Old Issues New Perspectives

India faces major challenges as it transitions to new leadership in June 2024. Rising debt, income inequality, strained relations with neighbours, and global power dynamics are critical issues. The incoming government has a tough task ahead

By Arun Bhatnagar

• India’s economic trajectory has been marked by contrasting trends, with household debt reaching unprecedented levels
• At a time when India anticipates becoming ‘Viksit Bharat’, it has been revealed that the divide between the Rich and Poor is worsening
• In the parabolic arc from the Middle East to the South China Sea, only India provides the US with the geostrategic depth to counter China
• India has cultivated cordial ties with the Arab world, including Saudi Arabia, that have strengthened over the past two decades

SINCE K Natwar Singh (born 1929) did not become India’s Foreign Secretary, it is the incumbent External Affairs Minister (EAM) who is, so far, the only former professional head of the IFS to progress to an even higher level in the same sphere.

He lately observed: “India right now has a very abnormal relationship with China and Pakistan”.
On the premise that the statement is entirely valid, then the Incoming Government in June 2024 is likely to have its hands full and its task cut out, not only with pressing domestic challenges but also with serious difficulties in the field of foreign policy.

In what could be construed as a sign of rising distress, the country’s household debt levels are estimated to have touched an all-time high of 40 percent of Gross Domestic Product (GDP) by December 2023, while net savings dropped to their lowest level of around 5 percent of GDP, according to a Research Report of a leading financial services firm.
Households’ annual borrowings had surged to 5.8 percent of GDP in 2022-23, the second-highest, post-1947.

RISE OF BILLIONAIRE RAJ

At a time when India anticipates becoming ‘Viksit Bharat’, it has been revealed that the divide between the Rich and Poor is worsening.
India’s income inequality is currently among the highest in the world and more pronounced than in Brazil and South Africa, as per the recent Golden Age of Billionaires, a new study from the World Inequality Lab.
The current number of Billionaires in India is peaking at 271, with 94 Billionaires added in 2023 alone. With a combined wealth of close to 1 Trillion USD (or 7% of the world’s total wealth), this is the highest number of newly wealthy individuals in any nation outside the United States.
It is claimed that the ‘Billionaire Raj, led by the contemporary bourgeoisie in India, is now more unequal than the British Raj, …..’, which is striking, particularly when India is being praised for its 8 percent GDP growth economy and, as some analysts predict, it would overtake Germany and Japan to become the third-largest economy, globally, by 2027.

The dynamics of ‘wealth inequality’ have been monitored by economists, after the Indian authorities started conducting extensive household surveys on Assets, Debt and Wealth. It was apparent that ‘Income Inequality’ had been growing since around 2014-15.
Should the Government increase public spending on Nutrition, Health Care and Education, then Indians (not just the elite), could benefit from globalization. A ‘super tax’ of, say, 2 percent on the net worth of the wealthiest Indian families could generate revenues equal to 0.5 percent of the country’s income and ‘create valuable fiscal space to facilitate vital investments.’

Another Agency – a global country risk research company – opines that India’s economy is not doing as well as recent GDP numbers indicate and a growth slowdown is likely; it has identified ‘political risks’, stemming from reliance on religious appeals and a narrowly perceived nationalism to retain support-base, along with demographic factors related to youth unemployment, as key ‘monitorables’ for the economy’s trajectory in the coming months.
The rise of the affluent is the real India growth story.

SAUDI ARABIA’S MEDIATION EFFORTS

This is also a time when India-Pakistan relations remain cold and both sides do not have High Commissioners in New Delhi and Islamabad. Slightly ahead of the auspicious festival of Eid-al Fitr (April 10-11, 2024), Pakistan and Saudi Arabia, in a Joint Statement, called for resolving all issues between the two neighbours of the Subcontinent through dialogue to ensure peace and stability in the Region; the Statement was issued at Riyadh at the end of an official visit of Prime Minister Shehbaz Sharif who met with Prince Mohammed bin Salman Al Saud, Crown Prince and Prime Minister of Saudi Arabia.
India has cultivated cordial ties with the Arab world, including Saudi Arabia, that have strengthened over the past two decades.
As things stand, the country is engaged with both friends and non-friends.

