LIKE
it or not, India is rapidly getting integrated to the global economy –
which requires all of us to consider a deeper strategic and geopolitical
view of the world.
As we gradually move into the new year and plan where
we will be relaxing, George W. Bush is steadily preparing for his second
term. China is forging ahead to be the prime power of Asia. After Beslan,
Vladimir Putin is setting the stage for a more centralised, politically
powerful and economically significant Russia. Continental Europe is economically
floundering, with little or no sense of political unity. Amidst unparalleled
violence, Iraq attempts an election in January 2005. Yasser Arafat is
dead, with no succession plan in place. Iran and North Korea want to join
the nuclear club. And nobody knows what Osama bin Laden will do next;
indeed, General Pervez Musharraf has even gone as far as to say that Pakistan
doesn’t even know where he is.
There is an alleged Chinese saying, ‘May you live in
interesting times.’ Today, it takes on even greater meaning.
Traditionally, most of us Indians are insular in our
world views. This is partly due to the sheer size of the country and its
relative lack of integration with world markets. It is also cultural and,
I suspect, arises out of a Brahminical epistemology, namely, ‘We are the
font of all wisdom, and what we don’t know, we don’t need to know.’ This
position is no longer tenable. India is getting integrated, and it behoves
of us to consider a deeper strategic and geopolitical view of the world.
In this article, I shall try just that – to present some issues that we
as a country should be thinking of as we engage a wider world. In doing
so, I shall focus on the US, Europe, Russia and China. Thereafter, I will
try to interpret the geopolitical changes in terms of what they may mean
for India’s economic and political strategy.
The best place to begin is the US. For one, it is the
most powerful nation in the world. For another, having won by a margin
of over 3.5 million votes in what was the largest turnout in US elections,
President Bush has, in his words, ‘earned some political capital’ and
he ‘intends to use it.’
Geopolitically,
the big question is whether George W. will behave like a triumphal President
who interprets his mandate to determinedly – almost unilaterally – put
in place a new moral vision of the US in the global arena; or whether
he will use his last four years in office to fashion a more inclusive,
participatory and, therefore, more workable world order.
Some of
the answers will come from the shape of his new cabinet. Colin Powell
has been replaced by Condoleezza Rice as the Secretary of State. While
it would be wrong to think of Condi Rice as an unmitigated hawk in the
mould of Dick Cheney, Donald Rumsfeld or Paul Wolfowitz, she is undoubtedly
far closer to a Bush vision of the world than her predecessor at Foggy
Bottom. Bush is exceptionally close to Rice, and she has a very special
bond with the President.
This symbiotic
relationship can cut both ways. On the positive side, one should expect
far less friction between the State Department and the Oval Office; indeed,
the State could easily serve as the extended administrative arm of White
House’s views on foreign policy. The negative is that, faced with Bush’
preferences, Condi Rice may not be too keen on marshalling sufficient
counterfactuals, especially in scenarios where such counter-evidences
matter in developing more nuanced positions.
From
India’s perspective, the loss of Richard Armitage is more significant.
He was not only very familiar with the subcontinent but also more sympathetic
to a secular country with a billion plus democracy over an Islamic military-led
dictatorship. Given the extent to which South Block views our foreign
policy with the US through the prism of Pakistan-US relations, Armitage’s
demise is going to be an issue. As yet, we don’t know who his successor
will be. Nor do we know what role will be played by ex-Ambassador Bob
Blackwill in Bush’ second term. What we do know is that in the wake of
General Musharraf’s seemingly successful recent visit to the US, we will
have to work overtime to create a special niche for ourselves at the State
Department, the National Security Council and the White House. In this,
we will need all the help and advice that we can get from friends of India
such as Blackwill or Richard Haas.
