India is facing a rising, new strategic threat. It isn’t another brigade the Pakistanis moved to the LoC, or another overly dramatised missile test. It isn’t even some new incursion by the Chinese.
Three things this new threat isn’t. It isn’t military, it doesn’t come from our traditional adversaries, and it doesn’t lurk from across our borders. And here are the three things this new threat is. It is economic, it comes from within, and it threatens to ruin our greatest asset of the past two decades: Global goodwill, the rising ‘good guy’ image in the post-9/11 world, only partly because of our stability and democracy, but predominantly because of our rising economic strength.
For simplicity of understanding, see it this way: When your economy is growing at 8 per cent or above, it is a case of what you might call saat khoon maaf (you can get away with seven murders). At 7 per cent, it becomes paanch (5) khoon maaf. But once your growth is 5 per cent, you are in a dodgy zone.
This is when a rising global power becomes just another flailing Third World economy with a per capita income in that lowly $2,000 ballpark (Sri Lanka is twice this).
For about 25 years since economic reforms were launched in the summer of 1991, India had risen to be the favourite of the world, in the West, the East and in the Middle-East. India’s unique socio-political attributes, its ability to flourish with its diversity when large parts of the world were struggling with it, democracy and strategic restraint had enhanced its global stature. It reflected in the support India received during Kargil, Op Parakram after the Parliament attack, and 26/11.
The bigger strength was, however, economic. India was not only the second fastest growing major economy even in a world growing at express speed, it was grabbing global attention for its rising tech prowess, innovation, friendliness to foreign capital, stable markets and tax regime. India also drew global admiration for the way it shepherded itself out of the 2008 global downturn.
Over these years, India rose as a moderate, predictable and stable continent-sized growth island in a turbulent world, a magnet for global portfolio and direct investment. It gave big powers — including China — and their corporations a stake in India’s stability and security.
This is how a red-hot economy became India’s greatest strategic strength in a period when its military spending lagged and modernisation lost pace and direction.
Also read: India is in a ‘quasi-recession’ and growth remains elusive, report says
A growing GDP was now more powerful than all the megatonnage of nuclear weapons. If a big power invested in your sovereign or corporate bonds, the last thing it wanted was to be party to any action or policy that destabilised you. Even for the Chinese, the trade surplus rising up to $60 billion depended on a booming Indian consumer economy.
Sure, they sell India a lot of machinery, power-generation equipment and engineered goods. But which other economy had the size and hunger to swallow tens of billions of dollars worth of low-quality, almost no-tech junk they produce: Toys, slippers, furniture, parasols, gaudy veneers, agarbattis, plastic bangles, trinkets and much other junk that fills the shop shelves in middle and rural India.
This Chinese dependence on India’s capacity to import in volumes that no other economy could, vicariously became a strategic asset for India as well. Check out, therefore, China’s responses when war-like crises rose between India and Pakistan: Kargil (1999), Parliament attack (2001-2) and 26/11 (2008). Each time, these were qualitatively better and more helpful than lately. Even the 2009 tensions over the Dalai Lama’s visit to Tawang, when Manmohan Singh’s considerably less muscular government bravely stared down China, were calmed down uneventfully.
For much of the first term of the Modi government, the growth momentum was not only maintained, but accelerated after the 2012-14 stall. India benefited from it, as did Narendra Modi. His image and stature rose greatly in the community of global leaders. But he broke his momentum himself with demonetisation. India’s economic growth has been downhill since.
The big decline has come in the last four quarters and, at this point, nobody is expecting any recovery soon. This is now diminishing and damaging India’s global stature. And it reflects in many of the responses over the abrogation of Article 370. It was indeed a turning point — and provocation — much greater than any from India since the launch of the 1971 war. But the first indication of this strategic downside of our declining growth had come even before this when Donald Trump talked casually of mediating between India and Pakistan, in Imran Khan’s presence.
