Leader Development & Education for Sustained Peace Program: Cross-Cultural, Geopolitical & Regional Education

InReview: India’s Modi – A Quarterly Review

Excerpted from the August 2014 LDESP Indo-Pacific News Update.

Since Narendra Modi assumed the Prime Minister’s office just over a few months ago in May 2014, India seems to be experiencing a revitalization. As is common with newly elected officials, Modi currently enjoys immense popularity: “A Mood of the Nation Poll, conducted nationwide by the India Today Group in collaboration with Hansa Research, has found that 61 per cent of the respondents consider Narendra Modi to be an excellent prime minister while an overwhelming 71 per cent of them said they were satisfied with the performance of his government.” (India Today)

Not only does Modi enjoy great popularity but, perhaps bolstered by this popularity, he has implemented several key changes throughout the country’s military, economic, and governmental realms.

First, with regard to India’s military, the Wall Street Journal recently reported that “Modi Calls for Faster Development of Defense Technology”:

Indian Prime Minister Narenda Modi, who has pledged to strengthen the country’s military, reportedly took a swipe at the defense department’s research and development agency on 20 August, saying India needs to  change its “chalta hai” attitude, which in Hindi means “anything goes.”

“The world will not wait for us. We have to run ahead of time. We should not say in 2014 that a project conceived in 1992 will take some more time,” the Times of India quoted Mr.  Modi saying in a speech to scientists and military leaders gathered at an awards ceremony at the Defence Research & Development Organization in New Delhi.

Officials in the prime minister’s office could not be reached immediately for comment, but Mr. Modi’s official web site said he “made an impassionate appeal for defense programs to keep pace with the world, where technology has become the key driver for defense products.”

Ravi Gupta, a spokesman for the DRDO, said Mr. Modi’s comments had been distorted by some media outlets. He said some important projects, such as the development of a jet fighter and a new ballistic missile, were running behind schedule.

“Yes, there have been some delays but you should know that India was developing these technologies for the first time. Entirely new infrastructure had to be created in the country. Such delays aren’t unknown in the defense industry worldwide,” he said.

“Keeping technology at the forefront, we need to further speed up our defense program and keep pace with the world,” Mr. Modi tweeted from the event.

Not only does Mr. Modi want India to keep pace with the world, but he wants the research and development organization “to visualize, anticipate, and eventually set the agenda for the global defense community,” Mr. Modi said, according to his office web site.

India, the largest importer of weapons in the world, has been struggling to build an indigenous defense industry. To boost the effort, Mr. Modi’s cabinet recently tried to open the defense manufacturing industry in India to more foreign investment, approving increasing to 49% the amount of foreign direct investment allowed in military equipment manufacturers. The previous cap was 26%.

Nalin Kohli, a spokesman for Mr. Modi’s Bharatiya Janata Party, told India Real Time that he wasn’t at the speech but the prime minister at many appearances has been trying to jumpstart the government into operating with a greater sense of urgency.

“The issue he’s conveying is that it isn’t going to be business as usual anymore,” Mr. Kohli said.

(Wall Street Journal, emphasis added)

Modi’s sense of urgency would lead one to believe that previous Prime Ministers have been neglecting the country’s military development. Further, the military is rarely referenced when discussing India’s potential and development, as their economy and successes in democratic governance often come to the fore. However, as explained in an excellent analysis in the Economist from just before the recent general elections, “India is poised to become one of the four largest military powers in the world by the end of the decade.” The article “India as a Great Power: Know Your Own Strength” is excerpted below, though reading the entirety is recommended:

UNLIKE many other Asian countries—and in stark contrast to neighbouring Pakistan—India has never been run by its generals. The upper ranks of the powerful civil service of the colonial Raj were largely Hindu, while Muslims were disproportionately represented in the army. On gaining independence the Indian political elite, which had a strong pacifist bent, was determined to keep the generals in their place. In this it has happily succeeded.

But there have been costs. One is that India exhibits a striking lack of what might be called a strategic culture. It has fought a number of limited wars—one with China, which it lost, and several with Pakistan, which it mostly won, if not always convincingly—and it faces a range of threats, including jihadist terrorism and a persistent Maoist insurgency. Yet its political class shows little sign of knowing or caring how the country’s military clout should be deployed.

