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The rockstar reception Prime Minister Narendra Modi received in San Jose, California, on Sunday evening may have stolen the headlines. But after six action-packed days in the United States, culminating in a bilateral with President Barack Obama in New York on Monday, the real takeaway from Modi's US visit is this: India has finally risen above its region.
The contours of the Modi government's strategy are now sharply etched. They rest on two key pillars: the economy and geopolitics.
The first clear priority is to focus singlemindedly on the economy. That includes attracting foreign and domestic investment in infrastructure, manufacturing, digital technology, education and healthcare. Former US President Bill Clinton, during his 1992 presidential campaign, immortalised the phrase: "It's the economy, stupid." Prime Minister Modi needs to place that principle at the heart of his government's geoeconomic policy.
The world respects hard power: economic, military and diplomatic. Soft power - culture, diaspora, innovation - is a necessary but not sufficient condition for converting the emerging US-China bipolar world order into a tripolar world order with India as the third angle of this triangle of power.
The PM's attention must now be unflinchingly on economic reforms. His meeting with 47 CEOs in New York and an elite group of technology entrepreneurs in California threw up one overwhelming message for the Indian economy: right direction, wrong speed. Unless the pace of economic reforms picks up, India's seven percent annual GDP growth rate will not be enough to raise 300 million people out of debilitating poverty quickly enough.
The key reforms?
Tax policy must be clear and consistent. Bureaucratic red tape must be cut. Project implementation must be speeded up. The ease of doing business must rapidly improve. Everyone recognises India is the world's second largest market. The only thing holding back a flood of foreign direct investment (FDI) is decrepit public infrastructure, a colonial-era bureaucracy, rampant corruption and opaque governance.
Modi fought the Lok Sabha election on the promise of rectifying precisely these problems. But they have proved harder to tackle than he imagined. The governance ecosystem he inherited from the Congress is broken. The prime minister has erred in not being more ruthless with the detritus of this old, fixer-and-crony driven system. Some in the BJP, especially the Delhi unit, are a silent part of this system.
The prime minister must fix the talent gap in the government by co-opting technocrats from the private sector. If a KV Kamath can be appointed chairman of BRICS Bank in Shanghai, there is no reason why top talent from the corporate and academic world can't be attracted to positions in government. The recent decision to hire chairmen of select PSU banks from the private sector is a move in the right direction. The PM knows that the Aadhar scheme, which is central to his financial inclusion strategy, was created by the UPA government's one sensible private sector appointee with cabinet rank: Nandan Nilekani. The Modi government needs several Nilekanis in key positions - and there is no shortage of such individuals.
Let's look at some hard numbers. At an annual growth rate of seven per cent, India's nominal GDP will double to $5 trillion (Rs. 33 lakh crore) in ten years. By then China's GDP, assuming an average annual growth rate of six per cent, would have risen from $11 trillion to $19 trillion. America's GDP in ten years, at an average annual growth rate of three per cent, would have increased from $18 trillion to $25 trillion.
The picture changes dramatically, however, if through strong economic reforms India ups its annual GDP growth rate from seven to nine per cent. Within ten years, India's GDP would then rise from $2.50 trillion to $6 trillion, edging out a deflationary Japan to become the world's third largest economy after the US and China. If purchasing power parity (PPP) numbers - which the International Monetary Fund (IMF) and the World Bank (WB) routinely use - are taken, India's GDP in 2025 at an annual growth rate of nine per cent would be even higher - roughly $14 trillion to China's $34 trillion and America's $25 trillion.
The arc of containment
It is argued, both in government and outside it, that India must maintain good relations with Pakistan to ensure that our economic progress is not derailed by a country obsessed with parity with India. That parity of course is a myth: India's economy is currently nine times larger than Pakistan's. At current respective growth rates, within ten years it will be nearly twenty times as large.
How then should India control Pakistan's juvenile behavior across the border? The key is to neutralise Islamabad's geopolitical support structure. Pakistan's principal benefactors are China, the US, Saudi Arabia and the UAE. The PM has shrewdly begun the neutralisation process with the UAE. A visit to Saudi Arabia is next in line. The rapidly developing India-US partnership will further cut American support to Pakistan.
That leaves China. Here India must build on its relationships with Vietnam and Japan, both victims of Chinese bullying. In 1979, Vietnam fought and won a short, sharp conflict with China. It remains an implacable opponent of Chinese expansion in the region. Japan has a long history of conflict with China. Beijing still smarts over Japanese occupation of parts of its territory during the Second World War. The dispute over islands in the East China Sea continues to poison relations between the two Asian economic powerhouses.
