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Even before the coronavirus pandemic swept through the country, India was at a crossroads. Its sustained economic expansion, accelerated by pathbreaking reforms in 1991, slowed significantly. Convulsions around religion and citizenship roiled domestic politics under Prime Minister Narendra Modi. Meanwhile, the aspirations of international leadership that India has harbored since independence remain unrealized.

For all its recent shortcomings, however, India should not be counted out. At a time when China’s myriad pathologies have left many countries thirsting for an alternative exemplar, India could again become the world’s fastest-growing free market democracy. But it will need a new approach to revive its hopes of joining the league of great powers. 

Can India grow fast enough?

India’s economic growth has contracted since 2018, alongside a larger global slowdown driven by falling commodity prices, declining international trade, intensifying U.S.-China tariff wars, and decreasing manufacturing output across the developed world. If these cyclical factors alone accounted for India’s weakening performance, New Delhi could get by on provisional remedies while waiting for global conditions to improve.

The unpalatable reality, however, is that the Indian economy’s structural weaknesses intensified these cyclical headwinds. Investments slowed because heavily indebted Indian companies left India’s major public sector banks saddled with huge nonperforming loans and other Indian financial intermediaries fell victim to bad investments, thus bringing credit expansion to a halt.

The resulting contraction compressed consumer spending at a time when the global slowdown was also pushing down exports. Additional government spending could not compensate because falling revenues and the costs of debt restructuring had aggravated the government’s fiscal burden. The coronavirus pandemic only intensified this problem, forcing the Indian government to expend resources to save lives and livelihoods at immediate risk.

While all these challenges contributed to India’s recent drop-off in growth, they do not sufficiently account for it. The deepest underlying cause—one only now receiving a serious response by the government—is India’s failure to complete the program of reforms begun in 1991, which liberalized commodity prices, removed production constraints, and reopened India to international trade.

Those measures did not do enough to subject land, labor, capital, and enterprise to the rigors of a genuinely free market. The necessary follow-on reforms on this count were put off—largely out of fear that voters would penalize political leaders for the difficult decisions involved, after having come to view high growth rates produced by the initial reforms as a new birthright.

The consequences have been onerous. Acquiring land in India today, for example, remains an arduous and distasteful enterprise that deters all but the most intrepid or the most corrupt. Labor in the organized sector can be hired but not fired, because current law is indifferent to market conditions and firm needs. Labor productivity growth in the informal sector—where most Indians are employed—is abysmal. India’s public sector banks dominate the nation’s financial capital, directing it toward the wealthy and the powerful often at the government’s behest with limited regard for viability. And red tape, corruption, arbitrary taxation, and unpredictable policies continue to sap both foreign investment and domestic entrepreneurship.

Even as India struggles to reform these conditions, it has focused more resolutely on expanded distribution rather than growth. To attack inequality, the Indian state has tried to provide the disadvantaged segments of its population with subsidized food, medical services, electricity, and cooking fuel. These are commendable initiatives, but they ultimately must be paid for through accelerated economic growth. Yet this is precisely where India has faltered: without the structural changes that deepen markets, improve regulatory capacity, and expand human and physical capital through targeted investments, India will struggle to regain growth rates of 7 percent and above—the minimum level necessary to sustain its development and its great power ambitions.

Modi’s government has initiated important reforms under the pressure of the coronavirus crisis. Modi has encouraged states ruled by his party to institute land and labor reforms, even as the central government has begun to transform policies for agriculture and other industries to attract investments leaving China.

Whether these efforts will produce lasting success, only time will tell. But India historically has only pushed forward with reforms when its back is to the wall—and, today, it is. Between the coronavirus pandemic and the heightened security threats from China, India needs to revive its economic growth in a hurry. The current crises may tip the balance in favor of the decisions necessary to free up the country’s substantial untapped capacity and master its myriad challenges. 


Also read: Lesson from Ladakh — India & China were both rising together until China just raced away


Can India play a meaningful global role?

India’s economic performance remains its best instrument to shape the international system. But its role in international trade, its defense investments, and its conception of the global order also affect its rise to power.

