Foreign Policy Watch: India-United States

Four geopolitical developments and a window of opportunity for India

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Prelims level : Not much

Mains level : Read the attached story

A number of important developments has taken place over the past several weeks. They may appear disconnected but in fact add up to a significant shift in regional and global geopolitics.

Four major recent developments

  1. Withdrawal of US and NATO forces from Afghanistan: The complete takeover of the country by the Taliban
  2. Significant domestic political changes in China: The ideological and regulatory assault against its dynamic private high-tech companies and now its real estate companies
  3. Announcement of the Australia-UK and US (AUKUS): It represents a major departure in US strategy by its commitment to enable Australia to join a handful of countries with nuclear submarines
  4. Convening of the Quad physical summit in Washington: A major step towards its formalisation as an influential grouping in the Indo-Pacific going beyond security

Risks and opportunity for India

These four developments, taken together, present India with both risks but also with opportunities.  In affirmation, one can conclude that the opportunities outweigh the risks.

[A] Risks in Afghanistan

  • The Afghan situation is a setback for India in the short run.
  • The political capital and economic presence it had built up in the country over the past two decades has been substantially eroded.
  • The Taliban government is dominated by more hard-line and pro-Pakistani elements.
  • They will help deliver on the Pakistani agenda of preventing a revival of Indian diplomatic presence and developmental activity in Afghanistan.

Future of Taliban

  • In the longer run, it seems unlikely that the Taliban will give up its obscurantist and extremist agenda.
  • This may lead to domestic inter-ethnic and sectarian conflict.
  • The unwillingness of the Taliban to cut its links with various jihadi groups, including those targeting Afghanistan’s neighbours, may revive regional and international fears over cross-border terrorism.

How should India defer the Taliban?

  • India’s response should be to bide its time, strengthen its defences against an uptick in cross-border terrorism.
  • India can keep its faith with the ordinary people of Afghanistan, provide shelter to those who have sought refuge.
  • It can join in any international effort to deliver humanitarian assistance to the people of Afghanistan.

[B] Domestic political change in China

  • This is taking an ideological and populist direction.
  • The country’s vibrant private sector is being reined in while the State-Owned Enterprises (SOE) are back in a central role.
  • After the tech sector, it is the large real estate sector that is facing regulatory assault.

Concerns for investors

  • This is leading to deepening concern among foreign investors, including those who have long been champions of long-term engagement with China.

Opportunities for India

  • It is not coincidental that while in NYC, our PM had meetings with the CEOs of Blackstone and Qualcomm, both of which are heavily invested in China but are reconsidering their exposure there.
  • If India plays its cards well, this time round there could be significant capital and technology flows from the US, Japan and Europe diverted towards India because it offers scale comparable to China.
  • Since India has benign partnerships with the US, Japan and Europe, there are no political constraints on such flows.

[C] AUKUS and QUAD

  • The AUKUS and progress made by the Quad serve to raise the level of deterrence against China.
  • It is useful since it has now become the core of the US’s Indo-Pacific strategy. China will be more focused on its activities.
  • The Quad now represents, from the Chinese perspective, a second order threat.

Underlying opportunities

  • This offensive against China suits us since we are not ready to embrace a full-fledged military alliance which will constrain our room for manoeuvre.

Why should India gauge these opportunities?

  • China has given up the expectation that it could unify Taiwan through peaceful and political means, including through closer economic integration.
  • It has lost its credibility after the recent crackdown on civil liberties in Hong Kong.
  • China may advance its forcible takeover of Taiwan before the AUKUS gets consolidated.
  • The nuclear submarines for Australia may not be built and deployed for several years.
  • We may, therefore, be entering a period of enhanced uncertainty and danger in the Indo-Pacific.

India’s area for introspection

  • The constraints are policy unpredictability, regulatory rigidities and bureaucratic red tape in India.
  • Some of these issues are being addressed, such as dropping of retrospective taxation.
  • But there is still a long way to go.

Way forward

All these developments has heightened risk perception among international business and industry who have hitherto seen China as a huge commercial opportunity.

  • For India, some bold initiatives are required to take advantage of the window of opportunity that has opened.
  • It is a narrow window with a very short shelf life.
  • If grasped with both hands, then it could deliver double-digit growth for India for the next two or three decades.
  • This will shrink the asymmetry of power with China and expand India’s diplomatic options.

Conclusion

  • India should not be caught off guard. Failure of deterrence in the Indo-Pacific will have consequences beyond the region and change the geopolitical context for India.
  • For now, let us focus on what we can do to advance India’s economic prospects, for which the times are unexpectedly more propitious.

 

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