New Delhi: When it comes to the Indian growth story, there are two things, according to global media, that are shaping it—Adani and China.
Let’s take China first. Rather predictably, Global Times in an opinion says New Delhi needs to be taking India-China ties more sincerely. Doubts have arisen in China, the piece says, about Indian sincerity towards improving its relationship because of India’s tenuous current position in the West over issues like “democracy” and “human rights.”
“Given India’s previous inconsistencies in its policy toward China, these doubts are not without merit,” the piece says. India needs to eliminate “erroneous concepts” like the need to counter China, or the inevitability of war.
It goes on to list three areas of improvement in India’s policy towards China: domestic public opinion, an overemphasis on security and not on economic development, and barriers in people-to-people exchanges.
The writer of the op-ed is of the opinion that domestic public opinion is too skewed away from China, and the Indian establishment needs to be doing more to “properly guide rather than manipulate public sentiment when issues arise in bilateral relations”. Think tanks and media outlets have “poisoned” public perception against China by creating a “China threat”—and that needs to change, apparently, because trade and economic cooperation should take precedence over issues of security. Never mind that there are actual border encroachments taking place—India needs to stop practicing “discriminatory economic and trade policies against China” as a way to get back at China.
“Actions speak louder than words,” the op-ed generously concludes. “We hope that India will quickly take concrete and positive actions on various issues related to bilateral cooperation, truly working to thaw the relationship between China and India.”
The Wall Street Journal offers another viewpoint—one in which India absolutely does have a Chinese threat to counter. If incoming American president Donald Trump makes good on his promise to levy high import tariffs on Chinese goods, then India stands to gain a lot: but first, it must “get out of the way of its factory owners.”
In a report on how India has done very little to clear hurdles for labour-intensive manufacturing, the WSJ takes the example of the garment industry, in which India should have an edge. However, annual apparel exports have declined more than 11 percent compared to a decade ago. In the same time period, Bangladesh saw a growth of over 50 percent.
Bangladesh and Vietnam are the two top choices for the China+1 strategy as the Chinese share in global manufacturing exports declines. India doesn’t even figure in the top 5, the WSJ reports.
The WSJ lands on stringent regulations as the cause for holding India back: it’s keeping companies from expanding, apparently. The question of labour rights—and what the government is doing to protect them—is painted as a headache and the reason why India isn’t surging ahead of countries that seem to allow exploitative practices.
The piece does talk about how the Modi government planned to overhaul the labour code and loosen laws—including allowing firms employing upto 300 workers to fire workers without government permission—but says pushback from labour unions have stalled the process.
“Manufacturing firms in India said they are wary of operating large factories because of the power of organised labour,” the piece says. Plus, “India’s failure to sign free-trade agreements with other countries that would slash tariffs on its exports has also made Indian garments increasingly too expensive for global retail companies.”
This has meant that Indian retailers and manufacturers have shifted production and sourcing to Bangladesh, leading to a jump in apparel imports. But manufacturers expect “Trump’s election—and political unrest in Bangladesh which ousted its prime minister in August—to provide opportunities to larger apparel makers”. India can still get ahead of China, if only it figures out its labour problems.
The spectre of Trump still lingers over India and China relationships. Academic Walter Russell Mead writes in the WSJ that “a strong U.S.-India relationship is both necessary and problematic. Only America can help India keep China on its own side of the border, but America is a difficult friend.”
Mead visited Tawang as part of a delegation organised by the Hudson Institution on an invitation from the India Foundation, which is close to the BJP. It might be far-flung and remote, but Tawang is where “the promise and complexity of the U.S.-India relationship are easy to see”, writes Mead.
The threat of Chinese incursion into the region has drawn India closer to the US. But religious tensions—like the major proselytising that Christian missionaries do in the region—and the difficulty of defending the northeast without access to Bangladeshi airspaces complicates things for India. An American hand is seen behind both: American ideas about religious freedom and accusations of America meddling in Bangladesh are both irritants in India.
“In New Delhi and Tawang, Indians mostly cheered Donald Trump’s election. They hope he will give India the support against China it seeks without making a lot of noise about human rights,” Mead writes. “We shall see.”
Which brings us to Adani and the billionaire boys club, and the inconvenient timing of the American justice system investigating the Adani Group.
To start, the Financial Times has a story on Kenya’s jubilation over cancelling the proposal for the Adani Group to expand its international airport and invest in its power sector.
“Kenya’s decision underlined the global ramifications for Adani’s companies after he was indicted for allegedly overseeing kickbacks to win business in India,” the FT reports.
The Adani Group’s expansion into Africa is seen as part and parcel of India’s geopolitical ambitions, but investing in Kenya was like kicking the hornet’s nest after massive protests against Adani’s involvement took over the country in July.
“Modi urged Indian corporates to become ‘multinational’ soon after taking office in 2014, although Adani has always denied receiving preferential treatment from the government. India sees opportunities for its companies from Africa’s natural resources and growing population,” the report says, listing Adani’s investments in other countries.
But the scandal also creates problems for India’s own domestic growth.
“The allegations validate foreign investor perceptions of the difficulty of doing business in India and how a few politically connected players can allegedly game the system,” Bloomberg says in its latest India Edition newsletter.
Foreign investors are warier than ever about fresh projects in India. It’s undeniable that India’s massive growth in the past 10 years has been supported by a “fivefold increase in infrastructure investments by the Modi government.” One of the best successes of this expansion program has been the solar energy sector, and Bloomberg believes that this sector will be impacted the most by the Adani bribery scandal.
“First, the solar sector’s bidding processes and economics will come under additional scrutiny now that US agencies have alleged that officials of Adani and Azure Power offered bribes to various state governments to purchase expensive power after having overbid to bag 12 GW projects from Solar Energy Corporation of India,” the piece says.
Second, the involvement of Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ)—a major investor in Azure Power—shows that even Western institutions are caught in the mess. Funds are likely to side-step India, even as markets in the US look exciting.
But keeping foreign investors back will also be hard: the government “will have to fix the reputational damage while protecting one of its so-called national champions.”
Reuters worries that Indian businesses will learn the wrong lessons from Adani. “Corruption’s long history in India explains the country’s failure to live up to its growth potential,” the editorial opens. “The danger, however, is that businesses learn the wrong lesson from the affair and grow warier of international capital markets rather than cleaning house.”
The problem, as Reuters sees it, is that corruption tends to “evolve” rather than disappear in fast-growing economics. “The scandal shines a light on a reality that many global companies would rather ignore. India’s $3.9 trillion economy, with its low $2,700 GDP per capita, is full of promise but also a difficult place to do business, like many other developing markets,” the piece says.
And routing out corruption should attract more FDI, but instead, “authorities know that going after big targets in any crackdown could have a shorter-term economic hit.”
“Ultimately, Adani’s use of U.S. debt capital markets exposed him to the long arm of the Justice Department, which doesn’t mind ruffling feathers of Washington’s diplomatic friends and foes alike,” the piece concludes. “The message Indian tycoons are hearing loud and clear is clean up fast or curtail your international ambitions.”
Also read: Is having an India connection an advantage or a liability? Global leaders are divided