The coronavirus pandemic has unfortunately added momentum to the backlash against international trade, but jumping on the protectionist bandwagon in pursuit of self-sufficiency would provide India only illusory benefits. There is no way that India can reach its ambitious growth goals without expanded exports, which have recently been the fastest-growing slice of its economy. Those exports often depend on foreign inputs and cannot be sustained if India suppresses imports through higher tariffs, localization requirements, and other trade barriers. Rooting for trade expansion—at least among friends, if not beyond—offers the greatest opportunities for Indian leadership and revived growth. But New Delhi’s inability to conclude even a modest trade truce with the United States, let alone integrate itself into the wider Asian economic system, is not reassuring.

Defense investment presents parallel challenges. India’s slowing economy has constrained its defense spending—especially planned expenditures on modernization—at a time when frontier security remains a major preoccupation. Any state seeking to become a great power, however, must influence outcomes beyond its immediate borders. Yet the economic downturn has left India without the necessary resources to expand its reach. Now that Chinese military assertiveness along India’s borders promises to bring new troubles, the financial constraints on India’s defense modernization could prove especially costly.

The persistent obsession with indigenizing defense production will not help matters either. The belief that a country of India’s size should not import advanced weapons extensively is driven by sentiment at the expense of rational calculations about domestic capacity and economies of scale. Instead, India should import as needed to equip its military with the best operational capabilities while nurturing the development of critical components, subsystems, and technologies that can be integrated into global defense supply chains. This strategy offers better prospects than self-reliance for both securing cutting-edge technologies and stimulating domestic manufacturing.

In recent years, India’s deepened strategic engagement with partners such as Australia, France, Israel, Japan, Singapore, and the United States has given it more room to play on the global geopolitical stage. Through better access to more advanced technology, increased exercises with highly proficient foreign militaries, and greater diplomatic coordination with other regional partners, India’s influence continues to enlarge, making it a stronger counterweight to troublesome challengers such as China.

Ironically, India’s economic weakness has diminished its capacity to control its own neighborhood even as it has fortified other global ties. And New Delhi’s policies on global issues such as data management, international trade, and sometimes even religious freedoms put it at odds with its Western partners, reminding the world more of India’s extant infirmities than of its growing strengths.

India’s own conception of global order—centered on preserving a diverse, nonviolent, nondiscriminatory, polycentric state system—is not inherently incompatible with liberal internationalism. Consequently, there is no reason why India should not defend the liberal order more vigorously, both at home and abroad, despite its colonial history and its occasional disagreements with the West on norms such as the “responsibility to protect.” 


Also read: How India’s liberals and opposition can start winning the battle of ideas


Can India remain a liberal democracy?

Unlike China, India has seen its rise widely welcomed: it proved that rapid growth could occur even in a liberal democratic society marked by sharp demographic heterogeneities and severe developmental challenges. In fact, the United States and many other Western powers jumped at the prospect of aiding India’s ascent, presuming that it would not misuse its power against its own citizens or its neighbors.

Yet a recent wave of policies widely perceived to be illiberal has eroded this confidence. Critics within and outside India point to many developments such as the revocation of Jammu and Kashmir’s autonomy, the passage of the Citizenship Amendment Act, and the possibility of implementing a National Register of Citizens as evidence of a weakening commitment to liberalism. The government’s defenses of these moves have not satisfied India’s minority groups or others concerned about India’s direction. But more than government policy is at issue here: key Indian institutions are weakening dangerously, and important segments of the population appear disenchanted with their country’s liberal inheritance.

The community of liberal democracies internationally stands to lose if domestic unrest fueled by confrontational politics stymies India’s growth or if India enlarges its material capabilities only by sacrificing its liberal character. Either outcome would dilute the West’s eagerness to partner with India.

To be sure, India’s relevance in the Indo-Pacific will survive, thanks to the exigencies of balancing China. This ensures continued engagement by the United States and other powers, but a constrained acquiescence to partnership is a poor substitute for the enthusiastic boosting of India that would otherwise occur if its liberal credentials were not contested.

