India The next superpower?
Peter Leslie
The Vail Trail, CO
August 29, 2007
World View
One hundred and fifty years ago, Indian rebels were massacring British men, women and children in a vicious war of independence, with little mercy shown by combatants on either side. The rebellion was ruthlessly suppressed, the last Moghul Emperor forced into exile, and for the next 90 years the British government replaced the East India Company as rulers of India.
This month marks the 60th anniversary of the Indian independence that was eventually achieved in August 1947. And since that time, India has been the worlds largest democracy.
Recently, India, the worlds second largest country, with a population of more than 1.1 billion (almost four times that of the United States), joined the trillion dollar club a club with only 11 other members with economies exceeding this amount. This reflects an economy that has been growing very fast in recent years and is currently growing at an annual rate of more than 9 percent.
Along with its economic strength, India has the worlds second-largest standing army with a total troop strength of around 2.5 million (1.3 million active and 1.2 million reserve), has nuclear weapons, and the worlds fifth-largest navy that includes one aircraft carrier (and a second under construction).
The 90 years of direct British rule gave India an excellent network of roads, railways, canals and irrigation works, large-scale capital investments in shipping and mining and well-developed commercial agriculture. An education system in English, English law and a functioning civil service created suitable conditions for the growth of industry and enterprise; and the integration of India into the world economy.
But Indias economic strength and status as a potential superpower is relatively recent. The first 40 or so years following independence were years of sluggish economic growth.
Following independence, Indias socialist leaders imposed strict government control over private-sector participation, foreign trade, and foreign direct investment. A cumbersome central bureaucracy developed a huge and inefficient public sector, with business regulation, and central planning, import substitution, inept industrialization and state intervention in financial and labor markets.
However, starting in the early 1990s, economic reforms that reduced government controls on foreign trade and investment gradually opened up Indias markets. And the availability of large numbers of English-speaking, highly educated people willing to work for one-quarter the hourly wage of equivalent U.S. workers made India a logical choice for international companies seeking to outsource workers, especially in such fields as call centers, data entry and software development.
According to consulting firm Cap Gemini Ernst & Young, the average computer programmer in India costs $20 per hour in wages and benefits compared to $65 per hour for a comparably qualified and experience American.
While large numbers of Indians still live on subsistence agriculture or on starvation wages in the slums of the big cities, there is a growing middle class estimated at 250 million to 300 million that shows an ever-increasing appetite for consumer goods. The Indian auto market reached one million cars in 2003-04 and this could easily treble by 2015. Indian manufacturers are going global with multi-billion dollar acquisitions that bring them into the league of Fortune 500 companies; and some are already world leaders in their sectors.
In recent months we have seen numerous cases of poor quality control by Chinese companies necessitating expensive recalls of defective or dangerous products and a ban on exports to the U.S. of certain human and pet foods. This may provide an opportunity for India to build on its large numbers of highly skilled and experienced managers and engineers and a vast pool of low cost, unemployed or under-employed workers. If India can be relied on to sell high-quality products, it could well take advantage of Chinas recent missteps.
Investing much more in the manufacture of consumer goods for both local consumption and export could help sustain Indias economic growth and provide a major competitor for China. And because Indias population is growing faster than Chinas, we might soon see India as both the largest country in the world and one of the most powerful.
This possibility has major implications for U.S. foreign policy in Asia and for the balance of power in the region. We are lucky that Indian-U.S. relations have never been better. This and future administrations should ensure that this continues.
Peter Leslie is the former CEO of the United Nations Development Office. He lives in Vail.