On the topic
of creating special ties, it is fatal to downplay the role of personalities,
their body language and their energy levels. This is particularly true
of the key people in the new Bush administration. Either they like you
as a ‘regular guy’ or they are suspicious of you irrespective of what
you do. Here, it is well worth thinking whether Foreign Minister Natwar
Singh has the personality to impress and create a bond of friendship with
Condi Rice, her Deputy Secretary of State, the new NSA, or others in the
White House. I could be totally wrong, but the impression I get of Natwar
Singh is that he is a protocol-driven, hierarchy conscious, somewhat testy
man, without sufficient charm and ease. If this is true, then it won’t
go down too well in the new Washington dispensation, where it pays to
be a ‘regular guy’.
Equally,
we need to think of whether our envoy Ronen Sen – a fine gentleman – will
have the energy and drive to play the bridge-building role that Naresh
Chandra did in the wake of our nuclear explosions. Chandra and Jaswant
Singh spent huge amounts of political capital, personal charm and goodwill
to rebuild ties after relations had hit rock bottom in June 1998. The
phenomenal political, economic and strategic turnaround that one saw between
then and pre-9/11 had much to do with their diplomatic initiatives, as
it did with Strobe Talbott. I’ll come back to this issue in the last section
of the article.
As
it stands, it looks like Donald Rumsfeld will remain at the Pentagon for
at least the next eighteen to twenty-four months, and so too will his
key team. Dick Cheney, of course, will continue as Bush’ closest confidant
and strategist. Without Powell’s apparently more sobering influence, and
with the State Department being in greater sync with the White House and
the Pentagon, could we be seeing an even more Crusader-like Bush in Iraq?
Somehow, I don’t think so.
The last
thing Bush wants is to have his armed forces stuck in Iraq for the next
four years. Therefore, my guess is that his Iraq agenda will be as follows:
first, ensure that the 30 January 2005 election happens on time; second,
accelerate the process of training the Iraqi security forces – not to
any US-certification, but to a base level of acceptability; third, announce
a pull-out date which should be the end of 2005 or early 2006. End-2005
is better, for Bush can then say that he brought the men and women back
for Christmas. All this won’t translate to an Iraq which can be a shining
beacon of western democracy, but it will allow a planned disengagement
and permit the US to claim to have achieved all its pre-stated objectives.
And if, five years down the line, Iraq gets balkanised between the Shias
and the Sunnis, I suspect George W. won’t be too bothered.
The
Iraq strategy may go for a toss if the insurgents significantly step up
their offensive after Fallujah. The entire timetable can be pushed back
and, worse still, the process of ‘democratisation’ be discredited if either
the elections have to be postponed or are carried out amidst severe violence.
The next thirty days will unveil how things go.
Iran and
North Korea are trickier matters. Given its negative history with Iran,
how does the US persuade a proud and largely self-sufficient country not
to go ahead with its nuclear plans? How does it credibly convince an unpredictable,
xenophobic dictator at Pyongyang not to play with enriched uranium? And
what concessions can we expect these countries to extract in return? This
is where the US badly needs help from international allies: Russia vis-à-vis
Iran, and China for North Korea. Therefore, how the US engages Putin and
the Chinese high command will be a focus of global discussion and observation.
Regarding
the US economy, the good news is that it is doing far better than Europe,
and will continue in that vein over the next few years. Spurred by sustained
productivity growth, US GDP increased by 3.7% in the third quarter of
2004, and it is expected to top 4% growth for the year. The non-farm unemployment
rate has reduced to 5.4%, and the jobless growth that Senator John Kerry
railed against seems a thing of the past. In fact, the economy has trotted
along well enough for Alan Greenspan to raise the Fed rate by another
25 basis points to 2% – the fourth time in the year. GDP growth forecasts
for 2005 are between 3.4% and 3.6%, which is a whole lot better than what
is expected of the Euro Zone (1.9%) and Japan (2.1%).
The
bad news is that the US trade and current account deficits are going out
of control. The trade deficit stands at $611 billion, and the current
account is going to be well over $630 billion in red, or over close to
6% of GDP. Simply put, the US imports way more than it exports. A recent
study shows that for every 1% growth in US GDP the country’s import bill
rises by 1.4%; and for every 1% growth in the rest of the world’s income,
demand for US goods goes up by only 0.7%. This is a longer term structural
phenomenon and it isn’t going to change in the foreseeable future, unless
the dollar depreciates at an alarming rate.