Trump will be Trump, but it is unlikely that he would have taken such a chance if India’s economy was as vibrant as earlier, his companies were investing and making profits rather than coming to him, complaining about Indian tariffs and loss of policy predictability. Walmart, Amazon, medical and drug manufacturers were all crying to him as India made sudden changes to its set policies, including taxation.
Today, a broken Tory government in Britain is talking down to India almost admonishingly on Kashmir, besides acting in a hostile manner at the UN Security Council. Even Tony Blair’s Labour had shown greater respect for India in the booming past. Between 2002 and 2013, there were six prime ministerial visits to India. You did, of course, expect goodwill for India to cut across party lines when an Indian conglomerate (Tata) acquired Jaguar Land Rover (JLR) and Corus for $14.3 billion and became Britain’s largest private sector employer.
All analysis is ultimately hypothetical, but you can’t just toss it because you don’t like it. Not when it is based on facts. When Trump sat with Imran at that press conference, in his uncluttered mind, India wasn’t a strategic ally, but a pesky trade warrior and irritant. On the pure strategic side, India wasn’t willing to annoy China, and its interests in Afghanistan conflicted with Trump’s.
Some repair work was done at Biarritz last month and a new trade deal can calm things down there. We will know later this month in the UN General Assembly (UNGA) week. The meeting to watch, more than Modi-Trump, will be between Piyush Goyal and his American counterpart Robert Lighthizer. And if it does restore some calm, as it probably will, our point about economy and trade being the new megatonnage of strategic clout would be made.
While the situation in Kashmir looks bad today, it isn’t the worst ever. We tend to forget even our recent past, especially if it was pre-Google. In 1991-94, popular anger, state response, repression and violence in the Valley was the worst yet. Torture centres flourished, foreign journalists were barred, encounter killings were common. Punjab was on fire too, with multiple killings daily.
This also coincided with an angry international response and India was friendless. The Soviet Union, our only ally, had just disappeared. America, driven by human rights and non-proliferation groups close to the Bill Clinton administration, was targeting India relentlessly. There wasn’t one public event in Washington where a stellar team of Indian diplomats didn’t have to field attacks over allegations of mass murder and rape as a military tactic in Kashmir. P.V. Narasimha Rao was dealing with all this quite mercilessly at home despite being friendless in the world.
The BJP will give him his well-deserved Bharat Ratna in the course of time, and please do remind me then that I had said so. But maybe not for what remains his biggest achievement: Showing us how economics is the biggest post-Cold War strategic asset. He started economic reform in the summer of 1991, markets, GDP and trade boomed, and India’s friends appeared in unlikely global capitals.
Note the contrast between the first Clinton Administration (which included Assistant Secretary of State Robin Raphel who questioned the Instrument of Accession), and the second term when Clinton declared that lines on the subcontinent’s map could no longer be redrawn with blood. If a fast-growing economy was a decisive strategic asset even in the early 1990s, a slowing one is bound to be a liability in 2019.
Also read: Fall in GDP growth needs to be reversed before it becomes a sustained downward spiral
“Impulsive”, or “arbitrary” are not desirable labels for a national leader to have. Mr Modi seems to be eager to break links with the past thinking of India’s leadership. In his attempt to look more dynamic, I hope he doesn’t end up looking merely more unpredictable. Indian economy was perceived red hot till recently, that’s true, but now there’s only one thing the world is perceiving about India : The country’s maverick leadership.
Diminish India’s stature????? 132 out of 192 countries???? oh do be objective.
Hahahaha. Journalists like Shekhar should be journalists and stop giving lectures on economy.
Old age has begun taking a toll on Guptaji.
Daily killings in Punjab between 1991 and 1994? By 1991 the violence had died down and what remained was sporadic. (And kudos to KPS Gill for this feat.)
Global support after 26/11? Yeah what? Please enlighten us Guptaji!
