A Superpower in the Making?

The rise of this growing nation will change the balance of power in Asia—and potentially the world.

http://www.realtruth.org/articles/434-iasitm.html

BY JEFFREY R. AMBROSE

With nearly 1.1 billion inhabitants, India is the second largest country on earth in population, and seventh largest in geographical area, over 1.1 million square miles. This is almost 1,000 people for every square mile of area nationwide—much denser than even China.

Since achieving independence from British rule in 1947, it has seen its share of conflict, struggle and setbacks. Although India still faces many challenges, it is now poised to reach a higher position on the world scene than at any previous time.

The Indian economy has grown an average of around 6% annually over the past decade and 8% per year over the past three years—among the fastest rates in the world. It boasts an emerging middle class and increasing gross domestic product, exports, employment and foreign investment. This is complemented by a roaring stock market (index value up by a third in 2005 and by 200% since 2001), low external debt and large foreign exchange reserves.

Recent visits from leaders and officials from the United States, France, Germany and Russia have spotlighted India’s rise. These wealthier nations see India as a trading partner with enormous potential.

Although it has not yet matched the financial performance of China—currently the fastest-growing economy in the world—according to some analysts, India shows even more long-term potential for rapid growth. Leaders from both nations have discussed the creation of a Chinese-Indian common market based on the European Union model. Although only an idea at present, if realized, it would be the largest economic system in the world, home for about 2.5 billion consumers—almost 40% of the human race (or 3 of every 8 people on earth)!

India’s growth becomes more impressive in light of the fact that it is driven by a fraction of its population. Much of the nation remains a picture of rural poverty. Nearly all foreign investment in India goes to its six most urban states, with 22 other less developed states virtually ignored. This gap between city and country is keenly felt in places such as Gurgaon, a suburb of the Indian capital New Delhi: “In a land still plagued by deep poverty and backwardness, Gurgaon has become a renowned home of international call centers, business-processing operations, and information-technology firms. There are gleaming, glass-paned high-tech towers, condominium blocks, multiplexes, and shopping malls, where Indians dine at Ruby Tuesday, browse for Samsung electronics, or kick the tires at a Toyota, Ford, or Chevy dealer. If one overlooks the dusty pockets of poverty nearby, a few water buffaloes picking at garbage near shantytowns, the look is more Southern California office park than the India of yore” (U.S. News and World Report).

Despite the problems seen in India’s underdeveloped countryside—for example, massive unmet infrastructure needs; more illiterate citizens than any other single nation—there are several areas in which the nation excels. These particular specialized talents have allowed a tiny percentage of the populace—perhaps less than 1%—to spearhead its move toward a higher standing in the world order.

Intellectual Capital

India’s economy is divided between agriculture (which accounts for a quarter of the gross national product), manufacturing (constituting another quarter) and the high-tech service sector, which now makes up fully half of the gross national product. Striving to become a “knowledge superpower,” it hopes to skip the intermediate step of industrial development that has preceded other nations’ march into the Information Age.

Scientific and information technology companies from around the world are opening research and development labs in India—more than 100 in the past five years. One mainstay of the new economy is software development, with ever more global firms outsourcing to India the time-intensive work of programming. Businesses worldwide also rely on the country for customer service—phone calls from around the world are directed to call centers in Indian cities such as Bangalore. Other developing markets include pharmaceutical and biotechnology research. Currently, the majority of top American companies send some of their IT work to India, and there is little evidence of a slowdown in this trend.

The business world is also looking in India’s direction. Graduates of the nation’s business programs are in high demand among multinational corporations, with each graduating class commanding a higher average salary than the one before. Those who complete MBA degrees at schools such as the Indian Institute of Management can now expect starting salaries ranging from $75,000 (USD) at Indian firms to over $200,000 outside the country. This is comparable to graduates of top American business schools such as Harvard, Stanford and Dartmouth—testimony to the market value of Indian talent in this area of study.

Military Buildup

As its clout has grown, India has placed a high priority on improving its military capabilities as well.

New Delhi has not joined 187 other nations in signing the Nuclear Non-proliferation Treaty (NPT), and appeared on the world’s radar screen as a nuclear-armed nation in May 1998, with the detonation of five warheads in the desert near the border of Pakistan. This disturbed many governments around the globe, naturally including that of Pakistan, which responded with nuclear tests of its own.

