Syed Mafiz Kamal*
New York, August 28, (2014) Alochonaa: In my previous two articles I have explained what could India look like in 2020 and three scenarios for India 2020. I continue my prediction in this article.
Timeline of Scenario #1 – Strong and Prosperous
2014-2017: The Indian economy bounces back to 7% growth due to reforms to attract foreign investment. India’s large English-speaking youth are able to capitalize on foreign investments, which may give India a competitive edge over neighboring competitor China. Moreover, due to economic reforms which provide better protection and easier facilities to create wealth, local investments are also set to surge. The investments are in vital sectors such as technology, healthcare and entrepreneurship. India has started creating both manufacturing jobs and high-skilled jobs, which in turn is helping both urban and rural population, especially the youth. Liberal policies for investments and economic activities in previously forgotten regions such as northeast and central India are being discussed. A progressive taxation system has been set up with proper tax reforms to collect the fair share of revenue from the increasing number of new-rich.
The economic boom is creating new revenue for the government. The government addresses institutional reforms and takes anti-corruption measures. E-governance measures are set to be in place to increase efficiency. The policymakers make debt reduction a priority for India. Through series of forums and media promotion, the government and the private sector are having close communication with civil society to address social issues related to economic development in India. Because the private sector has taken the lead in R&D spending, the public spending is shifting into social programs.
Indian foreign policymakers have realized the need for India to hold a strong position in the external environment, both regionally and globally. India needs to keep up with globalization, innovate its diplomatic strategies and also modernize its security apparatus. This means India is bringing in new policymakers who will replace the competitive security paradigm with a cooperative security paradigm to reduce threats from other states and non-state actors. With a promising economy, India’s role in international affairs is rising. SAFTA has kicked-in and Indian investors are able to invest in the region. Increasing amounts of Indian goods and services are selling in neighboring states. Due to high level diplomatic efforts, economic and cultural exchanges with Pakistan are improving. The Indian military has setup special R&D systems with increases in drone technology and investment in advanced instruments, such as aircraft carriers.
2017- 2020: Indian economy is booming up to 9% due to the results of early economic reforms. Policy makers are discussing another set of reforms. High-tech and educated workers are helping businesses flourish in an enlarged consumer market. Tax reforms have significantly expanded the revenue base. As a result India is able to spend the revenue wisely. With anti-corruption policies (such as inflation adjusted wage for public employees), institutions are functioning more efficiently. Indian government is able to refocus on its anti-poverty programs. Poverty has been cut down by 50% because of increasing cooperation between the private sector, the government and civil society. Human development has been made the priority for Indian public policy. As a result demographic indicators in sectors like public health have shown significant improvement.
With an increasingly cooperative foreign policy stance, India’s relations with regional powers like China, Pakistan, ASEAN and Middle East have improved, partly due to trade. Trade with China has increased three fold. Oil imports from Middle East are helping India meet its energy demands. BRICS countries have turned out to be a power group in international society. India is a catalyzing force in the BRICS. International nuclear deals have helped India diversify its energy sector. With confidence building measures like cultural exchange and economic exchanges, such as trade in textiles, India and Pakistan are able to sit and honestly discuss the issue of Kashmir. Both nations have put aside confrontational policies and able to divide and accept Kashmir as two zones with a common border. They have also discussed giving Kashmir some level of semi-autonomy. As a result cross-border terrorism has significantly reduced in India. Terrorism and other internal security threats have reduced because of a recently modernized security and intelligence apparatus.
SAFTA is slowly reaping the benefits that it promised and India is able to benefit the most out of it. Indian goods, services and investments are flooding in the region. Regional cooperation is promising regional security. Many conflict issues – particularly those relating to the border, migration, nuclear race with Pakistan, and maintaining Nepal as a buffer state – are being resolved because countries are able to tie their economies. Moreover, all countries at India’s border, except China, are now functioning democracies. The decade-old democratic wave in Pakistan, Sri Lanka (post-civil war), Maldives, Bangladesh and Myanmar has stabilized the region. Democratic values in the neighborhood are helping India better foster a compatible and cooperative regional policy. India is able to take leadership in regional institution such as SAARC. In short, India is an indisputable regional powerhouse.
Timeline of Scenario #2 Growth, not developed, with fragmented governance
2014- 2017: Economic reforms have been put into place. However, observers are not expecting quick results. Growth is at an optimal rate of 6% and is expected to rise to 7% if economic reforms attract investment and entrepreneurship. The government has declared that social programs will be made a priority and has invited the private sector to help out. Civil society has started getting money from rich corporations as part of the economic reform. However, the government does not have the capacity to oversee the transfer of the funds. As a result social development is not taking place as aspired by policymakers. The poverty level is still at high rates.
The government is not able to reform its tax code. As a result, the taxation system is flawed and the revue base is yet to expand. The government is not able to finance projects, such as food security, that it prioritized. Urbanization is increasing and is projected to surge. Governance in India is not changing. Some subtle anti-corruption measures have been put into place because of increasing public pressure.
Indo-China trade has increased however there is growing tension between the countries because of attempts to increase their relative power. There have been few cross-border disputes with China. Indian policy makers have vowed to increase military spending to rival China’s strategic rise. In South Asia, India is developing a cooperative regional policy. SAFTA has kicked in and India economy is seeing some benefits of it, in which more Indian goods and services are flowing into neighboring countries. Strategically and militarily, India is able to deal with regional threats of cross-border terrorism, migration from Bangladesh and minor conflicts with Pakistan.