As a senior
international central bank administrator put it to me recently, ‘The US
trade and current account deficit is now in uncharted waters.’ Add to
that the effects of Bush’s tax cuts carried out during his first administration
– which has converted budget surpluses of the Clinton era to a deficit
in the region of 5% of GDP. As of now, Bush has not yet come up with any
plan to cut his federal budget deficit, leave aside trade and current
account.
What does
that mean for the dollar? Clearly, it will continue its downward course.
Between January 2003 and early December 2004, the dollar has declined
by 23% against the euro, almost 18% against the British pound, and almost
15% versus the yen. Even in India, where our Reserve Bank intervenes systematically
to manage the exchange rate float, the dollar has fallen by over 8%.
Basically,
the dollar survives because it is the currency of choice in most parts
of the world, and because trade and current account surplus countries
of Asia seem to have an insatiable appetite to hold US currency, treasury
bills and dollar-denominated bonds. But that can hardly prevent further
depreciation of the dollar. According to experts, the dollar could slide
upto another 20% against the euro and the pound, and probably an extra
15% against the yen.
Somewhere
down the line – probably towards the end of 2005 or early 2006 – the system
will have to give. The dollar’s weakness is needlessly strengthening the
euro and, in the process, creating further brakes on economic recovery.
It’s the same for the yen. And China can’t go on accumulating phenomenal
dollar reserves – over $515 billion at last count – without thinking of
revaluing its renminbi. What will be the mechanics of the adjustment and
its attendant political play are anybody’s guess. But an adjustment has
to occur if the global currencies and capital markets are to function
properly.
Most
of Europe is in doldrums. This year, the Euro Zone (the fifteen nations
that have the euro as their currency) will be lucky to achieve 1.8% GDP
growth. Germany is the laggard of the flagging pack, with around 1.5%
growth in 2004 and 10.7% unemployment; Italy isn’t doing well either,
with 1.2% growth and over 8% unemployment. In 2005, the US is expected
to grow at around 3.5%, China at about 8%, and India at around 7%. Contrast
that with Europe, which will be lucky to achieve 1.9%.
Not only
does Europe under-perform, but it also creates dangers for its common
currency. With the three major countries of the Euro Zone – Germany, France
and Italy – continuing to breach their self-imposed fiscal deficit ceiling
of 2.5% of GDP for the second year in a row, it has become extremely difficult
for Jean Claude Trichet, the President of the European Central Bank, to
steer a sensible course for the euro. Matters are worse with the steadily
depreciating US dollar. Moreover, in a milieu that favours six-weeks paid
annual holidays, labour market rigidities, high wages and an unsustainable
social security and pension system, one can’t see how the mature economies
of continental Europe can compete with either the US or Asia.
Then
there is the issue of the ten new member states of the EU. With the Euro
Zone reeling under 9% unemployment, western Europe will now witness a
legalised influx of workers from the former Warsaw Pact countries to take
up low wage jobs. This can create serious social and cultural strife in
countries like Germany, Holland, France, Italy and Spain, which already
have large unemployment. Labour migration arising out of enlargement can
have one of two consequences. Either Europe will have to change its outdated
labour laws and reduce its gargantuan social security benefits to create
a more flexible and lower cost labour pool – that being the good outcome
– or it will induce the new members to adopt its own institutional rigidities.
While the latter may assuage problems in the very short run, it will foster
further lack of competitiveness over an even larger geography. I fear
that the EU may well choose the second option.
Although
Europe’s economic problems are bad enough, to me the key issue is political.
With the EU having 25 member countries, Europe as a bureaucratic entity
centred in Brussels does not know what it politically is, or what it should
be. At a time when Europe should be playing a more active role in Iraq,
Iran and the Middle East, and in re-developing its historically strong
ties with the US, it finds itself devoid of a common foreign policy.
