India and Future of Asia

Custom Student Mr. Teacher ENG 1001-04 4 January 2017

India and Future of Asia

Introduction- As the world increasingly acknowledges India’s rising power status, India is adapting its foreign policy to meet the international challenges of the 21st century and to increase its global influence and status. For many years, India took pride in its role as leader of the Non-Aligned Movement and viewed itself as the primary defender of the rights of the less developed countries. In the past few years, New Delhi has expanded its strategic vision, most noticeably in Asia, and has broadened the definition of its security interests. While India has focused special attention on cultivating ties to the United States since 2000, the overall thrust of its foreign policy has been to seek geopolitical partnerships in multiple directions to serve its national interests. It has pursued special relationships with the U.S., Russia, China, and key European countries. In June 2006, Indian Defense Minister Pranab Mukherjee (the current foreign minister) described India’s foreign policy: “Premised on the twin policies of no extra-territorial ambition and no export of ideology, India seeks the peaceful resolution of all disputes.”

He went on to say that “[s]imultaneous improvement in ties with the U.S., EU, and Russia and Southeast Asia, Japan, Korea, and China demonstrates that for the first time in its diplomatic history, India is forging significant strategic ties with both West and East Asia.” Broadening Indian engagement across the globe, especially in Asia, is in the U.S. interest and should be further encouraged. Washington’s and New Delhi’s strategic perceptions are increasingly converging, and there is tremendous opportunity to cooperate and coordinate in this dynamic region. Because India is a fellow democracy without hegemonic interests and with a propensity to seek peaceful resolution of conflicts, its increased economic and political involvement in Asia will help to further overall U.S. goals in the region. India’s involvement in Asia will help both to ensure that one country does not dominate the area and to encourage stability in a region that will take center stage in the 21st century.

The period since India adopted the new economic paradigm and the LEP has witnessed substantial transformation of its global relations, including with the rest of Asia. This has primarily been due to the recognition of India’s increasing capacities to address its developmental challenges, and the potential of its soon to be USD 1000 billion economy to provide substantial commercial opportunities. India has grown at an annual rate of nearly 6 % per annum since 1980. Contrary to perceptions, India has been able to sustain high levels of growth without significantly increasing income inequality8. India has no parallel in managing relatively peaceful and democratic transfer of political and economic power among different social classes. It thus appears that India’s growth experience has been inclusive, though there is no room for complacency.

Compared to East Asia, India’s growth strategy has relied relatively more on domestic markets, consumption rather than investments, decentralized entrepreneurial rather than state-led development9, and on financial and capital market intermediation in allocation of savings10 (Das, 2006; Huang, 2006, Morgan Stanley, 2006). India’s de-facto growth strategy is consistent with bottoms-up diagnostic approach to reforms advocated by Rodrik.

However as India begins to pursue policies leading to higher savings and investments,11 and as the role of external sector increases12, differences in India’s growth characteristics on the one hand and those of East Asia may narrow13. India is also attempting to develop a robust diversified manufacturing base14 (Bradsher, 2006); and modernize its agricultural and plantation sectors. The emphasis is thus on creating a more balanced and resilient economy, and increasing India’s share in the world economy.

India’s growth strategy and trajectory thus provide an avenue for global risk diversification for businesses and investors from around the world. India ranked 43rd on the Global Competitiveness Index (GCI) moving up two places from last year. India scored well in indicators relating to innovation and sophistication of firm operations as well as in adoption of technologies from abroad. However weaknesses remain in the large budget deficit, (about 9 per cent of GDP), inadequate infrastructure investments, low level of efficiency in delivery of governance services, and a need for wider access to and improvements in quality of health and educational services.

India in the changing scenario- So many things is changing in India. The launching of the manufacturing industry, the new importance given agriculture, the good, even excellent, level of scientific training, openings in the financial sector… all generate optimism and international interest in a country with the possibility of achieving the highest growth rate in the coming 50 years. India enjoys this potential despite problems like monumental bureaucracy and lack of infrastructure. Meanwhile, democracies and a smoother path of development than China’s appear to be holding possible social agitation at bay. The novelty is not so much the policy of the new government of the Congress party: in power for just a year, it has hardly had the time to implement any real changes. The rampant India which emerged from the rule of defeated Nationalist party, Janata, has certainly not disappeared; thanks to use of English, this India focused on the services sector, primarily computers and also international de-localization of computerization and call centers.