For all its difficulties, India is by no means out of the great power game. It possesses vast and still largely untapped potential. But realizing that potential will require New Delhi to deepen its economic reforms in order to expand its national power, use that power to strengthen the liberal international order in partnership with its fellow democracies, and remain a credible example of how liberal politics can advance development in large, diverse countries outside of the West. On each count, India will have to meaningfully correct course if it is to achieve these ambitious aims.

Ashley J. Tellis holds the Tata Chair for Strategic Affairs and is a senior fellow at the Carnegie Endowment for International Peace, specializing in international security and U.S. foreign and defense policy with a special focus on Asia and the Indian subcontinent.

This article was originally published by Carnegie Endowment for International Peace. 

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28 COMMENTS

  1. Some of the Hindus here write that the CAA-NRC was a humanitarian gesture on behalf of suffering minorities in Pakistan. It was not. The CAA was brought in after the first attempt at NRC in Assam ended up with the embarrassing result of more Hindus than Muslims declared as non-citizens. If the excercise was repeated elsewhere, the outcome would be the same. Then Shah hatched up the CAA, which excluded Muslims. When the CAA is combined with NRC, the Hindus who did not have papers could claim entrance through the CAA – but Muslims would not be able to do so. Then the concentration camps being built would be for Muslims, and Hindus will feel alright with that.

    Of course, most Hindus will go along with CAA-NRC and believe it is a humanitarian gesture. However, in the west, they see the parallel with the Nuremberg race laws of Hitler which was the prelude to the concentration camps. That horrifies people in the west. There is a video by comedian John Oliver explaining the CAA-NRC very clearly, and my advice to Hindus is to watch it. Then you will realise you can fool yourself, but not the west. Several US city councils have passed resolutions condemning CAA-NRC.

    Watch this year’s BBC interview of Ram Madhav and questions put on Golwalkar’s admiration of Nazis. There was the earlier interview where Mehdi Hassan of Jazeera bamboooed Ram Madhav over the RSS.

    Take the recent attempt to give an alternative news on the Delhi pogrom organised in Feb 2020 by the RSS-BJP. Bloomsbury India’s Hindu editors passed the story for clearance. There were protests at the attempt to whitewash genocide. It came to the attention of Bloomsbury UK, the parent company. They immediately realised it would be damaging to them, and they squashed the publication. The westerners are becoming aware what is Hindutva, and its Hitlerian connections, so my advice to Hindus is not to fool yourselves.

    Hence, what the author has written is correct : if India continues with aggressive Hindu fascism, then the west will be a less eager partner. People realise Hindutva is Nazism, Hindu style, and that is a big ‘no no’. The author realises that.

    My advice to militant Hindus is you cannot have your cake and eat it : that is, beat up minorities in the Hitlerian style and expect the world to agree you are the victims.

  2. The author has given gentle advice to Hindus, in a very polite and politically correct manner. As can be seen here, most Hindus do not receive the criticism of their fascism kindly. They feel they are the accused whereas they think Muslims should be the ones the west should be accusing !

    My advice to Hindus will be as usual, not soft or politically correct !

    Yes, you can say west has no business to advise on liberalism and they have always had business deals with non-liberal regimes. So India can tell them to go to hell with no consequence.

    However, that works if you have a strong manufacturing economy like China’s or you have some essential raw material like oil or energy source. Even then, it is a temporary arrangement. In a BBC discussion, when the relationship between west and Saudi Arabia was discussed, a Dutch panelist said ‘they are our friends, though they are not the friends we would want’.

    Now India does not have a strong manufacturing economy, nor is it a supplier of oil. What does it have ? It is a largely agricultural country, which transitioned partly to a service economy, with little manufacturing, It is a large market for the west – which is an opportunity to sell goods. But it depends on the locals having jobs and purchasing power to buy foreign goods. That is not the case after 2014. The economy shrank progressively after 2014, especially after demonetisation. Covid has taken it to -25% growth. India is also among the top shoppers for arms – but that impoverishes, as it is money going out.