France’s
President Jacques Chirac is a classic example. After acrimonious interactions
with the US on Iraq, Chirac seems to have taken upon himself to fashion
a French-led Europe which can be a counterpoint to the Bush-led US. That’s
counterproductive on at least two counts. First, there are many European
nations which want to rebuild bridges with the US, of which one can count
Italy, Spain, Greece and, I dare say, Germany. Second, at a time when
Europe needs France to be an integral part in resurrecting a solid trans-Atlantic
alliance, Chirac can ill-afford to play piqued. Today, Europe needs a
credible political interlocutor with the US. It can’t be Tony Blair, who
is seen to have ‘poodled’ himself in the eyes of continental Europe. It
has to be either Chirac or Germany’s Schroeder – and the latter may not
make the move if Chirac remains petulant towards Washington.
There
is a popular western European myth about Russia that goes thus: with the
right kind of economic and political incentives, Russia can be made to
transit from being an essentially dictatorial nation to being a truly
democratic entity with all the great institutions and liberal values of
modern Europe. Nothing can be further from the truth.
Russians
love their culture, their literature, their language and their land. They
also have a long-standing notion of their place in the sun, and a great
affinity for a strong state. From the time of Peter the Great up to its
defeat in the Russo-Japanese War in 1905, and then from Stalin till Leonid
Brezhnev, Russia has always believed in – and acted out – its role as
a European, a Central Asian and a world power. And from the Tsars to the
Bolsheviks, Russia has never had anything to do with democratic traditions
or institutions. Except for a brief fling with democracy of sorts during
perestroika, it has steadfastly believed that sovereignty of the
Motherland is contingent upon a strong, centralised state. Vladimir Putin,
ex-KGB, is a product of these long-held notions.
After
stamping his authority on the Chechens and in Beslan, and decisively showing
Yukos Oil and Mikhail Khodorkovsky who is the boss, Putin has emerged
stronger than ever before. Backed by sky-rocketing crude oil and commodity
prices, Russia is doing exceptionally well. Its GDP growing at 7.4%, thanks
to oil, it has a positive trade balance of over $78 billion, and it is
has already accumulated almost $104 billion of foreign currency reserves.
Putin is no longer the new leader wanting to be everything to everybody
in the western world. He now considers himself the undisputed leader of
a resurgent Russia – one who believes that he has the mandate to reengineer
the country’s historical place in the world.
Therefore,
I would expect Putin to leverage the commodity boom to create a stronger
economic base; to create a more centralised power hierarchy; and to insist
on Russia playing a more active role in global politics, especially in
Europe, Iran and the Middle-East. It will be wrong of Europe or the US
to lecture Putin, and far better to actively engage him. I think the US
understands this to some extent, but the EU doesn’t. Russia wants Europe,
but doesn’t want to subsume itself to it. It wants to be Russia – somewhat
European by convenience, but much more than it.
I
love it when western economic commentators write on the Chinese economic
slow-down. These are people who belong to countries which consider themselves
enormously fortunate if they clock 3.5% GDP growth. Then they talk of
a Chinese slow-down from 9.5% GDP growth to 8%. If I belonged to a country
whose ‘slowed down’ growth was 8%, I would be rocking all the way to the
bank!
Here are
some facts. According to the IMF, China’s GDP, measured in terms of purchasing
power parity (PPP) was $6.5 trillion in 2003 – second only to that of
the US at $11 trillion. As far as PPP goes, India doesn’t do too badly
with a GDP of a bit under $3 trillion, or 46% of China’s. However, the
great differentiator is the growth rate. In 1978, China’s GDP was 28%
higher than India’s. Since then, China has grown at an average annual
rate of 9.5%, versus 5.6% for India. Consequently, China’s national income
today is 2.2 times that of India’s, and the gap is only increasing. In
1990, China’s share of world GDP growth (measured in PPP terms) was under
10%. In 2003, it was 32%. Almost a third of global income growth that
one witnessed in 2003 was accounted for by China. Can you think of any
greater index of economic power?