2017 – 2020: India’s economic growth has remained 7%, which is still optimal. However, economic reforms have produced mixed results because they have not produced enough high-skilled jobs. Moreover, corruption is still an issue which has significantly hurt economic activities because of the prevalent inefficiencies. The Indian government has decided to spend a lot in infrastructure and R&D but that has taken money away from social programs. The government has also spent on the energy sector but it is not enough. Hence, India is yet to become energy sufficient. As a result human development indicators have not changed like the policymakers had envisioned. Poverty has only dropped by 25%. The private sector and the civil society have developed a love-hate relationship and the government is not able to mitigate it. This hurts the development of the country.
The central government in Delhi is handling many obstacles to adjust the economy. But because of earlier failed economic reforms the government has been weakened by special interests. As a result the states have taken up the burden of economic development in their own provinces. The chief ministers of various states are providing incentives to attract economic activities. As a result there has been a rise in competition between states. In due time, state-to-state competition has hurt central government and its influence over the country’s political economy. India as a whole is not able to reach its full potential because of such disharmonious competition.
In the foreign policy sphere, India and Pakistan are still in relative conflict. Although India is a larger power than Pakistan, there is no political will to resolve the issue of Kashmir. Instead the border disputes have continued over the years. In addition, there has been major terrorist activity in India which India blames Pakistan for. The dispute-focused status quo is counter-productive for India. Indo-China trade has kept increasing over the years but both nations aggravate each other in international institutions and seek to become the lone Asian superpower. They have developed a “frenemy like” relationship. In past few years there have been tensions over the Tibet issue, from which both India and China have tried to gain political points in international society. Although China is a greater power than India, with an economy about double the size, Indian military spending is at all time high in order to match Chinese threat.
With SAFTA functional, and other competitive strategic regional policies, neighboring countries are finding India to be intrusive. They are seeking Chinese help in areas such as military aid and infrastructure spending. In Nepal, China is playing a stronger hand via the Maoist movement. However, Nepal still remains an Indian ally and remains a reliable buffer state between India and China. Due to India’s unilateral regional policies, regional cooperation has been hurt. SAARC remains a dysfunctional institution, or “talking shop”. SAFTA’s benefits have not been equally distributed among all countries in South Asia. As a result regional trade has only increased to 8% where it could have increased to 15%. However, from India’s point of view India still remains the most powerful nation in the region and is trying to better the friendly relations with neighboring countries.
Timeline of Scenario #3 Stagnated and threat mitigating
2014 – 2017: India has put forward various reforms, both economic and social, in order to advance development and growth. By the end of 2017 the result are yet to come out. Economic growth has remained between 5 – 6%. Policymakers are still hopefully that these reforms will show results in the future. Therefore, they have refrained from making any bold reforms. Unemployment is not reducing because of a lack of economic opportunities. Corruption remains a major problem. Development indicators have not changed over the years. As a result, the civil society is taking an increasing role in social development. In response the government has taken some inconsequential anti-poverty measures. By the end of 2017, the sex ratio in India has fallen below 900 females to 1000 males, with various regions reaching below 800 to 1000. This is resulting in frustration and high crime rates of rape and violence by young males. States have crafted myriad strategies to development and grow at a provincial level. As a result states and regions (northeast and central India) with limited capacity and resources are lagging behind, indicating unequal development. Due to unequal regional development and lack of economic opportunities, insurgency movements have emerged in the respective regions.
Border tensions with both China and Pakistan have risen. Indo-China trade is still significant; however, it is not growing as projected. China has rebounded from its economic problems and is set to develop a stronger foreign policy doctrine. Chinese support for Maoist politics in Nepal is increasing. SAFTA has kicked in but it has not had any impact in any member countries, including India.
2017 – 2020: The Indian economy has stagnated at 5% and is not able to keep up with its population growth. This is putting India in a dangerous position both internally and externally. Policymakers are aware of the problem and have proposed various economic reforms. However, defense spending is still high due external threats. Demographic indicators have not improved. As a result economic performance has reduced with little foreign investment or domestic entrepreneurship. Therefore, social spending has reduced due to the shrinking revenue base. India has not been able to push through a comprehensive tax reform. As a result inequality is at record high. Due to efforts of the NGOs, poverty has reduced by only 10%. However, the government and the private sector are yet to drive social development as had been promised. Corruption is still rampant throughout the country. India’s debt to foreign countries and international institutions, like the World Bank, has risen because India had to borrow money as a result of the economic slowdown.
Over the years, national policies have failed to produce results which led to competition among India’s states, thereby further weakening the government in Delhi. The poor regions have been left behind and insurgency movements have increased significantly in these poor regions. The crackdown by Indian security forces is further depleting national resources as a result of undertaking continuous military operations. The crackdown has created a divisive public opinion within the country and hurt national unity.
In international affairs, Indo-China trade has reduced in recent years, eventually stagnating. China has gained much influence in Asia and has projected itself as an Asian superpower. India has not been able to live up to its vision. Chinese assistance in military and infrastructure is significantly more than that of India in many important countries, including Bangladesh, Myanmar, Sri Lanka, Afghanistan and, as expected, Pakistan. India is thoroughly worried about China’s role in its neighborhood. With China’s rise and India’s relative loss, the issue of Tibet has become a point of contention, at times encouraging heated rhetoric by China in the international media.
Simultaneously, the border firings with Pakistan have increased in 2018. Due to an event at the border, another Indo-Pak war breaks out in Kashmir and China assists Pakistan in the war. However, after a 6 month war, India is still able to win. In the process, India has exhausted much of its resources by buying military weapons and technology from countries like Russia. The policymakers are adopting a shift to refocus on building its economy and military. Due to the recent war, many of the South Asian countries have started viewing India as an aggressive nation.
Will India’s Future look like any of the timelines outlined above?
*Syed Mafiz Kamal is an international affairs analyst, formerly at New York University. His research focused on South Asian regionalism and also in the the thematic areas of political economy and peacebuilding. He is currently at the United Nations. He can be followed @SyedMKamal.
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