This stand-off was the turning point that began India’s pursuit of a full-fledged nuclear weapons program. According to The Bulletin of the Atomic Scientists, additional nuclear missile tests occurred in the summer of 2004; since then, the Indian Defense Ministry has earmarked $2 billion annually to build 300 to 400 weapons over the next 5 to 7 years.

India maintains a “no first strike” nuclear policy, and asserts that it only seeks enough nuclear weaponry to effectively deter aggressors. U.S. President George W. Bush, during a March 2006 visit with Indian Prime Minister Manmohan Singh, announced cooperation between the two countries on civilian nuclear programs, and had previously called India a “responsible” nuclear nation (Der Spiegel). These measures drew an American diplomatic line between India and other nations that have nixed participation in the NPT, such as North Korea and Iran.

Whatever its nuclear aspirations, the country has a long military shopping list. Last year, it announced plans to build the first aircraft carrier ever put to sea by a developing nation, and to lease two nuclear submarines from Russia. America has openly discussed the sale of naval vessels, combat aircraft, patrol aircraft and helicopters to India. One former U.S. ambassador to India opined, “Of course we should sell advanced weaponry to India. The million-man Indian army actually fights, unlike the post-modern militaries of many of our European allies” (The Economist).

A Turning Point in Relations With China?

Many have compared India’s pattern of growth to its neighbor, China. The countries have much in common—physical borders, immense populations, similar challenges, ancient civilizations, and quickly-rising economies. India also measures itself against China, coveting its economic power and international standing, including its permanent seat on the United Nations Security Council.

Though a degree of tension does remain between the two nations, with lingering memories of the brief 1962 war in which China soundly defeated India, the relationship between these two Asian giants is warming up. Trade between them is now increasing at a vigorous pace, and diplomatic relations are at a post-1962 highpoint. Chinese Prime Minister Wen Jiabao, during a recent visit to New Delhi, hailed cooperation between the two nations as the driving force of a new “Asian Century.” Indian Prime Minister Singh spoke of the potential for India and China to rearrange the world order by working together.

Many have pointed out that their economic strengths seem to be tailor-made for a partnership. India seeks to be a major player in the computer software world in the same way that China is in the area of hardware. Cooperation between Beijing and New Delhi could prove a dominant force in the information technology market.

Both nations have a voracious appetite for natural resources, and a recent energy deal neatly symbolized the new Sino-Indian dynamic: India acquired a 20% share in the development of the largest onshore oil field in Iran. The venture happens to be operated, and 50% owned, by Sinopec—China’s state-run oil company.

However, India could seek to undercut China’s manufacturing prices (as China did with many Southeast Asian countries in the 1990s). But it is more likely to pursue a different segment of the world market by producing higher-quality goods, as well as entirely different products.

Time will tell exactly how the relationship will mix competition and cooperation. These two nations both aspire to “first-world” status—and economic gains could be the incentive for a more tightly allied Asia.

Between East and West

With its newfound power, India faces a dilemma: Should it ultimately pursue closer ties with Western nations, or with other Asian countries?

After India gained independence, its first prime minister spoke of an Asian renaissance, envisioning a tightly bound continent changing the post-World War II landscape. Though premature at the time, the idea is now more feasible than any time since the Cold War era. Along with the improving relations with China, India is also friendly with Russia and Japan. And, as of 2004, the value of India’s trade with other Asian nations surpassed that of exchange with the United States and Western Europe put together (International Herald Tribune).

But the United States—after courting India’s arch-rival Pakistan as an ally in the war on terror after the September 11 attacks—is now distancing itself somewhat from the current Islamabad regime led by Pakistani President Pervez Musharraf, focusing on India instead. India’s common ground with the U.S. includes liberal democratic government, capitalism and, among the more educated urban residents, the English language.

However, America’s courting of India is viewed by some as a way to limit and contain Chinese influence in Asia. Some Indians resent this perception of their nation as a pawn of the U.S. Though they appreciate the American lifestyle and culture, much of the Indian population still sees this lone superpower as a bully.

While it may be able to dance with both partners alternately for a while, India will eventually be forced to choose. Which way will this nation turn?