However, such a model is no longer viewed as an end goal to reach in the future. Even in India, euphoria and riches even excesses generated by the so-called new economy for a few to enjoy, have given way to a realization that the “old” economy is still relevant after all. International trends especially the lack of energy and increase in prices of petroleum and other raw materials have in fact revealed how the famous “light” development, based primarily on factory chimneys, is limited in its incomes evanescence saving on, and at the end of the day, it is immaterial. This new awareness has led to an overall change of direction. This means a new emphasis on: manufacturing industries, like textile industries; primary sources, like energy; exportation of certain raw materials, like iron minerals. And certainly not least in importance, agriculture has today become once again the focus of attention, that old Cinderella of the Indian economy, neglected and portrayed as the legacy of an archaic society, although a large proportion of the population still depends on it.

Today, it has been recast as a strong point of some export industries like the textile sector, which can make the most of local availability of cotton to successfully counter the near-monopoly China enjoys in this market. In this overall change in direction, the government, for its part, is seeking to regain lost ground in comparison with Asian giants, China and Japan at least one year in guaranteeing energy sources for the industrial sector. In these very weeks, a diplomatic offensive is under way to ensure resources of petrolium and other raw materials wherever possible, not only in traditional and logical choices of Indian territory, but also in places both geographically and culturally distant, like Latin America. Re-orientation towards the manufacturing industry is certainly a consequence of changing trends at international level, but it also falls within the strategy of the Congress Party currently in power, which still enjoys a strong working-class base.

Anyhow, the traditional style of industry, typical of a socialist and working class party, holds several winning cards. The new stimulus in the manufacturing industry is a key factor in determining the future of all societal structures. On the one hand, it provides more interesting and better paid jobs, on the other it calls for more qualified human resources, for training, ongoing commitment and improved tuition in economics, maths and computers. All this requires secondary and tertiary education systems which ensure proper scientific and technological teaching. So there is more than low salaries behind the meteoric growth spurt of India and China. The secret probably lies in the swift upgrading of training and tough selection, based on merit, of students. This is confirmed by the preference shown by American enterprises and research institutes for graduates from the Indian Institute of Technology.

Indian excellence in mathematics has always been well known the numbers of the decimal system used for calculation are of Indian origin and more recently, Indians have now been shining at physics too. In view of all this, few would imagine that the expansion of manufacturing in India would be limited to the textile and computer industries alone. Already today, India is promoting itself, with high hopes of success, as a base for the de-localization of strategic industries like aerospace. In this sector, India can count on the importance of avionics, that is, of electronic control systems. India could exploit its dominance in the computer sector, as well as the low cost of a workforce which is highly qualified in science and engineering. Development opportunities are considerable even in the telecommunications sector, in the automobile industry especially in the spare parts sector, after foreign participation of up to 100% of investment was liberalized in 2002 and in pharmaceutical chemistry, as well as food industry. Indian economic growth is not due to external factors, a consequence of general Asia-wide expansion.

Rather it is a gradual process over a long period, even if not everyone is involved. Dalits, that is pariahs, are still marginalized. The growth rate of India before this global slowdown was nearly 8%. With such growth rates, in 2022, the overall size of the Indian economy will surpass that of the UK, its former colonial master. According to research undertaken by Deutsche Bank, in 2020 India and China would have left Japan behind at fourth place, while the US would still take first place as the largest economy. Compared to China, India’s economic growth rate, although considerable, has not flourished so much in recent years, and it is inferior by around 20%. However, India and Malaysia will surpass China in terms of economic expansion rates within the next 15 years, most of all thanks to demographic expansion, to the increased size of the population’s working-age bracket. While the China’s average growth rate will be around 5.2% per year, that of India will be 5.5% and that of Malaysia, 5.4%.

So China will soon have to pay in economic terms for its one-child policy. According to Goldman Sachs, India’s economic growth will beat China’s from 2015 onwards. Dominic Wilson of Goldman Sachs said: “India has the potential to produce the highest growth rate in the next 50 years with an average of 5% per year over that entire period. The growth of China is predicted to fall below 5% around 2020.” However, India is meeting obstacles along the road towards growth. First because large sectors of the population, not only dalits but also peasants, are cut out And in the long term, development along two tracks of very different speeds is not sustainable: the risk is that profound and endemic social exclusion from new-found wellbeing will take root in unmanageable massive cities, a situation which would have clearly explosive potential. Another tough obstacle in the way of development is the imposing fiscal deficit of the public sector, both central and local.

