The Recession and Geopolitics
In a recent speech, the Prime Minister’s Special Envoy, Shyam Saran, makes three significant arguments which should provide a sound basis for broader Indian strategy in the coming years. First, getting out of the recession will require greater U.S.-China cooperation which India should take into consideration. Second, the crisis gives India strategic space and flexibility. And third, that India should not use the crisis to regress back into statism and economic isolationism, but should rather treat it as an opportunity to enhance its infrastructure, to increase its regional integration and to secure an adequate energy supply.
This speech by the Prime Minister’s Special Envoy, Shyam Saran, is a must-read. There have been surprisingly few coherent speeches on the underlying causes of the current economic crisis by statesmen (including in the United States, where this is a much more politically-charged subject), and even fewer attempts at linking the current crisis to the geopolitical future.
However, the media coverage of the speech, such as this short assessment by Coomi Kapoor in the Indian Express, is off the mark. According to Kapoor, Saran “seems to have second thoughts about the pro-US tilt in our foreign policy. But, it was Saran, himself, who played a major role in shaping the policy. Saran declared that ‘India needs to be geared up for a more diffused and decentralised complex international landscape, with the US enjoying significantly diminished predominance.’” But stating that power in the global system is going to be more evenly distributed, as Saran does, is hardly a rejection of the so-called “pro-US tilt.” In fact, Saran also states that India “must remain fully invested in this critical relationship [with the United States], even while remaining alert to the possible threat to India’s interests…”
But let’s set aside as pro- or anti-American tenor of the speech, as that was not the point. Rather, Saran makes three significant arguments which should provide a sound basis for broader Indian strategy in the coming years.
First, he notes that the cause of the economic crisis is the imbalance between the fiscal and trade deficits of the West, led by the United States, and the fiscal and trade surpluses and forex reserves of other economies, led by China. This imbalance will not be adequately adjusted without considerable cooperation between the United States and China, including on the valuation of both their currencies. To gain economic and commercial concessions from the Chinese, the Americans could quite likely give China more space to pursue its own foreign policy objectives as a trade-off. India may have to adjust accordingly.
Second, the crisis is not necessarily a negative for India. It could give India greater strategic space and enable a more flexible foreign policy taking into account a greater number of actors. This is part of a continuing trend of the last eight to ten years, something that I have described in the pages of Pragati as India’s “omnidirectional commercial and diplomatic engagement.”
Third, Saran urges that India guard against a tendency to further regulate its economy and retreat into the safety of its shell, as most other states move in those directions. “Our statist legacy,” he argues, “makes us particularly susceptible in this regard.” He urges India to use this opportunity to increase economic cooperation with other actors, particularly in the region, even it if requires “unilateral and asymmetric steps.” He also notes that this is a buyer’s market, and India can take advantage of these conditions to enhance its infrastructure and try and meet its growing energy requirements, including through the development of renewable energy sources. Finally, he notes the lapses in leveraging India’s comparative economic advantages through inadequate public diplomacy:
We have to package and project ourselves as part of the solution to the global economic recession and not as its tragic victim. As a sound, credit-worthy and growing economy, with relatively less exposure to the buffeting of the global crisis, we are still a good bet, a low-risk and a potentially high-return economy. We need to communicate these strengths more effectively to the rest of the world than we have so far.
Some of my colleagues have said that it’s unfortunate that such an argument did not emanate from the political leadership. I’m reminded of what Daniel Lak, the Canadian journalist formerly with the BBC in Delhi, wrote after Natwar Singh’s resignation, when Saran was left holding the reins of the MEA as Foreign Secretary:
Saran was on his own, a rare opportunity for the professionals to run the show while the amateurs bickered in parliament. This, at least, was how the columnists depicted the situation. [India Express, p. 220]
On a similar theme: if you have not read it already, do take a look at Ravikiran Rao’s reaffirmation of liberalism in this month’s Pragati. His is a difficult stand to take at any time, but is particularly courageous when politicians and the public the world over continue to blame the market for all of their (and their countries’) ills.
Dhruva Jaishankar is
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Good speech by sri Saran.
Policy seems to be in sober hands, after all. Execution is a whole other story, though. Desi infrastructure remains where it was despite hosannas sung to its importance.