That clout is growing fast. For the past five years India has been the world’s largest importer of weapons (see chart). (…) Today it is the world’s seventh-largest military spender; IHS Jane’s, a consultancy, reckons that by 2020 it will have overtaken Japan, France and Britain to come in fourth. It has a nuclear stockpile of 80 or more warheads to which it could easily add more, and ballistic missiles that can deliver some of them to any point in Pakistan. It has recently tested a missile with a range of 5,000km (3,100 miles), which would reach most of China.

Which way to face?

Apart from the always-vocal press and New Delhi’s lively think-tanks, India and its leaders show little interest in military or strategic issues. Strategic defence reviews like those that take place in America, Britain and France, informed by serving officers and civil servants but led by politicians, are unknown in India. The armed forces regard the Ministry of Defence as woefully ignorant on military matters, with few of the skills needed to provide support in areas such as logistics and procurement (they also resent its control over senior promotions). Civil servants pass through the ministry rather than making careers there. The Ministry of External Affairs, which should be crucial to informing the country’s strategic vision, is puny. Singapore, with a population of 5m, has a foreign service about the same size as India’s. China’s is eight times larger.

The main threats facing India are clear: an unstable, fading but dangerous Pakistan; a swaggering and intimidating China. One invokes feelings of superiority close to contempt, the other inferiority and envy. In terms of India’s regional status and future prospects as a “great power”, China matters most; but the vexatious relationship with Pakistan still dominates military thinking.

A recent attempt to thaw relations between the two countries is having some success. But tension along the “line of control” that separates the two sides in the absence of an agreed border in Kashmir can flare up at any time. To complicate things, China and Pakistan are close, and China is not above encouraging its grateful ally to be a thorn in India’s side. Pakistan also uses jihadist terrorists to conduct a proxy war against India “under its nuclear umbrella”, as exasperated Indians put it. The attack on India’s parliament in 2001 by Jaish-e-Mohammed, a terrorist group with close links to Pakistan’s intelligence service, brought the two countries to the brink of war. The memory of the 2008 commando raid on Mumbai by Lashkar-e-Taiba, another terrorist organisation, is still raw.

(…)

Bharat Karnad of the Centre for Policy Research, a think-tank, believes Pakistan’s main danger to India is as a failed state, not a military adversary. He sees Cold Start as a “blind alley” which wastes military and financial resources that should be used to deter the “proto-hegemon”, China. Others agree. In 2009 A.K. Antony, the defence minister, told the armed forces that they should consider China rather than Pakistan the main threat to India’s security and deploy themselves accordingly. But not much happened. Mr Karnad sees feeble civilian strategic direction combining with the army’s innate conservatism to stop India doing what it needs to.

The “line of actual control” between China and India in Arunachal Pradesh, which the Chinese refer to as South Tibet, is not as tense as the one in Kashmir. Talks between the two countries aimed at resolving the border issue have been going on for ten years and 15 rounds. In official statements both sides stress that the dispute does not preclude partnership in pursuit of other goals.

(…)

China and India are both rapidly developing their navies from coastal defence forces into instruments that can project power further afield; within this decade, they expect to have three operational carrier groups each. Some Indian strategists believe that, as China extends its reach into the Indian Ocean to safeguard its access to natural resources, the countries’ navies are as likely to clash as their armies.

(…)

The absence of a strategic culture and the distrust between civilian-run ministries and the armed forces has undermined military effectiveness in another way—by contributing to a procurement system even more dysfunctional than those of other countries. The defence industrial sector, dominated by the sprawling Defence Research and Development Organisation (DRDO), remains stuck in state control and the country’s protectionist past. According to a recent defence-ministry audit, only 29% of the products developed by the DRDO in the past 17 years have entered service with the armed forces. The organisation is a byword for late-arriving and expensive flops.

