Pakistan seems to be
putting itself in a solid no-win situation. Its economy is in tatters, the
military rule the country, and Musharraf seems unable to control Islamic
extremism, drug trafficking, and corruption. His governmental structure is
heading toward dysfunction. The officer corps of the army is Punjabi and
Musharraf is not which means he is on thin ice with his only support base.
The armyís only reason for existence, as the officer corps views it, is
to fight for their country. They seem to be looking for a fight and it is
questionable whether Musharraf can contain them.
the other side, India has increased its defense budget by $3 billion,
roughly what Pakistanís entire defense budget is. This is hardly an
indication that India sees peace on the horizon. The Indian army has
strengthened its positions and has been stepping up counter insurgency
operations. It has also been equipping itself for fighting in the desert
terrain of Rajasthan.
in response, has been reported to have made large purchases of high
altitude fighting gear and snowmobiles. Additional troops have been posted
in several sectors of the LoC including the Kutch area which may signal a
threat to the industrial west coast of India from Gujarat to Bombay.
Pakistanís ISI is accused on a rather regular basis of attempting to
destabilize Indiaís economy by smuggling in counterfeit currency notes
and the number of insurgents infiltrated into Kashmir is reportedly
increasing dramatically. With tensions running at very high levels, some
analysts have gone so far as to suggest that India might even provoke
Pakistan into a war.
Regional Presence. In addition to the increasing tensions with
Pakistan, the Indian Navy has recently announced that it will be
conducting exercises in the South China Sea. China claims this as its
territorial area. If India expands its operational area, as it appears it
intends to, it will, no doubt, cause a shift in the balance of naval power
in the region. Relations with China, already strained over their support
of Pakistan and a couple territorial issues, will further deteriorate.
Along with the expanded operational area, India is expanding its naval
force as well. There are reports of plans to supplement Indiaís only
aircraft carrier, the INS Viraat, with a re-fitted Russian carrier and to
build a carrier of its own. The Indian Navy recently launched a new guided
missile frigate. It is also reported that India is nearing the launch of a
Kilo-class submarine with ballistic missile capability. If India does put
three carriers into operation, it will put India on a par with the UK in
carrier force capability. Together with support resources, this would make
India capable of extended force projection.
potential presence of an Indian carrier force and missile capable
submarines off its coast might well cause China to reconsider the level of
support it provides to Pakistan, thus ratcheting the India-Pakistan
tensions up a notch or two. China might also consider increasing its own
naval capabilities. This would further increase India-China tensions.
Because much of the Indian military equipment will come from Russia,
Russia-China relations may also deteriorate.
some point, this escalation becomes unsupportable by the Indian economy.
If China can cause India to focus its attention on Pakistan, it will
divert its attention from naval expansion. From Chinaís perspective this
may appear advantageous but it also increases the probability of open
conflict and brings to question the degree to which Pakistan and India
might escalate that conflict.
Growth. Quite aside from the strain on the economy that military
spending is likely to impose, the NDA government seems unwilling and
unable to contain the huge fiscal deficit. This will cause the economy to
grow more slowly than it otherwise might. At all levels and in all areas
of spending little is being done. The size of the government is
approaching its all time high despite claims of downsizing. The new Budget
2000 announced cuts in subsidies but these were minimal and even those
proposed are being restored under political pressure. The sale of Public
Sector Units is announced every year and, every year, very little actually
happens. It appears that will be the case again this year. Both Central
and State governments have demonstrated that they cannot handle natural
disaster time and again despite the outflow of a lot of money. Last
fallís cyclone in Orissa cost many millions of dollars. The current
drought will cost more. The prospect of a below average monsoon will
exacerbate a deteriorating fiscal picture.
The lack of infrastructure in India is regularly cited as a major problem
and a major hindrance to progress and growth. The country is chronically
short of electrical power and very little new generating capacity is in
sight. Nearly 50% of the power that is generated "disappears"
(the polite word is, of course, transmission loss) thereby further
reducing money available to increase capacity. Much of what is not lost is
given away (a form of subsidy) for little apparent gain. The country is
also critically short of water. The current drought merely highlights how
little has been done in 50 years to develop and manage a vital resource.
