15 days to G20: can India grab its geopolitical moment?
If experts are to be believed, China is the emerging global strategic power. But India has a strategic opportunity starting it in the face. The question is: can it grab it?
As geopolitics has evolved from the “age of sails” through the “age of space” to “the age of wealth” and conquest is now for the mind of the global consumer — a large chunk of which lies outside any national border — the severe meltdown of the developed economies has lightened their strategic weight.
In a brilliant article in Foreign Affairs (a must-read journal for anyone with more than a casual interest in strategic issues), Roger C. Altman, US deputy treasury secretary in 1993-94 argues that the crash of 2008 is “a geopolitical setback for the West”. You can read part of that piece here, the rest is unfortunately paid.
“This movement,” he argues “also reflects the rapid rise of other economies, especially China and India. The US share of world GDP has been declining for seven years before the financial crisis hit. And it looks increasingly likely that China’s GDP will surpass the US’ at some point during the next 25-30 years.”
The reason for China’s geopolitical advantage is its economy — an 8.5 per cent projected growth rate in 2009, $2 trillion of foreign reserves, household savings of 40 per cent — which it will leverage to buy natural resources in Angola, Kazakhstan and Sudan and expand its influence there.
Finally, through the conclusion of its free trade pact with Association of Southeast Asian Nations, Beijing would create the world’s largest free-trade area, where it is expected to play a leadership role and expand its area of influence.
While India is taken in almost the same breath as China — economic growth, strategic importance, huge market — it is not quite in the same league. According to Altman, “India does not have nearly the wealth or the internal cohesion of China….India is inwardly focussed and not particularly equipped to advance its geopolitical standing.”
But in the G20 negotiations, India has brought its intellectual prowess to the table. To convert that into a strategic advantage, India needs to behave like a leader. For instance, it needs to stop whining about protectionist tendencies (even though it has scored a goal on that front on March 14) and start offering itself as a global financial centre that can take the best from the world and package it within the conservative framework of Indian finance.
With the global financial centres of New York and London being looked at with suspicion and Singapore and Hong Kong reeling, India can position Mumbai as the next stable global financial destination — already, some of the biggest deals in the past few years have happened in India (Tata-Corus and Tata-JLR being the high profile ones), more should follow.
An incisive and in-depth report titled, Making Mumbai an International Financial Centre, highlights the potential. I wrote a few oped pieces on the report when it was released in April 2007. This one critiques the report, while this one condemns the attack on north Indians living in Mumbai by Raj Thackeray’s goons. If you want to follow this further, go to this brilliant blog by Ajay Shah.
But simply following the report won’t be enough now — the credit crisis has changed all that. Today, what the financial world seeks is stability, which ironically (the absence of sophisticated instruments here), is the mood and the need that India can provide.
Over the next 24 months, this mood and need will change, as the global economy revives. The question is: can Indian leadership see and exploit this opportunity? Can Prime Minister Manmohan Singh convince the world to consider Delhi (if Mumbai is unacceptable to the global finance fraternity because of local tensions) as the next global financial centre?
Of course, India has to get its domestic politics right — and that is the biggest fear that a lame duck Singh would present. If an alliance led by NDA or UPA emerges as the new government, global markets may consider the proposal. Any other alliance would need to be reassessed, something for which the world doesn’t have the time just yet.
The Third Front, in any form, will be backed by the Left parties and if Communist Party of India (Marxist), which released its election manifesto yesterday is to be taken seriously, the future of finance is rather dark — no full convertibility, no speculative finance, no FDI increase in insurance, no private pension funds, no pension money in stock markets…
That leaves UPA or NDA. If they have the right intent, if they want to bring in reforms that take the country many steps higher in the global financial stakes — as it has since 1991 — they will have one thing going for themselves: timing. In a recent paper, Do Elections Slow Down Economic Globalisation Process in India? It’s the Politics, Stupid!, Krishna Chaitanya Vadlamannati of University of Santiago de Compostela, Spain says that under the early part of any Indian government’s tenure globalisation quickens.
“As incumbent government nears the scheduled elections, economic globalisation process keeps slowing down, while this is exactly opposite during the early years of incumbent government in office,” he argues.
The alliance that gets to govern India for the next five years and enters office in May 2009 will do well to remember that and broaden its area of influence in an emerging geopolitics of a multipolar world. Of course, this won’t happen immediately — it will have to be a persistent investment that will bear fruit over the next quarter of a century.
This could be India’s best shot at capturing its geopolitical moment in a long, long time.