There are signs of slow change. These include interest in allowing partnerships between India’s small but growing private-sector defence firms and foreign companies, which should stimulate technology transfer. But the deal to buy the Rafale has hit difficulties because, though Dassault would prefer to team up with private-sector firms such as Tata and Reliance, the government wants it to work with stodgy HAL. Even if Dassault had a free choice of partners, though, it is not clear that Indian industry could handle the amount of work the contract seeks to set aside for it.

Richard Bitzinger, a former RAND Corporation analyst now at the S. Rajaratnam School of International Studies in Singapore, sums up the problem in a recent study for the Zurich-based International Relations and Security Network. If India does not stop coddling its existing state-run military-industrial complex, he says, it will never be capable of supplying its armed forces with the modern equipment they require. Without a concerted reform effort, a good part of the $200 billion India is due to spend on weaponry over the next 15 years looks likely to be wasted.

(…)

The dilemma over how close to get to America is particularly acute when it comes to China. America and India appear to share similar objectives. Neither wants the Indian Ocean to become a Chinese “lake”. But India does not want to provoke China into thinking that it is ganging up with America. And it worries that the complex relationship between America and China, while often scratchy, is of such vital importance that, in a crisis, America would dump India rather than face down China. An Indian navy ordered to close down China’s oil supplies would not be able to do so if its American friends were set against it.

(…)

India’s search for the status appropriate to its ever-increasing economic muscle remains faltering and uncertain. Its problems with Pakistan are not of the sort that can be solved militarily. Mr Karnad argues that India, from a position of strength, should build better relations with Pakistan through some unilateral gestures, for example cutting back the size of the armoured forces massed in the deserts of Rajasthan and withdrawing its short-range missiles. General Ashfaq Parvez Kayani, head of Pakistan’s army, has declared internal terrorism to be a greater danger to his country than India. That may also offer an opportunity.

China’s confidence in its new military power is unnerving to India. But if a condescending China in its pomp is galling, one in economic trouble or political turmoil and pandering to xenophobic popular opinion would be worse. Japan and South Korea have the reassurance of formal alliances with America. India does not. It is building new relationships with its neighbours to the east through military co-operation and trade deals. But it is reluctant to form or join more robust institutional security frameworks.

Instead of clear strategic thinking, India shuffles along, impeded by its caution and bureaucratic inertia. The symbol of these failings is India’s reluctance to reform a defence-industrial base that wastes huge amounts of money, supplies the armed forces with substandard kit and leaves the country dependent on foreigners for military modernisation.

Since independence India has got away with having a weak strategic culture. Its undersized military ambitions have kept it out of most scrapes and allowed it to concentrate on other things instead. But as China bulks up, India’s strategic shortcomings are becoming a liability. And they are an obstacle to India’s dreams of becoming a true 21st-century power.

(The Economist, emphasis added)

Modi’s policy toward the simmering rivalry with China seems to be one of maintaining the status quo. In mid-July, Reuters reported “China Invites Modi for APEC Summit but Rivalry Simmers”: Chinese President Xi Jinping invited India on 15 July to attend a summit of the APEC trade group in November, sending a message of cooperation during the first meeting between the new leaders of the world’s most populous countries. But behind the smiles at Xi’s 80-minute meeting with Prime Minister Narendra Modi in Brazil, India’s rivalry with its powerful neighbour bubbled up as the two nations argued over who would host the headquarters of a proposed BRICS joint development bank. Xi and Modi met soon after their arrival at a summit of the BRICS group of emerging powers. Xi said the two countries should join hands in setting global rules and suggested he attend the November meeting of the 21-nation APEC in Beijing, as well as take part in Chinese-led regional initiatives. India has never attended an APEC summit, and has long sought to become a member to help boost its economy.”

Soonthereafter, in mid-August, The Diplomat reported “the Indian Army invited Chinese troops to participate in Indian Independence Day celebrations in eastern Ladakh.” Nonetheless, as long as the two regional and global powers continue to rise economically and militarily, and as long as the territorial disputes remain unresolved, it is difficult to imagine a marked improvement in relations.