But let
me give you more. Infrastructure is a case in point. Chinese politicians
from Hu Jintao downwards realise that income inequalities have widened
very rapidly between the eastern and southern seaboard versus the interior.
They also understand that the greatest economic, social and political
challenge facing the country is to generate rapid employment growth, especially
for the poorer western provinces. Unlike many of our politicians, they
realise that employment increases only with sustained economic growth,
and are therefore putting in all the infrastructure and incentives needed
to attract the maximum possible private sector investment in the interior.
Consider,
for instance, Three Gorges, the world’s largest hydroelectric project
on the River Yangtze. When completed in 2009 at an estimated cost of around
$25 billion, it will produce 10% of China’s electricity. But that’s not
all. The country has embarked on a $60 billion project called ‘South Waters
North’, which will use a system of dams, canals and pipelines to divert
excess water from the flood-prone southern and south-eastern parts of
China to the arid north and west.
The Chinese
also realised more than half a decade ago that high import tariffs are
inimical to the growth of manufacturing and infrastructure. In 1992 –
roughly at a time when our industrialists were trying to form the protectionist
‘Bombay Club’ – China’s average customs duty was 41%. Today, it is under
6%, which happens to be the lowest average tariff rate among all developing
countries. Most infrastructure inputs are imported at zero duty.
More facts?
China’s foreign exchange reserves are now close to $515 billion. In 2003,
it attracted over $55 billion of FDI (while we got under $4.5 billion).
This was after routinely mopping up an average of over $45 billion per
year for the previous ten. In 2004, it is expected to garner another $65
billion. Joint ventures with foreign companies account for almost 30%
of the value of China’s industrial products. At $851 billion, its trade
in goods and services is about eight times that of India – and that will
grow at double digits. And it will be the world’s number one market for
mobile phones, coal, steel, metals, television, personal computers, white
goods, and agricultural and food products.
Don’t let
the experts fool you. China isn’t going to have a terrible ‘hard landing’
that is supposed to be the denouement of its economic ‘over-heating’.
Chinese mandarins are too clever for that. Here’s what I think. China’s
economic growth will slow down from a scorching 9.5% to somewhere between
8% and 8.5% for 2004 and 2005, which it will try to maintain right up
to 2008. Thereafter, it will probably brake a bit further to the neighbourhood
of 7.5% to 8%. It will gradually tighten interest rates and embark on
significant financial sector reforms, but not at a pace that can harm
overall economic and infrastructure growth.
Somewhere
in the first half of 2005, in order to show the world that it is a responsible
global economic power, China will create a 5% band for revaluing the renminbi.
Naturally, the currency will immediately hit the ceiling of the band and
remain there. If the experiment doesn’t hurt exports too much, it may
consider another 5% band. But that’s about what one can realistically
expect in the next year or so. I don’t see China suddenly letting the
renminbi go for a free float to assuage the feelings of the US Secretary
of Treasury.
Here’s the
last piece of fact on China. By 2015, China’s GDP, measured at market
exchange rates will overtake Japan’s. The best is yet to come, and one
can’t even imagine the scale and speed at which it will arrive. And there
is no doubt in my mind that China will be a major force in global geopolitics.
After
this high-speed resume of global trends, it is now time to think of what
these imply for India. Let me try and summarise them in this section –
first the economics and then, briefly, the global politics.
Thanks to
the 8.2% GDP growth last year and a possible 6.5% growth this time around,
India is again on the global radar screen. In part, it is because the
global investing community has realised that an economy of over a billion
people with growth rates above 6% is a space that it cannot ignore. In
part, there is an appreciation that the global market game is China and
India, instead of China versus India. It also reflects the desire
of global majors to adopt a sensible geographical de-risking strategy
– and India snugly fits into that scheme of things. Therefore, the present
global economic constellation is quite favourable to us.