    With the above negative combination, you add lynchings, mob rule, pogroms, laws that discriminate (reminding westerners of the Nuremberg race laws), beat up students, infiltrate universities….. then people will shy away.

    From about 1995 to 2014, the west started changing its image of India in the positive direction. There were articles in The Economist, Time etc. speaking of India in glowing terms as the next Asian Tiger. Unlike China, for the west there was the possibility of a country with a large market where they could combine trade and liberal values.

    But due to the Hindu ultra nationalism, the author is right : India appears like an elected autocracy (Mahua Moitra), not a liberal democracy. Hindus also need to realise that the outside world is slowly getting to know Hindutva is fascism, and some of them know what is RSS. I scour the western papers : The Guardian, Independent, WP, NYT, The Economist, Time, WSJ, BBC etc. and now I see only articles that describe India as a failing state. The same people 10 years ago had written with admiring hope about India. Gone are the days when Thomas Friedmann and Fareed Zakaria wrote eulogies about India. There is a BBC interview from this year where Ram Madhav was asked about the RSS’s ideology and statements supporting Hitler and Nazi style policies for India.

    So, Hindus you have messed it up for India with Modi ! It was foolish to think a chai wallah and genocidist with a forged degree would take India up. ,No point raging, get real with reality. There is karmic payback for wickedness. Of course, we are stuck with Modi for years to come, but prepare yourself for India’s decline and do some soul searching.

  3. So if we go by Ashley J Tellis’ reasoning, India was extremely liberal four-five decades ago and has lost its liberal characeter recently- then pray tell us why did the West and the US opppsed India in the sixties, seventies, during the Indo-Pak wars?
    This article is, plainly speaking, an attempt to use some biased narrative to further the West and US’ agenda- Indians are only asserting themselves under this government, because they have been pushed around too long both internally and externally. All countries are trying to maiximise their gains- the West particularly has been oppressive at this as the world’s experience in these past decades and centuries show. So, let us not try and get some brownies from them and learn to stand on our feet.

  4. Ashley Tellis has informed India and indeed much of the world that according to him – the West is merely a liberal orthodoxy cloaked in a democratic facade. Apparently idealogical dogmatism to leftist liberal crusades is the only criteria for Western favor – not the actual idea of self actualization and political sovereignty that true democracy affords.

    It is curious to note that while Ashley edifies us about our deviation from the global liberal project, he makes no mention of the political expression in the US of A that has chosen a decidedly illiberal President backed up by ostensibly illiberal policies. Is America now also “excommunicated” from the Western Church of Liberal Utopias?? Tellis should let us know…

  5. Strange that India is Anti Minority Country? Muslims from Myanmar, Bangladesh and even Pak ‘rushing’ to India? Entire Muslim anti CAA movement was on this demand that Muslims from everywhere must be freely allowed in India. Again Strange that No Indian Muslim wants to go to Pak though this South Asian ‘landmass’ was divided into 3 parts two for Muslims and 1 for rest. Not only this they (genuinely) get angry if they are asked to go to Pak. Strange again that this persecuted minority increases from mere 9 % to 17 % population of that “persecuting” country? There is subtle demand again for a Muslim landmass called “Urdustan”? Strange again that they say persecuted minorities from religious republics must not be allowed here. What do you call this “PROJECT”? West is forcing India to become like CHINA?

  6. if indeed , what the writer says is true, then China would not have become the economic superpower that it is now, inspite it being an authoritarion country……it would have become a pauper… Its a question of MONEY… HONEY……. most important India does not need any certification from any country about it being LIBERAL or otherwise….. We are what we are… Warts and all…..

  7. If India keeps diluting its liberal character, the West will be a less eager partner.
    A classic case of irrelevant write up for a predetermined narrative.
    Other than the mention of 370-35A and CAA which has nothing to do with external partners the article under the ” diluting its liberal character” writes about everything which has nothing to do with headline.