Along with the military, Modi and his political party, the Bharatiya Janata Party (BJP), ran on the promise of economic and also political reform. Again, many political candidates make lofty promises with the hope of winning elections and implementing these changes in good faith. What sets Modi and the BJP apart is their overwhelming election victory unprecedented in Indian politics. The Economist explains:

INDIA brims with colourful politicians, but none has quite the sense of political theatre of Narendra Modi of the Bharatiya Janata Party (BJP). He swept into Varanasi, India’s most ancient city, on May 17th pledging to clean the Ganges, its holiest and filthiest river. Three days later, in Delhi, BJP parliamentarians chanted and roared unanimous support for him, and he broke down in tears in mid-speech. After that he called on India’s president, Pranab Mukherjee, who agreed to swear him in as India’s 14th prime minister on May 26th.

Mr Modi won the election by a margin almost nobody imagined possible. Last year he spoke of an aandhi, a “storm blowing in our favour”. The storm broke, marking a national political shift as big as any since independence in 1947. Mr Modi smashed the long domination of Congress. In no previous national election had any single party got more votes than Congress; this time the BJP stunned its rival, winning 31% of the votes to Congress’s 19%. No single party other than Congress had ever before won an outright parliamentary majority; this time the BJP alone took 282 of 543 seats. Add its closest allies in the National Democratic Alliance and the tally is a handsome 336. Congress got just 44.

(The Economist, emphasis added)

Despite Modi’s and the BJP’s popularity, there are several key challenges to their economic policy changes. One such challenge is the Rajya Sabha, the upper house of the Parliament of India. An excellent article in the Center for Strategic and International Studies Asia Program blog, cogitAsia expounds on the Rajya Sabha and provides useful insight into India’s political and legistlative system. “India’s Road to Economic Reform”:

Despite the Bharatiya Janata Party’s (BJP) historic election victory earlier in May, the party will still face difficulty in getting major legislation through parliament because of its relatively weak presence in the Rajya Sabha – it currently holds just 18 percent of seats in the upper chamber, which equates to 42 seats out of 243. Coalition allies hold another 13 seats. This poses a unique challenge to the government’s reform agenda, as we at the India Chair have emphasized in a recent report and video presentation. This weakness in the Rajya Sabha was on full display earlier this month as the government unsuccessfully tried to move legislation that would have increased the foreign direct investment (FDI) cap in the insurance sector.

So at what point during its term in office can the BJP realistically gain control of the Rajya Sabha? 2018 is likely the earliest the BJP and its allies can hope to exert control over the Rajya Sabha. First, one must keep in mind that members of the Rajya Sabha are elected by state legislatures for six-year terms. Looking at which of these members of parliament (MPs) are set to retire over the next five years and represent states that the BJP controls or might control in the near future could very well determine the government’s ability to carry out reforms at the Center.

(CSIS, cogitAsia)

Nonetheless, as reported by the Indian publication The Economic TimesIndia’s Economy Looks to Narendra Modi for Growth Rebound”:

Economic growth picked up marginally from a decade low in the fiscal year ended March, but pro-business Narendra Modi’s thumping victory in the recent general election has stoked optimism of an investment-led turnaround in the coming quarters.

Asia’s third-largest economy grew 4.7 percent in 2013/14, slower than an official estimate of 4.9 percent and higher than 4.5 percent growth a year earlier. It marks the second straight year of sub-5 percent growth – the worst slowdown in more than a quarter of a century.

Economic growth for the quarter to end-March came in at 4.6 percent from a year earlier, compared with 4.8 percent estimated by analysts in a Reuters poll and a revised 4.6 percent growth in the previous three months.

“We are not able to yet see…how the economy will grow but certainly the mood is upbeat,” said A.M. Naik, chairman at the country’s biggest engineering firm Larsen & Toubro, who expects growth to pick up to 5.5 percent this fiscal year.

Growth stuck below 5 percent is disappointing for an economy that boasted of a near double-digit economic expansion until a few years back and was widely expected to be one of the main drivers of the global economic recovery.

It also poses a challenge for the new government to generate enough job opportunities to employ the 10 million people who enter the country’s workforce every year. New Delhi reckons the economy needs to grow 8 percent a year to prevent a demographic disaster.

Modi won India’s first outright parliamentary majority in three decades with a pledge to boost growth and create jobs, raising hopes among investors for a turnaround led by spending on infrastructure.

