India: Asia’s Geopolitical Sweetheart

Economic doldrums mean that India is not much of a destination for global investors nowadays and the flight of foreign capital is depressing the rupee’s value to record lows vis-à-vis the U.S. dollar.  Even domestic investorsprefer to put their money elsewhere.  The country was the toast of the 2006 World Economic Forum in Davos, with “India Everywhere” emblazoned throughout the conference halls and a Bollywood extravaganza staged as the main social event.  But it was relegated to the sidelines at this year’s gathering.*

Nonetheless, as a series of developments in recent weeks prove, New Delhi is emerging as an important pivot point on Asia’s geopolitical stage.  One set of events attests to India’s long-term economic significant.  The Organization for Economic Cooperation and Development reported that India, even with its current decade-low growth rate of five percent, has likely moved past Japan as the world’s third-largest economy and the second largest in Asia.  It added that by the end of this decade India may even have supplanted China as the world’s fastest-growing major economy and that over the next half-century the country’s GDP per capita will increase more than eight-fold.

Reinforcing these points is a new report by WealthInsight, a London-based consultancy.  It projects that India by 2020 will possess the world’s fifth-largest population of high net-worth individuals.**  Both it and the OECD estimate underscore the assessment made last fall by the U.S. National Intelligence Council that “India will be the rising economic powerhouse that China is seen to be today.”

Next consider how the Asian diplomatic scene has started to resemble a Bollywood romance, in which three zealous suitors (America, China and Japan) vie for the affections of a woman (India) whom they previously took for granted.  Beijing and Tokyo have both spent the last month chasing after New Delhi, and Washington will shortly rejoin the pursuit.

Until very recently, China did not give much notice to India.   Four years ago,The Global Times, a state-run news outlet, dismissed India’s strategic prospects out of hand:

India cannot actually compete with China in a number of areas, like international influence, overall national power and economic scale.  India apparently has not yet realized this.

And two years ago, Beijing rejected Washington’s suggestion to hold a trilateral dialogue with New Delhi, telling U.S. officials that India was a “lesser power” that had no place in an exchange among equals.

But the Chinese were singing a much different tune during Premier Li Keqiang’s four-day visit to India in mid-May.  The Global Times now ran an opinion piece noting that “Chinese people lack understanding and respect toward India. They tend to judge it according to ill-conceived preconceptions.”  It added that ….

China’s surrounding environment will suffer if India, a country which has the prospect of running neck-and-neck with China, becomes another Japan or Philippines in terms of its policies toward China.

The China Daily, another official press organ, resurrected the neologism of “Chindia,” a theme that Mr. Li picked up in an article published in The Hindu, in which he stressed that Asia’s future hinged on the tight cooperation between the two countries.  Li had previewed this pitch a few days before his trip when he told a visiting Indian youth delegation in Beijing that India and China “must shake hands” to make Asia an “engine of the world economy.”

During his stay, Mr. Li played up the symbolic honor he was according India by making it his first foreign stop since assuming the premiership in March.  And he repeated a line he’s been using for a while about how Sino-Indian ties were destined to become the century’s important bilateral relationship.  It’s striking that Li’s phrase is a virtual echo of the Obama administration’s regular formulation about Washington and New Delhi constituting “an indispensable partnership for the 21st century.”

Li went on to promise Indian business leaders that “China will make your dream come true” and offered talks on a free trade agreement.  With New Delhi looking for greater foreign investment in Indian infrastructure projects, Beijing has floated an offer to pump as much as $3 billion into a project expanding the Mumbai metro system.  And Li topped off the wooing by recalling a Chinese proverb about how a distant relative may not be as useful as a near neighbor, a reminder of the attractions Beijing holds out compared to what Washington is offering.  The People’s Daily underscored the point byeditorializing that the United States should not be jealous of a China-India combination.

No sooner had Li departed than it was Japan’s turn to ride the courtship carousel when Indian Prime Minister Manmohan Singh arrived in Tokyo for a four-day visit.  With Japan the largest foreign investor in India and India being the top recipient of Japanese development funds, Tokyo has traditionally been more solicitous of New Delhi than Beijing.  But this pursuit has now kicked into overdrive with Shinzo Abe’s return to the prime minister’s office.

Abe has long put special emphasis on collaboration with India.  In a manifestowritten for his 2006 bid for leadership of the Liberal Democratic Party, he argued that it would “not be a surprise if in another decade, Japan-India relations overtake Japan-U.S. and Japan-China ties.”  Speaking before the Indian parliament in August 2007 during his first stint as prime minister, heproclaimed that Japan has “rediscovered India as a partner that shares the same values and interests and also as a friend that will work alongside us to enrich” what he dubbed a “broader Asia.”

Abe reiterated this theme during Mr. Singh’s visit, terming the Japan-India duo essential to ensuring that “Asia remains in peace and prosperity.”  He waseffusive in his praise of Singh, saying his friendship with the Indian leader has “touched me most deeply” and that “I think I have learnt from you more than I am aware myself.”  He plied New Delhi with gifts, including offers to lend $700 million to the Mumbai metro project and invest in India’s high-speed rail system.  And in a rare honor, the Japanese emperor hosted a private lunch for Singh and plans were laid for the imperial family to visit India later this year.

Predictably enough, Beijing reacted in jealous fashion to Abe’s serenade.  ThePeople’s Daily carried an article contending that China-India relations were now so tight that Japanese leaders would only embarrass themselves by trying to break them apart.  The Global Times fumed that “Japan does not have the strength to prevail over China’s influence in Asia” and “The little tricks that Japan is playing are nothing but a struggle for self-comfort, which will not affect the development of Asia.”  Surveying the bickering, the Hindustan Times newspaper opined that “Traditional Asian rivals Japan and China are at loggerheads again, and one country stands to gain the most from the chilly ties this time round: India.”

It will be the Americans’ turn to pay court in two weeks when Secretary of State John F. Kerry arrives in New Delhi for the annual U.S.-India strategic dialogue.  His predecessor, Hillary Rodham Clinton, kicked off the inaugural dialogue three years ago by proclaiming that bilateral relations were “an affair of the heart.”  The Pentagon’s most recent strategy review singled out India as the only country deemed “a strategic partner” and U.S. Defense Secretary Leon E. Panetta made clear during his trip to New Delhi last summer that the Obama administration sees India as a “linchpin” in this strategy.  Stating that the United States “views India as a net provider of security from the Indian Ocean to Afghanistan and beyond,” Panetta proposed the formation of a long-term strategic partnership, one that featured greater Indian access to the latest U.S. military technology and a defense trade relationship that went beyond a focus on one-off transactions to include joint research and co-production efforts.

New Delhi has so far played hard to get when it comes to U.S. overtures.  So look for Washington to sweeten the pot during Secretary Kerry’s visit as well as during Mr. Singh’s trip to the United States in a few months.

With India having been overlooked for so long in world politics, it must be gratifying for leaders in New Delhi to see their geopolitical dance card now filling up.  But the question they should ponder is just how much more ardent the wooing would be if the country got its strategic act together.

*Apropos of India’s plight, an article in The New York Times reports that the website created for the “India Everywhere” public relations campaign has not been maintained and is riddled with broken links.

**HNWIs are usually defined as persons holding financial assets (excluding primary residence) of at least US $1 million.

This commentary is cross-posted on Chanakya’s Notebook.  I invite you to connect with me via Facebook and Twitter.