  8. Ashley J Tellis is ‘Aunty’ National. I am a 60 year old uncle who has completely rigid and stubborn views and will never allow anything to even remotely question my beliefs because then that’ll show how insecure and hollow I am. (even though admitting that issues exist will make everyone’s life a lot better and would also mean that I am open minded enough to incorporate facts as they change in time)

  9. leftists and communists from all over the world to change India into a communist state under Muslim rule, silly communists forgot one thing, even though Christians, Ahamadiyas, Shias and communists supported for creation of Pakistan, they are the people first wiped out from Pakistan.

  10. I so agree with the views of the author! We should be progressing with time, not regressing into illiberal, undemocratic thinking and behaving. It is imperative to keep the democratic spirit of our constitution alive! Let’s all work for that! Rise above narrow communalism, patriarchy, casteism and think and behave like citizens of a democratic country! ALL of us!

    • and we are. the political landscape has now changed from muslim hindu to development. Its just a matter of toys being taken away from children. Also CAA was aimed at minorities in the first place. Not Indian but Pakistani ones. Our country staunch liberal approach is degrading. Those who fled to the streets were hailing constitutions article 14 without knowing what it is cause of ignorance during their civics class. They talk of rights while forgetting about fundamental duties such as not mobilizing riots. The whole CAA drama was whatsapp fake news drama.

  11. If you know nothing about CAA, please read it. Don’t mislead people.

    Non-Muslims in Pakistan face huge discrimination due to their Religion. CAA aims to give these religiously-oppressed people Citizenship in a fast pace, i.e., in 5 years (the regular is 11 years). What is the logic behind asking the same fast-paced approach for Muslims too, who are the Oppressors?

    For everyone else, including Muslims, the regular Citizenship Rule is 11 years of uneventful stay in India. Remember, Adnan Sami was a Pakistani Muslim, who got an Indian Citizenship after the prescribed period of stay without any wrongdoing.

    If you have the time, or care, write about the atrocities that non-Muslims face in Pakistan.

  12. When was “the West an eager partner” of India for itow become less eager? For heaven’s sake the “liberal West(?)”should stop this hypocricy and get its own houses in USA and Uk in order before pontificating about India!

  13. Well this article is case of bringing up everything except the kitchen sink. Not sure where to start to rebutt this rambling. Let’s start in 1999 or so. Despite NAFTA and EU western world under not sure influence of which weed smoked by Bill Clinton decided to promote China and Petro states under illusion that they will change a la Europe after WW2. Illusion broke after Bejing Olympics and then great recession. Obama could see it but closed his eyes in return of no active cyber attacks by China lol. In India liberal Congress government made mess of CWG and then cringed and reneging on soft promises on Indo nuclear deal. This was end of honeymoon period for India and West but Obama never told his best friend MMS. Nor did west had courage to make known annoyance via newspapers or articles. In fact Obama sold India to China , Paki and Turkey combine and it has not hit papers yet. Western world populace had enough of love of China and Obamaism this resulted in Trump and Brexit. In India liberal West was not supporting dear friend MMS due to obvious misgovernance …Modi came to power. After investing 20 years or a generation in China and petro states and almost nothing to show for except now green shoots of UAE Israel agreement…there is no appetite in West to see or support anyone’s rise including India. Hence this everything except the kitchen sink. This works well for China ….. example India lost 20 soldiers in Galwan and Chinese none ..not even injured..lol..do not believe me just check BBC, Reuters, AFP.

  14. I want to ask then how come west maintains close relations with deeply illiberal middle eastern regimes. Compare to them, we are amateurs. So stop pushing this bullshit.

  15. The Western powers have never had any moral compunction when it came to worst forms of dictatorships and authoritarianism. For example, Saudi Arabia, Pakistan. Even China till a few years back.
    The Western “powers” never ever put any conditions on these nations while collaborating with them. In fact, they quite shamelessly aided these nations in many of their nefarious activities. Eg. The US/UK stoutly aided and defended Pakistan when it carried out the genocide in East Pakistan.
    So this talk of Western powers putting pre-conditions for collaborating with India or any other nation is utter gibberish.
    The author rather comes across as a member of the liberal/secular fraternity bent on preaching and pontificating.