Roads are poor to non-existent in many areas and there is no national
in one of the few bright spots of the economy, the IT industry, there
appears to be lack of vision and management. IT is a fast pace, rapidly
changing business. India has done little to support this industry aside
from passing some accommodating tax laws. Two years ago an IT task force
identified 108 areas where government action was required to support and
develop the industry. Two years later, 56 have been implemented. Many more
have been identified and should, no doubt, be added to the list. Some of
the un-addressed action areas are critical such as high speed, high
bandwidth data transmission facilities and high quality internet access
other than the government owned VSNL. The IT industry has grown so far
because of exports. India itself must grow into the IT age or it will be
left further behind by faster developing nations.
Direct Investment. India is highly dependant on foreign direct
investment but is really doing little to make itself an attractive
destination when compared to other potential destinations. In a recent
financial survey, it slipped from 10th to 11th place
as a favored destination for investment. Trade barriers and tariffs, the
slow pace of reforms, slow and erratic bureaucratic processing,
corruption, and lack of infrastructure are all negative factors for
RSS Factor. As if this werenít enough, there is a potent force
lurking in the background of the political scene. This is the Rashtriya
Swayamsevak Sangh, the RSS which would have India focus inwardly
politically and economically and create a Hindu state to the exclusion of
all others. RSS has been trying to move steadily toward the forefront. If
the economy does not improve rapidly and if education is not improved and
progress made in the alleviation of poverty, India may well find itself
changing course considerably on issues of globalization.
Relations. The President of the United States visited India recently
with a thousand or so associates. The Indian media proclaimed the visit a
huge success. There can be no doubt that President Clinton turned on the
charm and struck a responsive chord in the Indian government and public.
The press proclaimed a grand new era of Indian Ė US relations, a desire
which has been further butteressed by the Indian Prime Ministerís visit
to the US.
the cold light of day, however, little really has happened. Before the
visit the US viewed India as a developing nation, albeit a large one. One
would suspect that the US also viewed India as a potentially useful
counter when dealing with China. Prior to the visit, the USís major
concerns were nuclear non-proliferation and the Kashmir conflict. When the
President left, the perceptions and concerns remained unchanged. Other
than a vague promise of future goodwill and a small amount of already
agreed to business.
to Kashmir? The first few years of this decade will be extremely
testing for India. The key to Indiaís future is not the IT business or
any other economic issue. It is finding and implementing a solution to
Kashmir. Until this is resolved, India and Pakistan will remain locked in
an increasingly dangerous confrontation. US concerns with Pakistan before
the Presidentís trip were nuclear non-proliferation, curbing the export
of terrorism and democratic and economic reforms. As with India, these
remained the same after he left. Pakistan is bankrupt. Its sources of
foreign funding have all but dried up. It will become increasingly
difficult to equip and maintain an army in the field. China will, in all
likelihood, provide continuing aid to Pakistan in order to keep India
focused on Kashmir and Assam, buying time for it to consolidate its
position and possibly strengthen its navy. The US may be forced to supply
some aid to prevent Pakistan from reaching a critical point at which war
is the lesser of evils. No one can afford to let Pakistan become isolated
seems entirely likely that the ongoing fighting will flare up periodically.
India must resist the urge to attempt to "conquer" Pakistan. If it
does that, it might force Pakistan to use their weapon of last resort which
would be to no oneís advantage. The only solution is to reach some long
term accommodation on Kashmir. This will require serious and committed
diplomacy and some give by both sides. So far, both sides have demonstrated
only intransigence. If the Kashmir dispute is not settled quickly, the
ongoing war with Pakistan will continue to drain Indiaís resources and
divert its attention from other very pressing issues. (For a possible
solution to Kashmir, please see Forum)
Development. India may not be able to sustain naval development to the
degree necessary to extend and maintain its operational area. Continuing
delays and cost over runs added to the Kashmir drain will impede Indiaís
plans for becoming a regional military power for some time. The frigate
India recently launched was five years late and very much over budget.
