A Power Cut For India

Source: This post is based on the article “A Power Cut For India” published in The Times of India on 31st August 2021.

Relevance: This article explains the link between India’s economic performance and geopolitical developments.

Synopsis:

The setback in Afghanistan highlights a recent decline in the country’s geopolitical & economic weight.

Context

India’s external environment and domestic foundations have facilitated India’s rise as a major power in the post-Cold War period. But the geopolitical setback in Afghanistan and prolonged economic underperformance at home have raised questions about the government’s policy, priorities and strategic objectives in the near term.

What is the state of India’s economic performance?

After three decades of annual average growth of national income of around 3.5%, during 1950-80, the economy grew at 5.5% during 1980-2000 and 7.5% thereafter. During the ‘golden era’ of growth, 2003-10, the economy grew at over 8.5%.

This acceleration of economic growth enabled a decline in poverty, a rise in employment and urbanisation, a doubling of the share of external trade in national income and more than a doubling of the share of Indian exports in world exports. The emergence of globally competitive Indian firms and professionals defined the ‘rising India’ narrative.

How economic performance helped to increase India’s geopolitical performance?

A report of the Indian National Security Advisory Board (NSAB) (chaired by the late K Subrahmanyam) was observed in 2000, “Economic power is the cornerstone of a nation’s power in the contemporary world.” India has so far lived up to the point. For example,

1. The global countries, especially the US, Japan and Australia, imposed sanctions on India after the Pokhran-II nuclear weapons test in 1998.
   • But the ability of the Indian economy to withstand the impact of economic sanctions attracted global countries for Indian markets.
   • Now, India is a part of the Quad with the same countries that imposed sanctions.
2. Economic prosperity helped India to address two key geopolitical challenges.
   • India is able to withstand the economic rise of an authoritarian China.
   • India is able to control the cross-border terrorism fuelled by ‘global jihad’.
3. Further, India’s economic rise has also made the global environment more conducive. For instance,
   • India’s sustained economic rise and its ability to weather storms such as the 2008-09 trans-Atlantic financial crisis reinforced positive perceptions about its rise.
   • After the signing of the ‘strategic partnership’ agreement between India and the US, the international community began to adopt a benign approach towards India.

Based on the above points, it is clear that India’s rise in the post-Cold War period has been defined principally by its economic performance.

What is the status of India’s economic performance at present?

• The slowdown of the Indian economy was initially viewed as a temporary blip. But the slowdown now appears as longer term. The Covid-19 pandemic has only made matters worse but is not the starting point of the slowdown.
• Despite several policy interventions aimed at jumpstarting growth, there is no evidence yet that the economy will return to the 7.5% trajectory of the 2000-14 phase.
• This has already imposed fiscal limits on domestic public investment and on external soft and hard power capabilities. In this situation, the rise of the Taliban can only further hurt India’s national security environment.
• So, to restore the momentum to the economy, India requires a stable domestic and regional environment. A new and honest strategic dialogue is needed between India and the US to secure an objective reassessment of their partnership.