  16. West has lost its clout over whole world.It can threaten a largest democracy but it is afraid of largest dictatorship.It could not post the cost on the China of economic loss due to corona virus all over the world.It could not stop spreading narcoterrossim in many countries by a small country Pakistan.But it has capacity to threaten India of dire consequences for stopping those people who threaten to break it.It is India who has stood like a wall against China.Has all the west got that courage.Big No.

  17. West never really helped India to the extent it did for China rise without liberal expectations.
    India is not obligated for any notions of democracy west wishes to impose while constant blame game when it comes to significantly helping India on economic front. Look at EU FTA, US actions on trade, poor interest of Japanese investors to help India on supply chain issues. EU has been a bully. They engage in capturing Indian generic drug exports.
    West should get its act on economy then talk democracy.
    It’s unfortunate when Tata chair person talk this.

  18. A lot of BS in this article. The West has begun to grudgingly acknowledge India. It has never been welcome, the WEST has been an ANTI India-Pro Paksitan crusaders for most of India’s post Independence era. This Anti-India tirade still continues. Why is India not part of UNSC? Why is India having such a hard time with the NSG? All this despite WEST jumping with Joy at India’s emergence? Who is the Author Kidding? This is again the typical Western Euro Centric Perspective. We will do without you Thank You Very Much!!!

  19. Ashley J.Tellis, you are spot on as far as Economic Liberalisation is concerned. Whatever you had mentioned is either sanctioned by the judiciary or is considered important for Indian security.

    As far as Indian liberalism is concerned, I guess you getting old and forgetting the facts of 80’s and 90’s. China, unleashing repression against it’s own populace did not stop you and your countrymen + west profiting from them.

    Mr.Tellis, would you stop visiting China since we know that there are concentration camps in Sinkiang??

    West included Turkey in NATO even after Armenian genocide and threw it away from EU saying it is too islamic. Your president us the foremost Islamophobic.

    We can go on and on and on. Now I know why S.Jaishankar shies away from an alliance with the west and proposes a multipolar world.

    A world with west as it’s only anchor stinks too much.

  20. Utter nonsense! Was Pakistan liberal when the west became its allies? Provided them huge arms & ammunition, state of the art jets. The US was ready to bomb us when we were supposedly “liberal” in 1972.? West is also a partner with very liberal Saudis and UAE. Fresh out of fucks what the West thinks of India!

  21. HaHa. Nice one. When has the West, as in the US and UK ever supported liberal democracies. The support was always for those who fell in line with their policies be it Pakistan or China. Make no mistake both countries have been propped up by the West as bulwarks against the Soviet Union. The truth is that the ‘liberal’ West finds it far more convenient to deal with dictatorships and autocracies even if they kill their own citizens as China did in Tianamen square. Apartheid state South Africa had the UK as it’s biggest benefactor despite discriminating against a large section of it’s own population. So much for the author’s arguments.

  22. Yes, the west went and me friends with China and created this monster. That time India was a liberal democracy, right? How come no one cared? How come west were buddies with Pakistani army dictators? Or African ones? Lets be fair ,if you are not white or rich,the west does not care about anything but their interests. But frankly lets not make a big deal of it

  23. It is ironical that this article was published on a day when India reformed it’s labor laws and 2 days after India reformed the farm laws. Reform on land and capital coming up in the next session of parliament.

  24. Gone are the days when gori madams and sirs would tell Indians what is good for India and Indian politicians with zero self esteem will oblige.
    And as regards West, they will partner with anyone for their self interest. No need to mention that west already has cordial and strategic relationships with some of the most oppressive regimes on Earth.

  25. What illiberal policies are you talking about? Don’t take Hindus for granted. Hindus have seen most liberalisation in the last 100 years. Turn your attention to non-Hindus. Give benefits of secularism to Hindus too, and prevent undue attacks on Hindus in the name of liberalism. Check Islamist ideology. See what’s happening in Sweden. That’s not liberalism.

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