India, a BRIC in a House of Glass?

by Ryan French

President Obama made a concerted effort to win India's favor during his recent diplomatic tour of Asia, taking every opportunity to praise the largest democracy in the world and even calling for a permanent Indian seat on the United Nations Security Council. The United States is indeed wise to strengthen its partnership with India; the country's skyrocketing economic growth and impressive power potential have led analysts to describe it as a “BRIC state” – one of the four rising states (including Brazil, Russia, and China) on track to challenge the traditional economic dominance of the West. While China is the BRIC that receives the most attention from worried Western policymakers and academics, India’s rise is conversely viewed with encouragement in the U.S., which sees India as a vital “offshore balancer” to China’s ever-growing regional influence.

India has attained BRIC status for a number of reasons, the most obvious of which being an average annual GDP growth of 7.4%, which only decreased to 6.5% in 2009 in the midst of the global financial crisis (CIA World Factbook). Additionally, India sits on a wealth of natural resources and arable land, including the fourth-largest reserves of coal in the world. If India is able to develop peacefully and harness the full productive potential of its massive population, there is little doubt that the country will rise as a regional power with a capacity to rival China. Nevertheless, India faces tremendous obstacles – both external and internal – to its long-term growth and development; these must be addressed by the government in New Delhi if India is to realize its destiny as a regional economic and military powerhouse by the middle of the 21^st century.

India faces a number of external barriers to its continued prosperity, primarily from Pakistan and to a considerably lesser extent from its regional competitor, China. The November 2008 terrorist attack in Mumbai demonstrated India’s vulnerability to terror as a state-sponsored tool, as allegations persist that Pakistan’s Inter-Services Intelligence provided intelligence and logistical support to the Pakistan-based terrorist group behind the attack, Lashkar-e-Taiba. While no definitive proof of the Mumbai link has been unearthed, the ISI's past support for militant groups in the disputed Kashmir region has created fertile ground for suspicion. These allegations have exacerbated ongoing tensions with Pakistan over Kashmir and threaten to embroil India in a costly war that could jeopardize its long-term growth. Furthermore, India and Pakistan’s relatively unsophisticated command and control procedures greatly increase the potential for a conventional war to escalate into a nuclear exchange. India should seek a compromise over Kashmir similar to the de facto settlement reached with the Chinese in the mid-1990s regarding the territory dispute over Arunachal Pradesh and Aksai Chin. However, negotiating with Pakistan over Kashmir would be a politically unpopular venture for Indian policymakers in a country where the news regularly demonizes its western neighbor, “Pak.”

India is also cursed with a number of formidable domestic obstacles to long-term economic growth. First is the underlying ailment of joblessness in India’s fast-growing economy; despite averaging 7.4% GDP expansion per year, India’s unemployment in 2009 was at 10.7% (CIA). In 2007, the percentage of the population below the poverty line was 25%, which in a country of 1.2 billion people is 300 million – the near equivalent of the entire population of the United States! Unless it is reversed, the developing world poverty that is so endemic to India will constrain per capita productivity and continue to hinder the country’s prosperity in the coming decades.

The population of India deserves particular analysis in any discussion of the country’s projected rise.Projected to surpass China by 2040, India’s exploding population – which grew by 15.58% between 2001 and 2010 – would be an incredible asset for a rich, developed country with high levels of physical infrastructure. However, India does not currently meet this development profile, and its economic growth could stagnate if its cities fail to meet the infrastructure needs of a growing population, which according to a Goldman Sachs report include, “…water supply, sewerage and sanitation, urban transport, and urban renewal.” India’s population is 52% agrarian according to the CIA World Factbook, and as the country modernizes, these people will flock to urban centers in search of a better living. As it stands, India is slated to become 60% urban by 2050. Because of Goldman Sachs' finding that the movement of rural populations to cities accounts for a considerable portion of India’s annual GDP growth, the Indian government must prepare the infrastructure of their cities to handle an unyielding influx of migrants (Goldman Sachs). Specifically, one of India’s most glaring infrastructure inadequacies is the endless trash that seems to pile up on the sides of roads, sidewalks, alleyways, and parks. The Indian government will have to muster a competent public sanitation program in the near term or watch as New Delhi and Mumbai become populated landfills.