A sea borne invasion of India’s financial capital by Pakistani jehadi terrorists and what do we do? Nothing. Likes of Shekhar Gupta, Rajdeep Sardesai and Barkha Dutt in fact gloat in the utter humiliation and spinelessness shown by UPA.
In fact while the Jehadis were still holed up in the Taj, a whole team of FBI come to Mumbai and occupy a few floors of Four Seasons hotel — not to offer any support but to get as much info’ as they could from senior Home Ministry officials — so that the USA could be spared from such incidents.
Cowardly Hindus (the Establishment since 1947) pay too much heed to “global opinion” and “what the world thinks”.
Thank god Modi is doing what he has to do without giving a rat’s ass for “what the world thinks”.
Postscript: Guptaji, check the FDI figures. Of past year. And the year before. And last quarter (April June 2019) – up by 28% from same time a year ago. So who are these people who are investing?
I think things will get better, if we don’t go the swayam hurting way of swadeshi and other equally nonsensical nostalgia propagated by men of geriatric tendencies.
Prof PK Sharma, Freelance Journalist, Barnala (Punjab)
Economy of India is indeed ironically
” diminishing and damaging India’s stature.”
Time for pondering over and deep introspection for this hopeless state of
affairs so far as shattering of nation’s economy is concerned .
Causes are not very typical and complex to spell out !
We are ourselves to blame, none else is !
The self and party above the NATION is the first and foremost !
Then the nation is dearly paying the price for discarding the
expert advice and counsel of celebrated economists like Dr.Raghuram
Rajan, Mr.Arvind Subramanian,Mr.Urjit Patel and Mr. Viral Acharaya
at the instance and behest of those at the helm of affairs at the Centre.
Furthermore, we are not in the habit of learning from the past mistakes and
experience taking “hollow pleasure” in “denial modes ” not just on the economic
front alone but in other streams of national interest.
The” collective wisdom “and “consensual approach” on issues of national importance
are our “dear irritants ” because growth of self and party are our prime concerns.
We very richly deserve facing the music on various accounts owing to our follies,
blunders and whims ! Why should we blame our neighbours or anyone else for
the same ?
Prof PK Sharma, Freelance Journalist
Pom Anm Nest, Barnala (Punjab)
While I broadly agree with the contents of this article, I would like to differ on vital aspect. It is not only the growth rate in GDP that matters, the overall size of the GDP is also a crucial factor. Now let us consider India versus Pakistan in economic terms. As of 2019, GDP of India is around of 10 times greater than Pakistan. In nominal terms gap is wider (above 10 times) than ppp terms (below 10 times). India is 5th largest country of the world in nominal method and 3rd largest economy in ppp method. Nominal ranking of Pakistan is 43 and PPP ranking is 25. Maharashtra has GDP ($334 billion) greater than Pakistan. Pakistan’s overall budget of Rs 6-lakh crore for this financial year had a fiscal deficit of Rs 3.5-lakh crore. Its GDP has now hit a nine-year low. Despite touching a maximum of 5.8 per cent growth in FY18, its economy’s growth for FY 19 plummeted to 3.3 per cent, well below a target of 6.2% set last year, with major sectors all performing poorly. India too has a GDP growth plummeted to just 5.00%, which is cause of worry, but also take into account the base which 10 times higher. Pakistan’s budget also projected the economy to grow at a rate of 2.4 per cent in FY20, while inflation is estimated to remain between 11-13 per cent this fiscal. The inflation rate in Pakistan increased to 9.11 percent year-on-year in May 2019, whereas India has inflation under control. India spends 18% of its revenue on interest payment, while Pakistan spends a whopping 42%. It is only in defence that the Pakistan leads India. Pakistan spends 17% of its budget on defence as against India’s 8%. India’s total trade in goods with China and US in 2018-19 was $87.07 billion and $87.96 billion respectively. As per the data of the State Bank of Pakistan, Pakistan’s exports to China increased from $1.8 billion in the fiscal year 2018 to $1.9 billion in the fiscal year 2019. Pakistan is currently 56th largest goods trading partner of the US with $6.6 billion in total (two way) goods trade during 2018. Data in respect of services export is not taken into account. To conclude, while there’s little to compare when it comes to India and Pakistan – as there’s a huge disparity in terms of population and economic parameters — India is way ahead than its neighbour in terms of GDP per capita, human capital ranking, money market, tax transparency and collection, imports and exports, and trade. Why then there is a Chinese tilt towards Pakistan? Again, why there is periodic ambivalence in US approach towards India, visa-a-vis Pakistan? Yes, dip in GDP growth is a matter of deep concern. But is it the sole determinant of the foreign policy in respect of the superpowers –US and China? I doubt, very much.
