India must push for faster economic growth as it navigates today’s bipolar world
Summary
- New Delhi must not get distracted from its focus on the emergence of its economy in a world that’ll have the US and China acting as rival poles of power for some time to come.
The United States has become less of a dominant world power over the last two decades. And China has risen to the level of a near-peer adversary to the US, despite spending only a third as much as the US on its annual defence expenditure. This much is true.
The next five countries combined in defence spending—Russia, India, Saudi Arabia, the UK, and Germany—spend about half of what the US does annually.
Of course, defence spending alone does not count towards becoming a ‘pole.’
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In strategic terms, a ‘pole’ is a country that is able to exert its influence over the world or a large region through its military might, trade and economic standards, economic wealth (a reservoir to create future strength), technological superiority and alliances.
By this definition, only Russia can even be considered; it has a large nuclear arsenal, abundant natural resources and the ability to exert influence in the vicinity of its large territorial boundaries. But Russia is not really a pole because its economic diversity and wealth are weak, and it cannot sustain its exertion of influence over time.
The European Union (EU), Turkiye, Saudi Arabia, Iran and the UK fancy themselves as poles, but are not big enough, nor wealthy enough, and in any case cannot exert power beyond small areas around their borders.
India and Indonesia are large democracies and economies, but their claim to being poles already is being undercut by competition from China and a domestic need to focus on creating prosperity before joining the high table of power.
And so, we are left only with the US and China as poles that can project power and influence over significantly large swathes of the world. It is possible that other countries, particularly India, may rise over time and push the world towards multi-polarity.
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It could also be the case that we remain in this bipolar state for several decades. It is even possible that China overplays its hand, and we return to a unipolar world with the US as the sole global hegemon. It is tough to assign probabilities to these scenarios, except to say that they are meaningful.
Unlike hegemons of the past, the US is one without an empire. It exerts its global influence through an intricate global system of rules and standards. These include multilateral Bretton Woods institutions like the World Bank and International Monetary Fund (IMF), and other such institutions like the World Health Organization (WHO) and World Trade Organization (WTO).
Many of these institutions have begun to fray at the edges.
US President Donald Trump has just pulled the US out of the WHO. The US has been openly showing its antipathy towards the WTO over the last decade. Despite this, US primacy has been maintained because of its military might, global armed presence, alliances and the dollar’s continuing role as the international reserve currency.
The US has about 750 known bases around the world in 80 countries, 350 of which are in Japan, South Korea, Germany and Italy (thus covering Europe and Asia).
China’s role in Latin America, the Caribbean, Africa, South-East Asia and Central Asia, apart from its own maritime zone, is led by trade and investment coupled with Beijing’s Belt and Road Initiative (BRI). China’s first international base is strategically located in Djibouti, south of the Suez Canal in the Red Sea. It also has listening posts in Cuba and Kazakhstan.
For emerging powers, it is a delusional distraction to believe that the world is well and truly multi-polar. This may result in inappropriate priorities and misallocated resources. These countries would do better to focus on the building blocks that get them closer to their aspirational pole status. The most important building block is economic strength and diversity, apart from trade networks.
For India, creating inclusive prosperity for its people should be the main focus for the next two decades.
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As and when India achieves upper-middle income status, and its fiscal and current accounts attain a better balance (from the deficits of today), then New Delhi will more naturally be invited to the high table. For instance, working on expanding the G7 to include India as an eighth member is a more important priority than securing membership of an expanded security council with differential (veto) rights.
While India does not make the cut on per capita income, it does for other reasons: It is a democracy and its GDP, both in terms of market exchange rates and purchasing power parity (PPP), places it among the world’s largest economies.
India has been invited to the G7 outreach meeting eleven times and it would be a useful allocation of our resources to convert this into membership.
True, the G7 is only an informal group of countries, but its focus on economics and the access that leaders have to one another can be especially useful to India for the purpose of engendering prosperity over the coming years.
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A high priority should also be to join at least one meaningful plurilateral trade group, such as the CPTPP or RCEP. Today’s supply chains even for single products touch many countries and it behooves India to be part of those supply chains.
We must also undertake the necessary domestic reforms to lift economic efficiency. Bipolar conditions need to be recognized and managed. So too, the state of this world.
P.S: “Power is like being a lady, if you have to tell people you are, then you aren’t," said Margaret Thatcher.
The author is chairman, InKlude Labs. Read Narayan’s Mint columns at www.livemint.com/avisiblehand
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