INDIA-US-CHINA TRIANGLE

The People’s Republic of China poses a particularly grave concern. It is obviously not a friend but cracks in its hostility to India may be showing. A senior Chinese diplomat asked the audience at a media event to ‘visit China and experience Chinese friendship’ and that ‘the boundary issue does not represent the entirety of bilateral ties’.
In roughly the same vein – and on the very brink of national elections – PM Modi told the New York City-based Magazine, Newsweek:
‘… For India, the relationship with China is important and significant… I hope and believe that through positive and constructive bilateral engagement … we will be able to restore and sustain peace and tranquillity on our borders …’.
Newsweek has had many notable editors-in-chief including Malcolm Muir (1937-59), Osborn Elliott (1961-76) and Jon Meacham (2006-10).
Beijing has, no doubt, watched the terse exchange between New Delhi and Washington DC over Arvind Kejriwal’s arrest and the Congress’ Tax Notices.
President Xi Jinping had tried, between 2014 and 2019, to wean India away from the US geopolitical orbit. Three Summits (between Xi and Modi) in Ahmedabad, Wuhan and Mahabalipuram failed to dilute India’s strategic partnership with the US.
The four-year-long standoff from April 2020 in East Ladakh – months after the Mahabalipuram Summit – seems an expression of Chinese discomfiture at their inability to stall the India-US strategic partnership.
Washington DC was pleased with this outcome and gave PM Modi a State Reception in June 2023.

INDIA-US RELATIONS : A HISTORICAL PERSPECTIVE

The United States (US) has been an old friend of India. During the later years of the Freedom Movement, the US was steadfast in its support and President Franklin Roosevelt (1882-1945) is known to have lectured Prime Minister Winston Churchill on the contradiction of fighting Nazi fascism in Germany while practising colonialism in India.

After India’s Independence, America remained a friend but drifted apart as the first Prime Minister, Jawaharlal Nehru, was perceived to lean towards the Soviet Union; he was inclined to follow socialist economic policies and became a founder of the Non-aligned Movement (NAM).
By the 1970s, Washington DC, under Nixon-Kissinger, had turned unfriendly, tilting towards Pakistan in the Bangladesh War and trying to intimidate India by sending the Seventh Fleet into the Bay of Bengal.
The relationship was restored, to some extent, after Prime Minister Rajiv Gandhi’s visit to Washington DC in 1985 and appeared to solidify under the George W Bush administration, following the India-US Nuclear Deal.

STRATEGIC PARTNERSHIP

The US regards India as a strong but not mission-critical ally. The progressive rise of China has changed the dynamic.
In the parabolic arc from the Middle East to the South China Sea, only India provides the US with the geostrategic depth to counter China in the Indo-Pacific.

However, problems often arise in a relationship when one partner seeks equality (or parity) with the other ‘dominant’ partner. Even as President Joe Biden travelled to New Delhi for the G20 Summit in September 2023, tensions had begun to surface.

The US State Department spokesperson had two options when a Bangladeshi journalist, with ties to George Soros-funded NGOs, asked about the US position on Chief Minister Kejriwal’s arrest. He could have said the US does not comment on the internal affairs of other sovereign nations.
Instead, he said: “We continue to follow these actions closely, including the arrest of Arvind Kejriwal. We encourage fair, transparent and timely legal processes for each of these issues.”
The Ministry of External Affairs (MEA) told the US to mind its business. It had said the same to Germany earlier. To make sure the message was understood, a senior diplomat from the US Embassy in New Delhi was summoned to South Block.

After further back-and-forth between the US State Department, a United Nations spokesperson and a rebuttal by India’s Vice President, the matter seemed to be settling down.
For a section of opinion in the Joe Biden administration, India’s geostrategic importance, as a counterweight to China, is a source of occasional frustration.