According to the International Monetary Fund, this deficit, at around 10% of the Gross Domestic Product (GDP) puts economic development at risk both because of insufficient fiscal collection as well as increased public debt, a carryover from previous decades. This constitutes a real risk because the financial system, and especially banks, are naturally obliged to favor investment in public debt stocks, which are considered, rightly or wrongly, to be more secure. This even if lessons could have been learnt from Argentina, although there were differences between that case and India’s. The end result is that savings are not pumped into productive activities and the capital market then lacks liquid cash. The state of the Indian stock exchange has so far been determined by decisions of big foreign institutional investors, the funds of specialized stocks investment in emergent countries. Certainly the 26 October decision of the Central Bank to keep the discount rate at 6%, the lowest since 1973, is a positive one for industrial development.

Also positive was the recent government decision to allow, in the near future, investment in shares of up to 5% of the value of the patrimony of private pension funds. However, these measures are insufficient to maintain sustainable development in the long-term. Besides, the current debts of India’s pension system constitute a hidden risk, although, as in Europe, they are about to be shared, not accumulated, meaning that future generations will be called upon to square the bills of those who work today. But, as in Europe, if demographic growth is stalled, the commitments, or better the lies, of the past will eventually impact on all society. Faced with estimates which foresee that future pension commitments will be increased by around 40% of the GDP, measures which the Indian government apparently intends to propose are too timid. Yet another obstacle standing in the path of Indian economic development is an endemic lack of infrastructure: roads and highways, bridges, airports and ports require important investment, but they are not completely compatible with the current state of public finances.

Other urgent and hefty investments regard energy production and distribution plants. In these infrastructures, as well as for oil refineries, it would be possible to resort to private and foreign investment. However, complications caused by electricity tariffs established for political reasons have not permitted such a solution so far. The unresolved problem is guarantees of remuneration of capital , Enron, which went bankrupt some years ago. Such incidents are proof of the intricate web of powers and the widespread rivalry between local authorities and central government, which has a paralytical impact on global finance which deals in such transactions. Not least in this list of woes are health and education problems in rural areas. Contradicting aspects are inherent in India’s health system. On the one hand, it offers pockets of excellence in some private sectors, which have served to draw patients from all over the region to Indian clinics.

In such structures, it is possible to conduct operations comparable to those in western countries and at a vastly inferior price. On the other hand, however, the total cost of health spending does not exceed 0.9% of the GDP, much less, even half what other countries at a similar stage of development would spend. It is this aspect which best illustrates the contradiction between optimism engendered by economic market growth and a group of significant social indicators. The bottom line is that although India’s development process is certainly more smooth than China’s its income redistribution curve is evolving in a more uniform manner and the middle classes are increasing in size and also in income per capita much remains to be done so that the marginalized are not excluded from the country’s growth.

Two factors certainly confirm the initial optimism about India’s future and they guide estimates on its economic growth. One initial reason for optimism comes from the existence of valid internal financial markets, more because of their structures and regulations based on British standards than for their size. According to Richard Batty of Standard Life Investments, the balance of economic global power will change radically in the next 50 years and the stock market could provide an average annual yield of 10% in this period. The second reason for optimism is to be found in Indian political institutions, which although far from perfect, are nonetheless able to allow for changes in power. This offers a precious guarantee of stability which China, for example, cannot offer. Despite their limitations, especially at local level, Indian political institutions appear better able than their Chinese counterparts to better reconcile various sectors of the population.