Since when has pakistan become a shinning borometer to measure economic progress. Bow long will we allow ourselves slaves of this complex.
Try bangladesh and you will start to see the reality enough of this “we are better than pakistan so whats the problem”
Pramod Patil, China has a Pakistan “tilt”. Thank god for Indo-China trade, or the tilt would have been a full fledged alliance which we are eminently incapable of defending against. An increased GDP will also mean more money for military equipment which acts as a deterrent for any shenanigans. The Chinese will always play to their long term plan of being the dominant global power. Any skirmish right now will hamper that so they have largely refrained from a large scale land grab or attack. The will however align with Pakistan and side with them to keep us occupied and focussed along the Indo-Pak border. If the situation warrants, they can easily roll the north Indian plains, you only need to look at their latest equipment from stealth planes, hi tech drones, class leading tanks etc. We do not posses the economic clout to purchase better equipment and a slowing GDP will increase the gap in military strength even more.
The United States will remain ambivalent till the time we do not join a formal alliance with them. We haven’t done anything to make us worthy of support. The US wanted India to send troops to Afghanistan, we did not. We insist on purchasing weapons from Russia like the S400 which means that the US will never sell or even allow us access to their platforms like the F35. We do not agree to stationing their troops . Till the time we do not join a formal alliance with the US they will never back us completely.
1. There are many critics and independent political analysts who do not think that NDA government is capable of managing country’s affairs. Further, these critics of NDA government are ready to forget past sins, past blunders and forgive the UPA government for not doing what was necessary to boost income of farmers and ensure growth of the farm sector. 2. I find that author of this article wishes to establish a close relationship between every problem, and blame NDA government, be it the falling GDP growth rate or merger of public sector banks or prevailing situation in the Kashmir valley. That of course is understandable. 3. In this context, I am reminded of criticism of NDA government’s policies by former PM Dr Manmohan Singh. I do not think that current economic slowdown should be regarded as an opportunity to criticize BJP and NDA government. (I admit that if BJP was an opposition party, similar thing would have perhaps happened). 4. I think the way our politicians react to current economic crisis is immature and a curse of our democracy. 5. When would our politicians look at the problems of economy as opportunity to set things in order? Is anyone enjoying the economic slowdown? 6. Is it not true that the economic slowdown, which is being experienced not only in our country but also in many Asian economies, has a direct relationship with international factors, especially USA-China trade war? 7. Citizen-voters like me wish that elder political leaders like economist Dr Manmohan Singh should offer a hand of cooperation to NDA government and make concrete suggestions about ways to ensure that the country’s economy slowly but surely comes out of recessionary cycle.
Dr. Manmohan Singh has done just that. But the egoistic PM should show the sagacity to heed his advice.
There’s weight in your observations, but factually that’s not true. India’s economic slow-down is not the reason for change in Western attitude. Rather the change in Western attitude is brought about by the way this Govt went about implementing abrogation of Article 370. The act of dropping Article 370 may have been within our constitution and I haven’t heard anyone (other than of course Pakistan) questioning the legitimacy of dropping 370. The issue is simply how the Govt went about doing it. The popular western media perception that this is a Hindu Majority Govt having a fundamental shift in approach. Secondly, and perhaps most importantly, we have totally suspended communication and civil rights in Kashmir Valley, which is unheard of in Western democracies. It’s like beating your wife in kitchen and shaking hands with your neighbour to say all is well at home.