Dhruva,
OT, but I wanted to talk about Joe Klein’s piece on this week’s Time. I am moderate, unaffiliated ABD, and this piece is bearing out the worries I’ve had since election time – uncharacteristically so, I think, among Indians or Indian Americans, or even political analysts – that Obama is, even if unintentionally or through sideline plays, truly bad news for India.
One, it’s worrying that Lute’s review, which has been found to be the most effective with respect to AfPak, has been discarded. Even though he’s still there, under Obama’s lead, in a direct switch from Bush policymaking, Pak is now going to be the ally in the war on terror while India is the externality.
Second, it’s also sad that Obama is discarding Petraeus’s effective COIN strategies and thorough analysis for yet another review. (Even if Petraeus’s numbers and strategies have been proven empirically only in Iraq so far, it doesn’t mean that they cannot be overhauled and applied successfully to suit AfPak, if given the due time, resources, and chance. It seems to is me – I don’t know if anyone would agree with this – that since FP is the one thing that has been going relatively well since BO took office (perhaps because a Clinton is running this? I digress. . ), he will do his best to press for points and leverage wrt to this, at whatever cost it may be to other nations such as India. I interpret this as him casting about for a review commission that will dole out what FP propaganda is suitable to his poll/FP needs that week.
To that end, obviously, Bruce Riedel is neither anyone’s fool nor Martha Nussbaum exactly when it comes to India. Post-Mumbai, however, I was disappointed to read some less-than-perfect accounts from him (biased by Pak-sourced anecdotes, it seems) about the general scenarion. Coll’s latest piece (and Christine Fair & Ashley Tellis’s post-Mumbai action reports also, now that I come to think of it) exhibit the same recalcitrance to pin Pak down. Presumably because it is an ally in the war on terror, but when it’s a “nation” that’s guzzling billions of dollars each year for at least the next five, what is the endgame, and is it even in sight? I – as well as others in the Admin save BO – seem to concur on this point.
I hope that informed opinions like yours are being given due emphasis in the Riedel review – and if you are not involved, I truly hope you can find someone who will convey what is necessary. Partially because it would right thing for America, and partially because USINPAC is no AIPAC (hello, Freeman!).
I am also out-of-sync with other Indians/India-watchers about the rise of the tiger. Military strength was touted amply post-Mumbai, but realistically, there was no chance of that happening. Diplomacy is only as strong as the sovereign behind it (what part about this – and WHY- do Indians fail to understand: carrot, stick, carrot, stick, carrot, stick?!) – and as of months ago, India had nil comparative advantages with which to be a constructive party in any talks or diplomacy. Thus, the economic recession is, IMHO, the absolute greatest thing that could have happened for India right now. Everyone but India is screwed, and if anyone but NDA and Manmohini were in power, I would shout from the rooftops that India is, from the first time in forever, strategically leveraged as if God himself had planned this. However, elections are a good while away, and even assuming a UPA victory (which is just as likely as it is unlikely, imo), I don’t think they’ll have much to work with.
While the economy has great fundamentals, we are lacking – and not acting on – capital investments, infrastructure building, and Modi-esque liberalization and job creation- at an optimal time. The army is in a worse shape, and in a time of greater need, than 1962. US forces have been – long since, and especially since the war on terror started – redesigning themselves for the new modes of war this century will bring – wars of the last century, barring a freak rampage by China, are going to become virtually obsolete. India, as the perpetual first front in the war on terror, should have been leading the pack in re-structuring and modernizing the Armed Forces. I also don’t trust NDA in the case of a worst-case nuclear strike. And I’m willing to bet one of each of my paired organs in saying that if (when?!) LeT/AQ get hold of Pak nukes, the US won’t care as long as the US/its interests are not in danger. India’s ABMs better be up to scratch! India is thus getting the worst end of every possible scenario – and I’m not optimistic. If we can be one of the few nations to get to the moon on our OWN, why the hell can’t we pull a Mossad and get Pak nukes secured or destroyed? Despite Gujral’s best efforts, the actions taken by certain BJPers lead me to believe that while humint infrastructure and good intel has been on the decline for a good while, there is still enough to build up from here and get going.
Anyways, I’m terribly worried about where this is all heading. If you could educate us Polaris readers on this situation, and what – if anything – you think can/should be done, I’ll at least be satisfied that we are attempting to engage with this.