However,
we can’t take that as a given and adopt an arrogant posture that I have
witnessed earlier – ‘Nobody can afford to ignore India. They will line
up on our terms.’ I can think of several cabinet level ministers of this
government, its predecessor and the United Front regime who regularly
spouted such egocentric drivel. The Chinese are far ahead of us in almost
every aspect of the game, and yet they want to do whatever they can to
attract more investments to their shores. As a friend of mine once said,
‘The Chinese always want to know; Indians always want to show that they
know.’
We will
have to use this opportunity to rapidly drive the second wave of reforms.
In this context, it is worth noting that six months have passed with the
new government being at the helm without there being any perceptible move
towards faster reforms. Like many readers of this journal, I have huge
faith in the reforming capabilities of Manmohan Singh. However, it is
important to note that nothing terribly noteworthy has yet occurred –
and the time to start moving is now.
To
my mind, the primary focus has to be infrastructure. Consider the country’s
highways programme, until a year ago touted as a success story. It is
a fact that after the new government has come into power, the road programme
has slowed down considerably. If my information is right, the Minister,
T.R. Baalu wants to vet every substantive contract. According to official
statistics, four- and six-laning of 3,294 kilometres of the 5,846 kilometres
that comprise the Golden Quadrilateral (GQ) project has been completed;
the remaining 2,552 kilometres are supposedly under implementation. What
is the status of the 2,552 kilometres that are allegedly under implementation?
What is happening to the contracts? Where exactly are the slippages? And
what is the target date for Baalu to announce completion of the project?
The GQ needs
to be quickly completed. More significantly, little has happened to the
North-South-East-West project – 7,274 kilometre long highways that will
link Srinagar to Kanyakumari, and Silchar to Porbandar. Only 675 kilometres
have been completed, with another 388 kilometres apparently under implementation.
It is now
imperative that the Prime Minister’s Office resurrect this programme,
give it even greater managerial impetus and accelerate the process of
implementation. Clearly, this project needs the country’s utmost attention
– and in India that can only happen if PMO decides to take ownership.
Now consider
airports. Let’s forget about Singapore’s Changi, Dubai, Kuala Lumpur,
Hong Kong or the Pudong Airport at Shanghai. Not a single Indian airport
can light a candle to Bangkok’s. I think that the only reason why a disaster
called Sahar Airport in Mumbai has not been erased from the face of the
earth is that it makes Delhi’s Indira Gandhi Airport look very good in
comparison. Almost twenty months have passed since we were told about
the radical modernisation of Mumbai and Delhi airports – funds for which
were allocated in the Union Budget. What has been done? Can we get a lack-of-progress
report? Can we know the target dates to which the government will be committed?
And when can we expect the new international airports at Bangalore and
Hyderabad?
The less
said about power the better. Today, there is at least a 9% shortfall between
peak energy demand and supply. In a study of 1,856 manufacturing companies
conducted by the World Bank where I was a principal researcher, we found
that Indian firms lost up to 9% of their value of output due to power
cuts. We also found that over 75% of the small and medium enterprises
in India were forced to invest in generator sets to overcome power shortages.
With
an infrastructure situation as poor as this, we cannot be expected to
sustain the current international interest in India’s economy. Therefore,
instead of wasting time having sterile policy debates about what to do
with $15 billion of foreign currency reserves, the government ought to
take upon itself the primary task of getting the road programme back to
speed, to radically revamp Mumbai and Delhi airports, to give the green
light for Bangalore and Hyderabad, to accelerate the process of modernising
the main sea ports, to solve the Dabhol imbroglio, and to start measures
to reform the power sector. The focus has to be on implementation.
Similarly
with tariff and trade reforms. Irrespective of what industry lobbies say,
we have to eschew the silly notion of ‘calibrated globalization’. In the
last four to five years, China has radically brought down tariffs without
any detriment to industrial growth. We are beyond the state where we can
think of a reduction of five percentage points at a time. En passant,
it is worth noting that at 6% average tariff, the growth of industrial
output in China in October 2004 was 15.7%; with an average tariff of around
17%, our growth has been 7.7%. This statistic, if nothing else, should
make the case for an accelerated reduction of tariffs to Chinese levels
by 2006.