India must therefore build an "arc of containment" from Vietnam and Japan in the east to the US in the west. A self-absorbed country like China respects strength and strategic insight in its opponents. India through the decades has shown neither. Now it can and must display both.
Vice-president Joe Biden underlined the importance Washington attaches to New Delhi when he said that the US wants to be India's "best friend". For the US, China is the principal economic and geostrategic threat. India represents the only credible counterweight to China. For India too, the US represents an important component in its arc of containment directed at China.
By containing China with geopolitical locks, its support to Pakistan will be capped. Simultaneously, the strategy with Saudi Arabia and the UAE will remove some of the back-end support Pakistan currently receives. Afghanistan meanwhile is turning increasingly hostile towards Pakistan. President Mohammad Ashraf Ghani began his tenure over a year ago as a Pakistani ally. He was far more sympathetic to Pakistan than his predecessor President Hamid Karzai. But in recent months a spate of terror attacks by Pakistan-based Taliban factions have turned him against Islamabad.
Pakistan in turn blames the Afghanistan government for not doing enough to curtail terrorists targeting Pakistan and operating from Afghan territory. The attack on a Pakistan military air base on September 18 killed 29 people. Within hours of the attack Islamabad said phone intercepts showed Taliban gunmen involved in the raid were being directed by handlers in Afghanistan. The Afghan people in survey after survey have blamed Pakistan for the insurgency in their country - and simultanelously praised India's role in building schools, hospitals and roads across Afghanistan.
In a recent oped in the Hindustan Times, Sameer Lalwani argued that the costs of "confronting" Pakistan would be very high. This is disingenous and simply wrong. It echoes the shrewd Pakistani strategy of threatening "economic derailment" to deter India from retaliating to its "hit-and-run" terror. It is a fradulent argument that needs to be buried.
These then are India's geostrategic cards: Vietnam, Japan and the US to pin China down; Saudi Arabia, the UAE and Afghanistan to reduce Pakistan's elbow room in the region; Iran, Israel and the littoral states of the Indian Ocean to strengthen India's hands. The Modi government inherited a scorched-earth economy and directionless diplomacy. The challenge is to fix the economy with robust reforms and reshape its geopolitical strategy by creating an arc of containment looping from Vietnam to the US.
Many in this government, including disappointingly home minister Rajnath Singh, repeat the old cliché that you cannot change your neighbours - suggesting India must somehow learn to live with Pakistan-promoted terrorism. It's true you can't change your neighbours. But by applying to them the right geopolitical medicine, you can change their behaviour.
Biggest takeaway of Modi's US visit: India has finally risen above its region
The contours of the Modi government's strategy are now sharply etched. They rest on two key pillars: the economy and geopolitics.
The first clear priority is to focus singlemindedly on the economy. That includes attracting foreign and domestic investment in infrastructure, manufacturing, digital technology, education and healthcare. Former US President Bill Clinton, during his 1992 presidential campaign, immortalised the phrase: "It's the economy, stupid." Prime Minister Modi needs to place that principle at the heart of his government's geoeconomic policy.
The world respects hard power: economic, military and diplomatic. Soft power - culture, diaspora, innovation - is a necessary but not sufficient condition for converting the emerging US-China bipolar world order into a tripolar world order with India as the third angle of this triangle of power.
The PM's attention must now be unflinchingly on economic reforms. His meeting with 47 CEOs in New York and an elite group of technology entrepreneurs in California threw up one overwhelming message for the Indian economy: right direction, wrong speed. Unless the pace of economic reforms picks up, India's seven percent annual GDP growth rate will not be enough to raise 300 million people out of debilitating poverty quickly enough.
The key reforms?
Tax policy must be clear and consistent. Bureaucratic red tape must be cut. Project implementation must be speeded up. The ease of doing business must rapidly improve. Everyone recognises India is the world's second largest market. The only thing holding back a flood of foreign direct investment (FDI) is decrepit public infrastructure, a colonial-era bureaucracy, rampant corruption and opaque governance.
Modi fought the Lok Sabha election on the promise of rectifying precisely these problems. But they have proved harder to tackle than he imagined. The governance ecosystem he inherited from the Congress is broken. The prime minister has erred in not being more ruthless with the detritus of this old, fixer-and-crony driven system. Some in the BJP, especially the Delhi unit, are a silent part of this system.
The prime minister must fix the talent gap in the government by co-opting technocrats from the private sector. If a KV Kamath can be appointed chairman of BRICS Bank in Shanghai, there is no reason why top talent from the corporate and academic world can't be attracted to positions in government. The recent decision to hire chairmen of select PSU banks from the private sector is a move in the right direction. The PM knows that the Aadhar scheme, which is central to his financial inclusion strategy, was created by the UPA government's one sensible private sector appointee with cabinet rank: Nandan Nilekani. The Modi government needs several Nilekanis in key positions - and there is no shortage of such individuals.
