Four geopolitical developments and a window of opportunity for India

Synopsis: China’s hardships and other significant events around the globe boosts  India’s economic prospects

Introduction

A number of important developments have taken place over the past several weeks. They may appear disconnected, but in fact, they add up to a significant shift in regional and global geopolitics. These developments are,

1. The withdrawal of US and NATO forces from Afghanistan and the complete takeover of the country by the Taliban.

The Afghan situation is a setback for India in the short run. In the long run, India’s method of keeping faith with the ordinary people of Afghanistan will reap benefits.

2. Significant domestic political changes in China

Political change: The “one country two systems” model in Hong Kong, which was on offer to Taiwan, has lost its credibility after the recent crackdown on civil liberties in Hong Kong. China may advance its forcible takeover of Taiwan before the AUKUS gets consolidated.

Economic change: After the tech sector, it is the large real estate sector that is facing regulatory assault now in China. This is leading to deepening concern among foreign investors, including those who have long been champions of long-term engagement with China.

3. The announcement of the Australia-UK and US (AUKUS) alliance

The AUKUS has now become the core of the US’s Indo-Pacific strategy. China will be more focused on its activities. The Quad now represents, from the Chinese perspective, a second-order threat.

4. The first physical convening of Quad

The meeting outcomes reflect a major step towards its formalisation as an influential grouping in the Indo-Pacific going beyond security.

How do these events boost India’s economy and how to improve it further?

India might attract significant capital and technology flow from the US, Japan and Europe diverted from China. But, some bold initiatives are required to take advantage of the window of opportunity that has opened.

Some of these issues are being addressed, such as the dropping of retrospective taxation. But India needs to avoid policy unpredictability, regulatory rigidities and bureaucratic red tape.

India should also consider rejoining the Regional Comprehensive Economic Partnership. In addition, India can also join the more ambitious Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). These would signal India’s determination to play itself back into the centre of the Asian economy.

All these developments provide a narrow window for India with a very short shelf life. If grasped with both hands, then it could deliver double-digit growth for India for the next two or three decades.

Source: This post is based on the article “Four geopolitical developments and a window of opportunity for India” published in The Indian Express on 29^th Sep 2021.