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January 2, 2011

The raja-mandala is global

At a seminar earlier this year, a participant asked if the numerous crises in India’s immediate neighbourhood will limit India’s growth. This was some time after Prime Minister Manmohan Singh, at a press conference in May, asserted that “India would be unable to realise its full economic potential if it couldn’t reduce tensions with its neighbours, especially Pakistan”.

“Not at the moment, and not for the foreseeable future” I replied, “because the biggest bottlenecks to sustainable economic growth are domestic.” Only after the most important reforms—creating a national common market, unshackling agriculture, liberalising labour laws and fixing the education system—run their course might the situation in the neighbourhood begin to matter.

In a recent paper demographics and India’s labour force, Tushar Poddar and Pragyan Deb of Goldman Sachs estimate that they see the Indian economy growing at an annual base rate of 8 percent. With the required reforms, the growth rate will increase to 9 percent. With wrong policies, there is a risk that the growth rate will fall to 6.5 percent. V Anantha Nageswaran, geoeconomics fellow at the Takshashila Institution notes that the country’s “high savings rate and better capital efficiency will ensure [high growth rates] with little difficulty” (See “Inflation is the tip of the iceberg”). Economic policy analysts are mainly concerned with ensuring that the growth is of high quality.

The neighbourhood doesn’t register much in these assessments. In fact, Dr Singh himself concedes as much. “A number of inherent strengths in the country’s economy” he said in July, “can contribute to rapid growth in the future and they should be harnessed to push up economic growth to double digits.” In other words, Dr Singh own economic prognosis contradicts his geopolitical rhetoric.

The prime minister’s concession underlines the simple fact the most brazen of Pakistan’s skulduggeries are shrugged off by the India economy. You don’t need to have grand “composite dialogues” with Pakistan’s flippant, impotent and tiresome politicians to sustain India’s economic growth.

On the contrary, the question for India’s immediate neighbours is whether or not they want to benefit from India’s growth process. It’s their decision. First Sri Lanka and now Bangladesh appear to have embarked on trajectories that make the most out of opportunities provided by both India and China. Pakistan—perhaps because its unaccountable elite are buttressed by liberal Western aid—is unconcerned with improving the lot of its own people. That is its own problem. It is in India’s interests to improve trade with its crisis-ridden neighbour, but it won’t hurt the Indian economy much if that doesn’t happen.

Once the Indian economy exhausts all the potential from the necessary next wave of reforms the state of the immediate neighbourhood might begin to impose constraints on its further growth. That point is at least two decades away. And it is by no means certain that it’ll matter even then, for it is possible that the neighbourhood will matter even less.

Also, as I have argued elsewhere, for too long New Delhi has convinced itself that India’s neighbourhood comprises the countries along its land borders. Engaging the countries of the subcontinent is no doubt necessary, but it is both accurate and important for Indian civil society, businesses and government to understand that the lands across the seas are neighbours too.

Take for instance, Indonesia: merely 167 km away at the closest points between the two countries. According to the latest EIU forecast, the $540-billion Indonesian economy is set to grow at 6 per cent over the next couple of years, its business environment is improving, it is more open to trade, and investment licences are easier to obtain. So, if you hear that India’s neighbourhood is not conducive to its growth, it is only because we have denied neighbourhood to some neighbours.

Dhruva Jaishankar, a fellow editor of Pragati, has pointed out, there are enough examples—he cites the examples of historical Europe, post-Meiji Japan and post-1979 China—to dispute the validity of the assertion that regional instability is a binding constraint on India’s emergence as a global power.

The Indira Doctrine—which treated the subcontinent as India’s exclusive sphere of influence—died sometime over the last twenty years. Whatever might be the reasons for its lapse, the objective reality today is that India is a pre-eminent power, but not the sole hegemon, in its immediate neighbourhood.

Should Indian foreign policy attempt to resuscitate the Indira Doctrine? Doing so would be limiting the vision to India’s capabilities and interests to what obtained during Indira Gandhi’s days, would be very challenging, of dubious strategic wisdom and perhaps even unnecessary. Why ? Because India is playing on a much bigger ground today. Indeed, New Delhi needs a Global Raja-Mandala doctrine. So, for instance, if China seeks to gain influence in India’s immediate neighbourhood, India can, and should do the same in China’s neighbourhood. And elsewhere.


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