One of India’s most critical and glaring problems lies with its transportation infrastructure. Any Westerner who has visited India immediately notices the dismal condition of the roads. Where the roads are paved, they are treacherous and dotted with potholes, and unpaved roads are simply incompatible with even medium-term population growth (and rainy seasons, for that matter). The need for radical improvement of the roadway network is evidenced by the fact that India’s demand for automobiles is expected to drastically increase; in 2009, Indian auto sales totaled 1.43 million, and Ford Motor Company alone reported a 237% increase in auto sales from April to September of this year. Although car ownership currently hovers at the 1% mark, that figure will soon begin an exponential ascent. India must develop the transportation network to handle tens of millions of additional cars, but they must also have the petroleum resources to fuel them.

Oil and energy sources in general are of particular salience to the subject of India’s rise. India presently imports over 97% of its oil to satisfy domestic demand (CIA). Thanks to soaring demand for cars, domestic oil consumption will continue to grow, just like with China. Moreover, once India's population surpasses China's sometime around 2040, the average Indian citizen will have an even greater economic means to afford a vehicle. India must work quickly to secure reliable oil sources to meet these eventual needs, though China has gotten a head start in this arena through its efforts to secure resource contracts with African countries in exchange for infrastructure development projects. There is more to the energy equation than oil, however, and India is making some progress toward a sustainable energy future. The 2005 Indo-U.S. civilian nuclear deal was a move by India to bolster its capacity to generate nuclear power with the help of U.S. technology and general know-how. In return, India has agreed to submit to IAEA inspections of their civilian nuclear facilities. Still, much more remains to be done for India to attain proper energy security.

India’s capacity for long-term sustained growth is further challenged by the fact that only 41% speak the most prevalent national language, Hindi; there are 14 other official languages in the country, including Tamil, Telugu, and Bengali (CIA). These overlapping language barriers are indicative of a deep-rooted structural problem – an inadequate public education system. With India’s literacy at 61% and school attendance by 6-14 year olds at 80%, there is much room for improvement in India’s education system. As the old parable of the Tower of Babel illustrates, a civilization that cannot communicate is unable to cooperate and achieve success. New Delhi, however, understands the urgency of India’s education problem and is seeking to ensure 100% school enrollment by the end of this year (Goldman Sachs). Whether the initiative will be a success remains to be seen, but as long as there is a meaningful effort to improve the primary and secondary-school educations of India’s children and teenagers, some progress is certainly better than none.

India’s long-term economic growth will also depend in great deal on foreign direct investment, but nothing scares away investors like a good insurgency. India has suffered from an ongoing Maoist insurgency since 1967 from a group of rebels known as the Naxalites. In 2006, Indian Prime Minister Manmohan Singh referred to the Naxalite-Maoist insurgency as “The single biggest internal security challenge ever faced by our country.” It is very much a rural, peasant-supported movement, but India upped the ante on the Naxalites in November 2009 by initiating an ongoing offensive known as “Operation Green Hunt.” Unfortunately, the Indian offensive has ignited unforeseen levels of violence, with the Naxalites conducting successful attacks on Indian security forces and the leader demanding an immediate end to the “Hunt.” Now that the offensive is well underway, India will have a difficult time disengaging from the bloody conflict while still saving face; what was previously a nuisance has mushroomed into a considerable dilemma with no easy solution.

India has an ongoing tourism campaign cleverly titled, “Incredible !ndia.” Indeed, whenever tourists visit India, they always return home with fantastic stories about the wealth of historic sites, the spectacular Mughal architecture, and the friendliness and hospitality of the people. It is never long, sadly, before the stories emerge about India’s abject poverty, the begging in the streets, treacherous roads, and crumbling infrastructure. India will have secured its future prosperity as a BRIC state when it shears the thorns from the rose; when that gloomy half of every visitor’s story becomes a relic of the past.