I would say that we have not yet started encountering the fallout of our economic mess as yet….that may be round the corner and in times to come.
Most commentators like the author don’t seem to get it. This is no Vajpayee’s government with bold economic ideas. This is a government headed by an extreme left wing Marxist, who makes even Communists look right wing.
Shekhar Gupta writes with a biased mind and is not objective. In the 1990s, our GDP was low and now it is much much higher now. Therefore, even at 5% growth, GDP is growing at much faster pace than during 1990 onwards.
A very fine quote : The human mind cannot be shrunk to its original size once it has been stretched over a new idea. 1991 showed Indians that a much better standard of living is possible for many of them. Very difficult to make the case, almost thirty years later, that our potential has withered on the vine, we are back to being like that only.
We seem to be losing on both fronts. During the years of Hindu rate of growth, India was genuinely respected globally for making a success of its democracy and pluralism, despite so many constraints. From 1991 onwards, the economic potential of a famished tiger being let out of the cage has raised our importance and utility to the world. So when we have begun to regress so visibly on preserving the Idea of India and the economy is turning so limp, expect a One Two punch from the global community. I would say India needs to get back its zing on both fronts. 2. After 1991 – 94, what the Editor calls the Haider years, should we really have opted for Shock and Awe as the basic approach to Kashmir …
Down with Socialist Bharat and her impotent economy.
The last line of the article is indeed true in the sense that a decelerating economy is a strategic liability as an accelerating economy an asset. Modi has neglected economy and allowed his deputies to run it which has resulted in various issues. A few things are elementary- 1. We have biggest trade deficit for years with our number one enemy, China and we have not done anything about it. 2. If Modi decided to do something on his own, he as a clever strategists, would have sensed that to tackle China, Indian manufacturing must be made globally competitive by slashing tax rates (while improving tax systems and administration), improving infrastructure and generally making the government business friendly. It would mean much higher fiscal deficit as Modi cannot reduce his social expenditure and accepting it as a problem to deal with for its consequences rather making fiscal deficit management as a primary policy focus, as done by Jaitley and Sitharaman. Government coffers will start filing in soon enough as economy grows and fiscal deficit will disappear. 3. Rest of improvements in ease of business would have naturally followed from these basic thinking. If Modi could do demonetization (or for that matter, Surgical or Balakot strikes or abolition of Art 370), managing economy is hardly an issue for him. Probably, no one has briefed him up on this in this simplistic manner! Or we now need a ‘Amit Shah’ as Finance Minister!! ( We can’t let Home Minister Amit Shah to go anywhere else; he has many more things to do- Ram Mandir, UCC, Police Reforms, Legal system reforms etc etc.). By the way, Shekhar is exaggerating in his article; he wants to convey somehow that Kashmir is not wholly accepted by the outside world- But who cares Shekhar? One deal with Trump and the dog will start wagging his tail again!!
If a briefing in ” such a simplistic manner ” would solve India’s economic malaise, the answer is staring us in the face : You should be appointed CEA with Cabinet rank.
The answer is less governance, not more. A leader, who understands that will make institutional changes that makes the life of a citizen easier.
No businessman wants a government monkey sitting on his shoulders telling him what to do and worst, stealing his money. Trust your citizens and give them the breathing space and liberty to attain excellence. Leash your baboos and lessen the regulations and the mountains of useless paperwork. The lesser a government intrudes in a citizens life, the more prosperous the country will be. Reduce interactions between bureaucracy and citizens. Digitize government records and transactions. Make the governing process transparent.
Make the Judiciary accountable to the common man. Bring legislative changes to the business rules governing the baboos and the judges. Reduce their retirement ages and flush the government with much young blood and vigor. Inspire and Lead!
Comments are closed.