Even with the delays, it is still missing several weapons systems whose
development is even further behind schedule. India has no carrier capable
planes or pilots. Given Indiaís performance on the frigate and nuclear
submarine programs, an indigenous carrier is at least a decade away. The
Arjun tank program is suffering from operational and production problems.
Despite its desire to produce military equipment indigenously, India lacks
the essential technical and production expertise. The government, given
the best opportunity in some years to present and implement a reform
oriented budget that will address critical areas of the countryís
financial situation, has failed miserably. Worse, it is backtracking on
the few positive aspects of what it did present. There may not be any
major improvement in the economy for some time to come.
The political situation is deteriorating. The NDAís allies are becoming
increasingly contentious with the BJP. The RSS seems well positioned to
move ahead with the Ram temple construction, which will cause major
internal strife and political fallout. Congress party is self-destructing
and has ceased to be an effective party in opposition. If the government
does fall, it is not beyond imagination that RSS inspired BJP candidates
may be able to achieve a majority or at least major influence. In that
case, the cause of reform and globalization will be set back immeasurably.
Corruption in business and government continues nearly unabated. The few
cases that do enter the judicial system join a backlog of 38 million cases
and will likely never be heard. The cyclone disaster in Orissa
demonstrated that corruption is so malevolent that it will even attack
humanitarian aid. Of the millions of dollars sent for disaster relief,
very little actually reached those in need. Even the procurement of relief
supplies has apparently provided an opportunity for skimming and scamming.
The deposed Chief Minister of Bihar still runs the state from the back
seat behind his wife.
The Indian Dream
In view of the above constraints, this decade will not see
India fulfill its dream of becoming a regional power. India will remain
engaged in internal struggles and the Kashmir problem and fall further
more rapidly behind developing nations. There is even a possibility that
its shining star, the IT industry, will begin to whither from neglect as
other countries, China and central Europe for example, begin to provide
the second half of the decade, Japan will begin to emerge as the Eurasian
alternative to the US and will establish economic and, possibly, military
leadership in the region. China is in for a difficult decade and will
maintain a posture similar to its current one. The wild card for China is
the Taiwan situation. If Putin succeeds in bringing Russia together,
Russia could quickly begin expanding its political and military influence
into the void left by increasing US protectionism.
where are we left with the three legs of power for India? Politically,
India must get its own house in order. A nation cannot project political
influence without a coherent and consistent domestic and foreign policy.
Economically, India will continue to struggle for its own survival. Japan
and China have economies three and four times the size of Indiaís with
imports and exports eight times as great. In a bidding war for economic
influence, India has little to offer. Militarily, India must resolve
Kashmir before even thinking about expanding its influence. Its track
record in coordinated command, technology upgrade and project completion
does not augur well for sustainable military expansion.
for India, the struggle will be more about survival than about becoming a
(IDC do not fully concur with the authorís views. As earlier contended by us, the accretion in the Indian Naval strength as pointed out in the article, is only a replacement of ships that have been decommissioned during the last five years or so. The carrier Gorshkov is a replacement for Vikrant as will be the indigenous Air Defence Ship (ADS) for Viraat, which would come to the end of its seviceability by the time the ADS gets ready. The only discernable force-multiplier is the submarine launched missile, which goes with the nuclear capability. So the Navy is certainly not projecting itself beyond the seas critical for Indiaís security. A similar fact is true for the Indian Army and the Air Force. India neither intends nor has the resources at least for the next decade, to project itself as a truly regional power and its history of more than two thousand years bears testimony that even at its best, India has transported beyond its frontiers benign cultural or religious influence; never hostile political or military muscle. On the whole, the views expressed by the author deserve some moments of thought as they very lucidly bring out the likely scenario of geo-political power play in the first decade of the new millennium.
For more please read the full article, ĎThe Indian Dreamí by a Foreign Researcher and send us your views).