Let's look at some hard numbers. At an annual growth rate of seven per cent, India's nominal GDP will double to $5 trillion (Rs. 33 lakh crore) in ten years. By then China's GDP, assuming an average annual growth rate of six per cent, would have risen from $11 trillion to $19 trillion. America's GDP in ten years, at an average annual growth rate of three per cent, would have increased from $18 trillion to $25 trillion.
The picture changes dramatically, however, if through strong economic reforms India ups its annual GDP growth rate from seven to nine per cent. Within ten years, India's GDP would then rise from $2.50 trillion to $6 trillion, edging out a deflationary Japan to become the world's third largest economy after the US and China. If purchasing power parity (PPP) numbers - which the International Monetary Fund (IMF) and the World Bank (WB) routinely use - are taken, India's GDP in 2025 at an annual growth rate of nine per cent would be even higher - roughly $14 trillion to China's $34 trillion and America's $25 trillion.
The arc of containment
It is argued, both in government and outside it, that India must maintain good relations with Pakistan to ensure that our economic progress is not derailed by a country obsessed with parity with India. That parity of course is a myth: India's economy is currently nine times larger than Pakistan's. At current respective growth rates, within ten years it will be nearly twenty times as large.
How then should India control Pakistan's juvenile behavior across the border? The key is to neutralise Islamabad's geopolitical support structure. Pakistan's principal benefactors are China, the US, Saudi Arabia and the UAE. The PM has shrewdly begun the neutralisation process with the UAE. A visit to Saudi Arabia is next in line. The rapidly developing India-US partnership will further cut American support to Pakistan.
That leaves China. Here India must build on its relationships with Vietnam and Japan, both victims of Chinese bullying. In 1979, Vietnam fought and won a short, sharp conflict with China. It remains an implacable opponent of Chinese expansion in the region. Japan has a long history of conflict with China. Beijing still smarts over Japanese occupation of parts of its territory during the Second World War. The dispute over islands in the East China Sea continues to poison relations between the two Asian economic powerhouses.
India must therefore build an "arc of containment" from Vietnam and Japan in the east to the US in the west. A self-absorbed country like China respects strength and strategic insight in its opponents. India through the decades has shown neither. Now it can and must display both.
Vice-president Joe Biden underlined the importance Washington attaches to New Delhi when he said that the US wants to be India's "best friend". For the US, China is the principal economic and geostrategic threat. India represents the only credible counterweight to China. For India too, the US represents an important component in its arc of containment directed at China.
By containing China with geopolitical locks, its support to Pakistan will be capped. Simultaneously, the strategy with Saudi Arabia and the UAE will remove some of the back-end support Pakistan currently receives. Afghanistan meanwhile is turning increasingly hostile towards Pakistan. President Mohammad Ashraf Ghani began his tenure over a year ago as a Pakistani ally. He was far more sympathetic to Pakistan than his predecessor President Hamid Karzai. But in recent months a spate of terror attacks by Pakistan-based Taliban factions have turned him against Islamabad.
Pakistan in turn blames the Afghanistan government for not doing enough to curtail terrorists targeting Pakistan and operating from Afghan territory. The attack on a Pakistan military air base on September 18 killed 29 people. Within hours of the attack Islamabad said phone intercepts showed Taliban gunmen involved in the raid were being directed by handlers in Afghanistan. The Afghan people in survey after survey have blamed Pakistan for the insurgency in their country - and simultanelously praised India's role in building schools, hospitals and roads across Afghanistan.
In a recent oped in the Hindustan Times, Sameer Lalwani argued that the costs of "confronting" Pakistan would be very high. This is disingenous and simply wrong. It echoes the shrewd Pakistani strategy of threatening "economic derailment" to deter India from retaliating to its "hit-and-run" terror. It is a fradulent argument that needs to be buried.
These then are India's geostrategic cards: Vietnam, Japan and the US to pin China down; Saudi Arabia, the UAE and Afghanistan to reduce Pakistan's elbow room in the region; Iran, Israel and the littoral states of the Indian Ocean to strengthen India's hands. The Modi government inherited a scorched-earth economy and directionless diplomacy. The challenge is to fix the economy with robust reforms and reshape its geopolitical strategy by creating an arc of containment looping from Vietnam to the US.
Many in this government, including disappointingly home minister Rajnath Singh, repeat the old cliché that you cannot change your neighbours - suggesting India must somehow learn to live with Pakistan-promoted terrorism. It's true you can't change your neighbours. But by applying to them the right geopolitical medicine, you can change their behaviour.
Biggest takeaway of Modi's US visit: India has finally risen above its region
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