(…)

CHALLENGES

Capital investment contributes nearly 35 percent to India’s economy, but it contracted an annual 0.1 percent in the fiscal year that ended in March.

Projects worth 6.2 trillion rupees ($105.1 billion) were shelved last year due to bureaucratic gridlock, according to CMIE, an economic think tank, the highest in the past 18 years.

Modi’s reputation, assiduously built while running the western state of Gujarat, of speeding up implementation of infrastructure projects and promoting manufacturing has raised hopes for a similar push at the national level.

Arvind Panagariya, an economics professor at New York’s Columbia University who is tipped to get an advisory role in the government, has called on the new administration to revamp the cumbersome tax regime and boost capital spending.

But that’s easier said than done. States wield much of the power in approving projects, while only a quarter of approvals come from federal agencies. High corporate leverage and rising bad loans at Indian banks are also weighing on investments.

(…)

Adding to the growth challenge is an adverse global economic climate that is hemming in the country’s exports growth. The sector accounts for nearly a quarter of the domestic economy.

(…)

Equally worrisome are the prospects of below-average monsoon rains this summer, which could hit farm output and fuel inflation. That would make it tougher for an inflation-focused central bank to lower interest rates to support growth.

Persistently high inflation and elevated interest rates have crimped consumer demand. Consumer goods output, a proxy for consumer demand, has grown just once in the past 11 months.

(The Economic Times, emphasis added)

Finally, while there are surely more political changes to come, a highly significant and symbolic governing policy Modi has implemented in the few short months that he has been in office is the end of India’s Planning Commission, a move New York Times reporter Manu Joseph describes as “An Experiment with Socialism Finally Ends”:

The Planning Commission of India is like those old men who are no longer harmful but are reviled because they once were. In their glory years, their ideas and deeds, couched in exalted convictions, destroyed lives.

The commission, in its final days now, was officially a think tank embedded in the government with the honorable mandate to reimagine India’s economic future. But culturally it was a lesson six decades in the telling that there is much to fear in the idealism of the elite. Created in 1950, it was once the heartbeat of India’s planned economy, when a small cabal in Delhi allocated funds, decided what factories should produce and how much, and what sort of industries — in fact, what sort of anything — was good for the nation. Its powers have diminished over the years, and its relevance has been questioned.

On 15 August, Prime Minister Narendra Modi said in his Independence Day address: “Sometimes it costs more to repair an old house, but it gives us no satisfaction. We have a feeling that it would be better to construct a new house altogether. Therefore, within a short period, we will replace the Planning Commission with a new institution.”

Mr. Modi displayed a degree of respect for the commission, but economic analysts rejoiced, saying that an ancient beast created during India’s experiment with socialism had finally been slain. Amusing then that the seeds of the commission were sown by some of India’s leading capitalists.

In 1944, eight men, including the heroes of Indian industry of the time, J.R.D. Tata and G.D. Birla, wrote a 15-year vision for the Indian economy to be circulated among their influential acquaintances. It soon came to be known as “The Bombay Plan.” The authors wanted per capita income to double in 15 years, and every Indian to enjoy a minimum standard of living — for instance, to have access to 30 yards of cloth in a year and at least 100 square feet of space to call home.

As incredible as it might appear now, they wanted government to exercise tight oversight over industry. “Practically every aspect of economic life will have to be so rigorously controlled by government that individual liberty and freedom of enterprise will suffer a temporary eclipse,” they declared.

It is widely believed among academics that this document was among the major forces that influenced newly independent India to create the Planning Commission, which would in time become the most hated institution among the business community.

The commission is commonly referred to as a “Soviet-style” behemoth. The comparison annoys the economist Amartya Sen.

In “An Uncertain Glory,” he and the economist Jean Drèze write: “One thing that Communist countries — from the U.S.S.R. and pre-reform China to Vietnam or Cuba — were committed to achieving, despite all the political indoctrination and dogmatism, was to ensure free and universal school education without delay.”

India’s central planning, at least in its early years, showed a disregard for the primary education of the poor, which would in time assume the proportions of a criminal neglect.

(New York Times, emphasis added)

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