CHALLENGES AND PRAGMATISM

Washington DC likes obedient friends; it does not care much for those who follow an independent geopolitical path. However, Washington is practical and knows it has to live with a ‘rising India’ in the long term.
The ‘murder-for-hire’ allegations against fugitives in Canada and the US were probably a ruse. The truth, perhaps, is that America likes to be in absolute control of its strategic partnerships.
In NATO, with its European allies, it usually has the last word. In East Asia, with its Japanese and Korean allies, it calls the shots. In West Asia, with its Gulf Arab allies, America is the unquestioned leader.
India is more mixed up; for the first time, in decades, it is an ‘Ally’ that the US needs at least as much as the ‘Ally’ needs the US.

America’s paranoia over a strengthening China-Russia-Iran-North Korea axis makes it imperative to have a dependable Ally in the Region and only India fits the bill.
That’s not a situation Washington DC is quite comfortable with.
To keep India a little off-balance, it uses its embedded media and assorted NGOs to ask questions about religious freedom and democracy; Western agencies are commandeered to amplify the message to New Delhi: know your place.

The question also is whether the US trusts the information shared by India on Khalistani separatist elements and is it more focussed on the alleged ‘plot’ against them than on curbing their terrorist activities? Given India’s deep concerns with radical rhetoric, even broadcasting threats against Air India flights and to diplomats and embassies, the US actions have been disappointing.

KATCHATHEEVU ISLAND CONTROVERSY

Problems abound for India in other areas of the immediate neighbourhood as well, such as with Sri Lanka where a controversy arose over the tiny island of Katchatheevu that could have broader diplomatic implications and stoke questions about other bilateral negotiations.
Even before the Sri Lankan government commented on India’s remarks on Katchatheevu, the island nation’s media took a critical view of the matter, while their fishermen’s associations urged that the issue of bottom-trawling be taken up more vocally with New Delhi.
A Colombo-based English newspaper in an editorial noted: ‘Sadly, even the seemingly unflappable Indian EAM has dropped all pretence of statesmanship… Sri Lanka desires to be left to its own devices, away from India’s internal politics …’.

Another editorial titled ‘Katchatheevu was not India’s to give away’ in a business newspaper wrote that the Indian observations were a ‘distortion of facts … a dangerous and unnecessary provocation of a friendly neighbour that could have serious repercussions… The constant provocative claims on Sri Lankan territory… would only force our country to seek security guarantees elsewhere…’.
To make matters worse, a serving Minister of the Government of India (whose own record in the IFS as deputy to High Commissioner J N Dixit at Colombo, in the period leading upto Rajiv Gandhi’s assassination, is nothing short of dubious) chose to jump into the fray.

The Indian side’s references to Katchatheevu – in the context of arrests of their fishermen in Sri Lankan waters – have drawn attention among those familiar with the long-persisting ‘fisheries conflict’ in the Palk Strait.

For now, an uneasy calm apparently prevails. Recently, Sri Lanka’s Prime Minister, Dinesh Gunawardena, indicated that China has pledged to develop Colombo’s strategic deep-sea port and the capital port, after talks in Beijing. He said China – the island nation’s biggest bilateral creditor – would ‘assist’ Sri Lanka’s restructuring of external debt, a key condition to maintaining a US$ 2.9 billion IMF bailout.

INDIA-NEPAL POWER SHARING

Several weeks after Nepal and India concluded an Agreement on long-term ‘power sharing’, both sides have yet to make ‘forward movement’ on the stalled negotiations over the Pancheshwar Multipurpose Project (PMP), by far the biggest bilateral power project conceived between the two countries.
The Project is envisaged to generate around 6,480 MW (to be divided equally), alongwith water for irrigation of 1,30,000 hectares of land in Nepal and 2,40,000 hectares in India. It is ostensibly delayed because the two sides have not been able to reach consensus on sharing of benefits. While Kathmandu feels that India should pay Nepal in lieu of getting the lion’s share of irrigation and flood control benefits, New Delhi does not accept this position as it challenges India’s understanding of other water-based treaties, of which the Indus Waters Treaty with Pakistan is a prime example.

