India Shining?: Life in the ‘Indian Century’

Paper ID:

264

Last updated: 31/01/2012 09:08:31

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Where: Regional

When: 21-50yrs+

How Fast: Years

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Keywords:

India, Security Council, Hindu, Muslim, United States, EU

Summary

Rapid growth in the political and economic strength of India could lead to the country becoming a major player on the world stage. A wealthier, more open India could lead to great opportunities for British business, whilst Indian management of such a diverse society within a democratic framework could become a beacon for developing nations round the world. At the same time, however, a newly resurgent, nationalist India, in concert with other BRIC countries, could post a threat to the economic hegemony of the G8, potentially leading to damaging trade conflict with Britain and the EU.

Discussion

‘India Shining’ was the name given to an overall general feeling of economic optimism in India after plentiful rains in 2003. It was also the central theme in the election campaign of the then ruling Bharatiya Janata Party (BJP) for the national elections in 2004. In many ways, the slogan seems appropriate. India's growing influence on global affairs is evident in a number of spheres - from academia and development theory to business and movies [1].

As suggested by the influential Goldman Sachs 'Dreaming With BRICs: The Path to 2050' report, the BRIC economies (Brazil, Russia, India and China) together could be larger than the G8 in dollar terms in less than 40 years [2] . Despite India's present small share of world trade, its economy could be larger than all but the US and China in 30 years .

Two issues will inevitably influence the role of India on the world stage. First, India's projected economic clout will inevitably mean that it will be a force in determining the health of international markets and the multilateral trading system. Secondly, as the largest democracy in the world, India enjoys unique political legitimacy which means that it is held up as a role model and a progressive influence in global affairs. In the words of Sunil Khilnani, India needs to "make use of its 'democratic dividend' in the ‘global battle of ideas’” [3] .

Most analysts agree that India has yet to find its voice in world affairs appropriate to its power and potential and that India's role on the world stage remains unclear – she has a history of being non-aligned and remaining aloof from power blocs. At the same time, Indian politics has moved generally to the right since the early 1990s [4] with the rise of Hindu nationalism. The potential is there for India to become a very assertive force internationally [5].

In the short term, key questions remain about how it relates to the west and other emerging powers, especially China. More long term, India has yet to stake out its position as a progressive international player, a positive broker in the pursuit of multilateral solutions to global problems and an active player in the promotion of liberal democracy around the world [1].

Implications

The development of India as a major global economic and political power will present a variety of different challenges and opportunities to UK policymakers.

Indian economic growth clearly creates a great number of opportunities for UK businesses across a wide variety of sectors [1] – both as a base for production, and as a (potentially enormous) market in its own right. Though currently British businesses are likely to view India as a source of cheap labour, in future industries such as higher education, manufacturing and automotive industries could offer great investment opportunities, whilst the long history of commerce between the two countries has the potential to provide unique opportunities for economic growth and development [6].

However, increasing Indian economic competitiveness holds the potential for tensions with the West and calls for protectionism [7] – particularly if the country is successful at moving up the value chain of production, competing with Europeans not only in the production of manufactured goods, but also in IT, biotechnology and other hi-tech industries.

Indian companies will very likely become major investors in Britain and the EU – and potentially out-compete European firms domestically and internationally in areas such as software and textiles [4].

Internationally, mutual competition with the West could move India closer towards China - though Sino-Indian relations have been cool since the 1960s. The increasingly influential BRICS – Brazil, Russia, India and China, as well as South Africa – could potentially consider forming a more effective economic counterweight to the G8. Such a scenario could have significant consequences for British trade – particularly as India becomes an increasingly important part of the global economy.

Politically, India could potentially be moved to the right by domestic social tension. Exponential economic growth has exacerbated existing concerns over poverty. The caste system is still an active force, giving social legitimacy to inequality but also stocking serious resentment [8] . This could cause a major sectional cleavage between the rural, the poor and the old, mainly supporting the centre-left, and the younger people, the city-dwellers and burgeoning middle classes who are more right-wing [4]. Together with the religious tension mentioned above, this might propel India’s Hindu political and social elite further from the centre ground and destabilise Indian democracy.

Alternatively, India's experience in managing religious, cultural and economic diversity could potentially act as a model for the developing world – capitalising on their ‘democratic dividend’. Such moral and political leadership could potentially make India a powerful force for global peacekeeping and stabilisation. Moreover, the benefits of a clear and predictable system of governance could make the country a more attractive target for overseas investment that potentially more opaque competitors such as China.

Clearly, for the UK, the emergence of a wealthier India, engaged with the global economy and acting as a strong force for regional stabilisation would be highly desirable.

Early indicators

Significant disagreement on trade with the EU / USA.
Economic growth trajectory follows that of China and hits 10% per year.
Major Indian company in the global top 10 by market capitalisation.
Acquisition of major British household name by an Indian-listed conglomerate.

Drivers & Inhibitors

Drivers:

Economic growth, greater liberalisation of Indian markets.

Inhibitors:

Increasing inequality in India.
Global economic downturn.
War with neighbours – particularly Pakistan.

Parallels & Precedents

The economic development of China and the ‘Chinese century’. The rise of the United States to superpower status in the 19th Century, and the reaction of the existing European powers to this.

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Ref.	Publisher	Date	Title	Category
1	The Foreign Policy Centre		Prasenjit K. Basu, Brahma Chellaney, Parag Khanna and Sunil Khilani (2005) ‘India as a New Global Leader’, London: The Foreign Policy Centre	Pol
2	Other		Goldman Sachs Report ‘Living with the BRICs’	Pol
3	Other		Khilnani, Sunil (2003) ‘Branding India’, India in the Emerging Global Order Seminar Series, FICCI, Delhi	Pol
4	Sage		Vora, Rajendra, Palishkar, Suhas (Eds.) (2004) 'Indian Democracy', Delhi	Pol
5	The Pioneer		Jain, Sandhya (2004) ‘The Demography of Politics’, The Pioneer, 21 September	Pol
6	Other		House of Commons Trade and Industry Committee (2006) ‘Trade and Investment Opportunities with India’, 22nd June	Pol
7	The Financial Express		The Financial Express (2005) ‘India / EU cross Swords over Trade Barriers’ , 8 September	Pol
8	The Guardian		Ramesh, Randeep (2005), ‘Villagers fall victim to India's caste war’, The Guardian, 14 June	Pol

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The contents of this paper were provided by the Outsights-Ipsos MORI Partnership. Any views expressed are independent of government and do not constitute government policy.