Triangle of India, China and Pakistan- Indian policy-makers have been facing a great challenge today to construct a peace-oriented but pragmatic long-term policy framework in an atmosphere where its neighbour Pakistan is hell bent for MAD (mutual assured destruction) persuasions and China is modernizing itself fast with DF-31 and DF-41 missile programmes along with MIRV (multiple independent re-entry vehicle) potentials. The shadow of the ghost of cold war days are still moving around and the principles of real politik are significantly being included in inter-national agenda. Recently held International Defence Exhibition And Seminar (IDEAS 2000 Pakistan) between 14th to 17th November at Karachi with its theme “Arms For Peace” and China as a significant participant could be perceived as catalytic to the rise of arms race in the South Asian region. On 17th November, Sonmiani Tactical Firing Range in Pakistan witnessed an unprecedented show of arms and ammunitions in its full range. Air Officer Commanding of the Southern Air Command Air Marshal Parvez Iqbal Mirza, while boasting the might of Pakistan defence, said to the attending guests that “all Pakistan-made weapons and ammunitions, which was of NATO standard, could not be displayed at the demonstration and only selective weapons would be shown off”.

Few remarkable demonstrations at the exhibition were – Super Mashshak Trainer (produced at Pakistan Aeronautical Complex, Kaura), Karakoram-8 advanced jet trainer (co-produced by Pakistan and China), MirageIIIs, mobility display of Al-Khalid and Al-Zarrar main battle tank (a joint venture of Pakistan, China and Ukraine), T-59 IIM tanks, T-85-2APS, Anza MK-11 missiles, Ghauri and Shaheen missiles. Even the Pakistani sources confirm that never before Pakistan had put on display its full range of military might. And unlike any other initiative of Pakistan in the past, these military demonstrations were wedded to “show of strength” configured against India. Also, it was a psychological display of Pakistan’s claim for military self-confidence in the wake of mounting international pressure on Pakistan, especially from the U.S, to go slow on military hardware and to stop abetting the terrorist groups.

In such upcoming adverse condition, Pakistan while on the one hand has been trying to reinforce its confidence amongst the Islamic states, on the other hand, apart from the clandestine supports from China, it has been pressing for new strategic and military partnerships. Ever since its coming into existence, the fundamental goal of Pakistan’s foreign and defence policies has been of “defiance” of international norms and values and to co-opt the tools that destabilise India’s territorial integrity and domestic tranquility. Defiance of international norms means violating the principles of non-interference in other country’s domestic affairs, or for that matter to launch attack on other’s territory. The nature of Pakistani involvement in Afghanistan during and after the cold war has always been a subject of international criticism and condemnation. Further, Pakistani statesmen and academia for the reasons only known to them are still justifying all previous five misadventures of Pakistan against India. More so, Pakistan is being labeled as supporter to several terrorist outfits round the globe, and considered as a hot pursuant of weapons of mass destruction.

Pakistan’s missile and nuclear development programmes are being increasingly encouraged by the Chinese politics towards the regional strategic triangle involving Pakistan, India and China. Subsequently, the regional adversaries not separately but jointly against India are raising the prospect of an arms race breaking out between India and China. Of course Pakistan has been acting and responding in a manner that definitely exceeds its strategic defence requirements. Hence, it is imperative to the Indian policy-makers to comprehensively understand, analyse and foresee the complexities and contours of Chinese international and regional behaviours. Evoking a sense of “mystery and fear” in international relations has long been a significant foreign policy characteristic of China. Historically, it is an aggressive and expansionist state.

And in the post cold-war world, with regard to South Asian security environment China is likely to take moves on two basic premises – one related to the Sino-U.S relations, and the other directly linked to India. First, while advocating for multi-polar world order, China desires to become a potential alternative centre of power in any given international system. For this reason, despite glaring limitations in technological advancements in China, they inadvertently find the clash of interests with America at almost all the present and prospective conflict areas of the world. South Asia is definitely not any exception to it. The recent improvements in U.S-India ties and the increasing gulf between the U.S and Pakistan are being seen as direct threat to the Chinese predominance in this region. Subsequently the mutual distrust and misperceptions between China and the U.S.A, on the one hand, directly affect the Sino-U.S relations and, on the other hand, indirectly but substantially it would affect the South Asian regional security configurations.

It may further provide scope for Pakistan to take more strides towards misadventures against India. Second, China desires to remain the sole “power” state in the Asian region. The rapid growth in Indian economy, especially its IT sector, together with the convincing progress in Indian defence advancements pose direct threat to the Chinese dominance in the region. Whether India is being referred directly or not in the Chinese world propositions, it is a fact today that India matters a lot to the Chinese strategic thinkers. Now, it is understandable by several means that Beijing could face considerable, if not devastating, reaction if anything done undesirable or against the vital interest of New Delhi. After all, future possibility of ‘engagement’ or ‘containment’ depends mainly in the development of India’s strategic build-ups. Chinese moves to contain the Indian strength are based on its policy of “encirclement of India”.