A way will need to be found to compensate the Nepalese in a suitable manner.
Kickstarting the Pancheshwar Project will require political courage, as also bureaucratic and diplomatic foresight in Nepal and India alike, which could emerge, post-2024.

INDIA-MALDIVES RELATIONS

Amid the plummeting ties with Male, a high-tech Chinese marine research ship arrived near the Maldives, after spending about a month in the Indian Ocean, another hit against India. Concern had been expressed by New Delhi about the movement of the Chinese research vessel – Xiang Yang Hong 03 – that was moored close to Male City.
An Agreement had also been signed for replacing the 88 Indian military personnel stationed in the archipelago nation.
President Muizzu visited China in January 2024 when the bilateral relationship was elevated to the status of a ‘comprehensive strategic cooperative partnership’.

China is playing the Maldives card to the hilt. On return from China (and in an obvious reference to India), Muizzu reportedly said: ‘We may be a small country, but that does not give you a licence to bully us …’.
A ‘defence cooperation agreement’ has been signed with the Maldives to provide free Chinese military assistance. Not long afterwards, Muizzu alleged that his predecessor (Ibrahim Mohamed Solih) had operated on the orders of a ‘foreign ambassador’, though he stopped short of naming any country.

DIPLOMATIC COOPERATION

Interestingly enough, it seems to be taking somewhat more than a flurry of top-level contacts between Thimpu and New Delhi (including audiences with the King of Bhutan) to arrest the growing Chinese presence that might soon result in the establishment of Bhutan-China diplomatic relations.
India has decided to double Bhutan’s assistance over the next five years from Rs.5000 crores in 2019-2024 to Rs.10,000 crores for the period till 2029.

The Bhutan visit of the Indian Prime Minister – after the electoral Model Code of Conduct was put in place – is considered unusual, because past Prime Ministers have invariably refrained from bilateral visits (or made policy announcements with financial implications) during this period.
Thanks to the interventions of Prime Minister Sheikh Hasina (born September 1947) and astute diplomacy on the part of India, the Dhaka-New Delhi bilateral relations have rested on an even keel, more or less, except for dire predictions from time to time that Hindus are fleeing Bangladesh.

GLOBAL POWER POTENTIAL

When all is said and done and the exact complexion of the ruling dispensation at the Centre is known in June 2024, those in authority will need to take quick cognizance of India’s status as a ‘potential global power’ and ensure that its core interests are insulated from jeopardy, in view of a realigning geopolitical scenario that, more and more, respects economic and military factors, not to mention ethnic harmony.
The Chinese Foreign Minister, Wang Yi, in a keynote speech commemorating the 45th Anniversary of diplomatic relations between Beijing and Washington D.C, said that cooperation is no longer an option for the two countries and even for the world, but an imperative that must be seriously addressed.
China urged the United States to play a ‘constructive role’ in the Middle East when Wang Yi spoke with Secretary of State, Antony Blinken, over the phone; Blinken used the call to ask Beijing to use its influence to dissuade Iran from striking Israel.

In January 2024, Wang Yi toured four countries – Egypt, Tunisia, Togo and the Ivory Coast – as an annual trip to Africa to enhance economic and security cooperation with the Continent.
In a nutshell, therefore, as new dimensions unfold between powerful contenders, hostilities continue unabated in two major conflict zones (in one of which New Delhi was suggested as ‘mediator’) and China, Russia (also Pakistan) are engaged in furthering collaborations, a key Hindu-majority nation like India must continually guard against being ‘squeezed out’ in the vagaries and machinations of international politics.

This could be the most vital challenge for the country’s political masters in the post-2024 era.