India's power to make autonomous foreign policy choices will make sense if it is geared towards improving its people's lives.
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India’s “strategic autonomy” - An analysis
- The story: India was the leader of the Non-Aligned Movement, through the 1950s to 2000s, before it slightly lost interest! All through, India made new friends, like the USSR in 1971. But through the twists and turns of world political equations, it always retained its own freedom, a certain 'strategic autonomy'.
- Strategic autonomy: It may be defined as the ability to make one's own choices, in the face of great power rivalry. It may be the ability to join one group or the other, based on the issue involved: for climate change with the third world, for Afghanistan with the US + Russia + Iran; for trade with China to preserve access to Asian market; or for balancing against Chinese hegemony - the Quad.
- Works for whom: This is manageable if the nation has an insular economy, with no great need to trade abroad (as domestic economy itself provides full employment, and a decent life for most). The security strategy then is geared to preserve the status quo, and the nations makes do with the minimum force level to deter other aggressive players.
- India's case: India is none of these. As the world's third largest economy, accounting for 6.7% of global GDP, India cannot retire into a corner and pretend it does not matter. Even if India did not do nobody any harm, others will not leave such a significant power alone. The rule of hard strategy says that 'if you are not with us, you are probably against us'. Neutrality does not exist, for a significant power.
- Today, about 55% of Indians are without jobs, some 25% are desperately poor, stuck in Malthusian traps, from which unassisted escape is impossible.
- India's annual per capita income is just 1900 USD, putting India in the lowest quartile globally.
- The minimum goal of planning must be [i] jobs for all which takes India's labour participation rate from 48% currently to at least 65 to 75% range, and [b] lift all those below the poverty line above a daily consumption level of $5 per day, by fostering growth that creates jobs for all.
- Most of India's trading partners already have labour participation rates in excess of 60%, and per capita incomes 5X times this level.
- Gross savings: India's present gross savings, at 30% of GDP, that includes about 3% of GDP as FDI plus portfolio flows plus external borrowings, cannot generate non-inflationary growth beyond 6% maximum. The most one can expect is 4 to 6%. Any incremental growth must come from export production, financed by external savings. India need at least 30 million new jobs per annum, for which it needs to increase exports from 450 billion to 1 trillion. Generating $ 500 billion in incremental GDP requires $ 2.5 trillion of new investment, over and above the existing level. If India sets a 10 year target, this means an FDI level of $ 250 billion per annum, over and above the current level of $60 billion. So engaging vigorously with the world is the only way forward.
- India's real imperative: Real strategic autonomy is always defined in relation to national imperatives. It is not an imperative by itself. It is a means to achieving national imperatives. China is 18% of the global GDP, the US is 16% of the GDP, and Japan and EU put together make up another 15%. Between these three, India is at 50% of global GDP. Given the need for export markets to provide jobs for our people, the first and foremost imperative is to preserve preferred access to the markets of China, US and EU. Under no circumstances can India afford to lose access to these markets.
- Get into the RCEP - So India must repair trade relations with the RECP. Begin by repairing the faulty exchange rate mechanism that inflates the value of the INR making protectionism necessary to shelter domestic producers. Local producers must be assured that adequate level of protection will be assured to them through exchange rates.
- Manage the exchange rate - The Central Govt must provide the RBI with budgetary support to mange the exchange value of the INR regardless of ups and downs in FDI and portfolio flows. Exchange rates must become a more important tool of economic management, just as the interest rate, under a new policy regime. All export subsidies may be eliminated with the exchange rate ensuring that exports are not only viable, but also profitable, in local currency terms.
- This will ensure India can join the RCEP without any disruption, and sort out the trade dispute with the US, and restore the MFN status. A similar exercise was undertaken at the time India joined the WTO.
- US, China, India: The US aim is not so much to prevent a China rise, as to limit its peak power, such that it cannot become the only dominant player. The US will not let China break through the Pacific Ocean to its shores. The US grand strategy is based not having to defend the homeland, by keeping actual conflicts as far from its shore as possible. Once its forward defenses are pierced, its capacity for global hegemony ends. AUKUS is about thwarting such an effort by China, which anyway needs many more years before it can confront the US and its allies with a credible naval force, to force its way past the line of defense that the US has drawn, stretching from Japan to Australia.
- How does China then expand its access to resources and secure them till it is ready with a westward expansion? By going eastward; where there is a middle power like India, many smaller powers in central Asia, and potential allies like Iran, Iraq and Pakistan.
- Hence India must assume that China will expand its sphere of influence eastwards, with or without India's acquiescence.
- India cannot prevent China's expansion eastwards, with or without US backing, being realistic. India's imperative must be trade with China, not war with it.
- Democracy: India's future lies with the US and its allies as a democracy, and not with an authoritarian China. India should ally with the US, especially as China is more likely to go to 25% of global GDP, while US goes to 20%, and India moves up to 10%. China may have already peaked under a despotic Xi, though momentum can see it carry on for a decade or two.
- What of Pakistan: It has achieved what it wanted since the 1970s - a complete and near total hegemony over Afghanistan. In doing so it risks sinking in the same quagmire that has trapped greater powers than it. Pakistan doesn't have the economic surplus to sustain a central government in Afghanistan. The latter's terrain and tax system is tailor made for warlords. India only needs some friends like Russia, Iran, and the US. (One day, the US might see an intervention in Baluchistan as an effective way to checkmate China's eastward expansion). As long as China is allowed free access to Iran, it might not be averse to shrinking the threat that jihadis in Pakistan and Afghanistan pose to it in Xinjiang.
- Focus on people, jobs, incomes: India's growth rate has been shrinking for 4 years, capped at 5 to 6% maximum because merchant exports have stagnated at $300 billion for the last decade. India can neither create jobs nor push up growth without a quantum jump in exports. But the latest trade policy is an oligopolists one, with protectionist tariff walls, keeping India from joining trading blocks or FTAs. Strategic autonomy is not just the ability to buy S-400 from Russia, or lease a nuke sub. Let Indian polity realise it needs to build an India where most have good jobs, and all foreign policy choices must align with it.
- EXAM QUESTIONS: (1) Explain the concept of 'strategic autonomy' from the Indian perspective (2) The moment policymakers start putting people, jobs and incomes first, the entire approach to foreign policy changes. Explain how.
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