Long back in 1983 U.S intelligence agencies had reported that China had transferred a complete nuclear weapon design of 25 KT nuclear bomb to Pakistan and had been helping to Pakistani centrifuge programme. Again in 1986, it was revealed that China sold Tritium (that is used to achieve fusion in a nuclear device) to Pakistan and Chinese scientists assisted Pakistan with the production of weapons-grade fissile material (Uranium) at A.Q.Khan laboratory, Kahuta. Further, in 1991, Wall Street Journal reported that Pakistan was buying nuclear-capable M-11 missiles from China. In addition, apart from the controversial Chinese sale of 5000 ring magnets, China has also been involved in transferring M-9 missiles to Pakistan. Thus, China has long been recklessly providing Pakistan with nuclear technology, conventional weaponry and missile systems to keep Pakistan’s ambitions high against Indian defence preparedness. Subsequently, by keeping the Pakistan-India hostility alive, China acts on the two-pronged foreign policy towards India.

Further, towards its policy of “encirclement of India”, China has also established a radar base in Coco island (belonging to Myanmar) that is only a gunshot away from the Indian Andmand and Nicobar islands. More so, recently the Indian Coast Guards that raised apprehensions across the Indian line of defence interrupted a Chinese trawler fitted with modern electronic surveillance equipments off the Indian shores. In addition, it has been widely reported of Chinese move of deployment of nuclear forces in Tibet and other bordering provinces and the advancements towards Chinese DG-25 missiles are being specially planned as counter move to Indian development of Agni II and III missiles. It has also been reported that a further upgrade of Hong Niano-3 (HN-3) is now being developed with range increased to 2.500Km for ship, submarine and aircraft launch. India’s motivation towards its strategic defence build-up flies in the face of conventional wisdom with recently achieved vigour of deterring the Chinese threat of “encirclement of India”.

And the proclamation of the Indian Defence Minister George Fernandes just after the launch of Agni II that “with this launch, no one, from anywhere, will dare to threaten us from now”, wisely stages India at a considerable level across the spectrum of rivaling strengths in the South Asian region. Although Indian moves for weaponisation programmes are primarily driven by the combined hostile attitudes of its neighbours, this may further lead Pakistan to more destructive engagements against India. The present environment of this region is so complicated, that even after a decade since the end of cold war, the western and Indian scholars have been facing difficulty in coming out with any definitive future trend in the South Asian strategic arrangements. In such volatile circumstances, the Standing Committee on Defence in its Report projects the level of Indian defence readiness as “The Kargil conflict of 1999 has been referred as wake-up call”.

It includes the long -term vision and planning for enhancing the defence capabilities. No doubt, the real and immediate need for India today is a solid back up of conventional hardware. Priorities are to be delimited for the speedy acquisition of defence equipment and technologies. Overestimation of indigenous potential in a given period of time may lead to further delays and might cost wastage of valuable resources. Areas of strengths and weaknesses are to be carefully drawn and closely monitored for effective conventional warfare in time of need. No doubt, it is proud to hold ‘minimum credible nuclear deterrence’, but at the same time ‘ignorance’ or ‘negligence’ on its ‘command and control’ mechanism part may prove fatal for the nation.

Only an effective inter-linkage within C-3I (Command, Control, Communication and Intelligence) could really boost the inner strength in holding the “nuclear button”, and to maintain some level of ascertained minimum deterrence capability. As far as dealing with international environment is concerned, tough task ahead for India is to maintain and build better India-U.S relations and to re-strengthen the hands of cooperation with Russia. It is always preferable for India to go for constructive engagement with China along with other interested partners than to seek Pakistani engagement only due to domestic compulsions. Last but not least, at first, to have a healthy relationship with China, India needs to break the mental blockade of its past experience. After all, now onwards India is a declared nuclear weapon power state with an emerging strong economy.


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  • University/College: University of Chicago

  • Type of paper: Thesis/Dissertation Chapter

  • Date: 4 January 2017

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