One
way of speeding tariff reforms is to consider more regional trade agreements
within Asia. Purists like Professor Jagdish Bhagwati will see red at this
suggestion. It is certainly true that in the best possible world, nothing
can be better than a full-fledged multilateral approach to trade negotiations
and reforms. But we aren’t in the first-best world. Led by the US, the
world is being carved up into regional free trade zones. If India does
not get into the act, it will be left out. We have made a fair beginning
with Thailand and are now closing the deal with Singapore. I believe that
in the next two to three years, we should move forward to having a free
trade zone with all ASEAN countries, and plan for getting into a similar
arrangement with China by 2008. If nothing else, it will force us to hasten
trade and tariff reforms, and accelerate the pace of competitiveness of
Indian industry.
Talking
of trade negotiations, let me revert to the issue of body language. At
the risk of offending many, I believe that our ‘success’ at Doha and the
‘leadership role’ that we played at Cancun has hoisted us on a hectoring
petard. It is no secret that the US Trade Representative Bob Zoellick
has been frequently exasperated by our negotiators, as has Pascal Lamy,
his counterpart at the European Commission. To disagree and conduct tough
negotiations is our birthright as it is everyone else’s. But to do so
in a manner as if it is we who are holding the moral authority of the
developing world can be irritating. I think it is time for us to revalue
what is in our best trading interests and actively engage in WTO negotiation
– with some sensible ‘gives’ for every major ‘take’ – instead of trying
to be the vanguard of a developing country movement. It is here that body
language will matter. And I hope that the Commerce Minister, Kamal Nath,
will be seen to be charming, relaxed and accommodating, even as he bargains
a hard line.
Geopolitically,
we will have to spend a considerable amount of capital trying to figure
out how to build even closer political ties with the US. Part of it can
be through greater cooperation in trade negotiations. But it goes beyond
that. We need to closely understand the global doctrines of the new Bush
administration. Some of these will doubtless be difficult for us to accept.
We don’t need to publicly reject them, but learn the art of smiling and
keeping quiet. There will be many more areas where we will agree, and
we need to continuously cement these agreements with decisive programmes
and decisions.
If we react
to US foreign policy through the Pakistan-Kashmir prism, we will surely
get unstuck. Thanks to Osama, Pakistan has become a valuable ally of the
US. We can’t change that. Instead of getting hot under the collar with
every little diplomatic coup that the clever general executes in Washington
and Islamabad, we should widen the economic, political and strategic engagement
with the US outside the sphere of Pakistan. It’s easier said than done.
But the good news is that we are gradually learning.
Economically,
we need to accelerate our ‘Look East’ policy and, in the process, bring
China in the fold. Most ASEAN nations want India to play a more significant
role, and we should be doing this with much greater vigour. In this, it
is imperative to build significantly greater trade and investment ties
with China. Today, the two-way trade is $10 billion. There is no reason
why this shouldn’t triple over the next five to seven years.
Finally,
the role that we can play on the world stage is wholly contingent on how
well we do economically. If, over the next decade, we can make the necessary
investments in infrastructure and embark on an accelerated path of reforms
to attain an average GDP growth of 7.5% per year, then we will have signalled
to the world the real arrival of India on the global map. Credible geopolitical
play has little to do with the size of the country; it has everything
to do with its economic power and concomitant influence. China has understood
this well. India should realise it too. A billion strong economy with
terrible roads, power cuts, horrible airports, poor ports and pervasively
delaying babu-dom carries no clout in the new global order. Consistent
growth does.
So, if we
want to play such a role in geopolitics as we think is our manifest destiny,
then we had better do all the reforms that give us the economic strength
to play this political part. Or else, we can remain content at being the
country of ‘perpetual promise and no delivery’ – one that can always threaten
to snatch defeat from the jaws of victory. The stage is set. The choice
is ours.
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