WHITHER INDIA? (2/4/11)

Shortly after receiving a midterm election “shellacking”, President
Obama and his foreign policy team made a diplomatic tour of Asia. Many
domestic observers saw this as seeking refuge abroad as Obama still
has the ability to exercise much of his presidential prerogative in
foreign affairs regardless of the Republican rout. However, Obama’s
choice of India for his longest visit yet reflects the increasing
importance of the bilateral relationship between our two countries in
economic and security matters. Over the last decade, India’s continued
economic growth has threatened American workers through outsourcing
while providing American consumers cheaper imports and services. It’s
influence has grown in South Asia as one of the few democratic stable
nations in the region and has now a far greater role in the security
of trade in the Indian Ocean. From the American perspective we must
ask whether India’s relative power continue to increase without limit.
Despite India’s growth during the 2000s, the country’s own problems
with income inequality, corruption, and ethnic tensions has already
started to place an upper limit to India’s ability to exert economic
power and influence on its neighbors.

According to the CIA World Factbook, the top 10% of India’s
population receive 31.1% of total income and the bottom 10% only
receives 3.6%. India’s rising income inequality, especially between
urban and rural populations, makes it far more difficult for the
country to grow and maintain a stable middle class. Without a large
middle class, there is less aggregate demand in the internal domestic
market, and consequently less affordable education for most students.
This requires foreign companies to re-educate undereducated Indian
workers at great cost. A smaller middle class means less social
mobility and greater potential for social and political conflict
between classes.

Also, without a large middle class, and with an increasing
consolidation of power in an elite, there are far fewer checks on
public corruption. On Transparency International’s Corruption
Perception Index, India ranked 87th out of 178 countries after having
fallen down a few places in the past few ears. Soon after Obama’s
visit, India was rocked by protests over a scandal involving the sale
of the mobile phone spectrum by politicians. This sort of corruption
discourages foreign direct investment, weakens the country’s ability
to govern, and hampers the ability of the government to continue
developing strong nationwide manufacturing and IT infrastructures.

Finally, long simmering ethnic tensions create political and
economic instability across the country. Current ethnic/religious
conflicts include the recent Gujarat riots between Hindus and Muslims,
the conflict among Kashmiris and Indian troops in Kashmir, Maoist
rebellions centered around West Bengal, and the rise of Hindu
Nationalists across the country. Ethnic conflict, language barriers
(despite the increased use of English as a lingua franca), and even
the persistence of the caste system in many aspects of society hinder
the formation of long-term coherent domestic and foreign policy
priorities. Many ethnic groups share more with their kin across the
Pakistani, Bangladeshi, or Burmese borders than they do with Delhi. By
comparison, the relatively homogeneous Han population of China,
combined with its single-party regime, has been able to more firmly
direct the powers of state on fixed domestic and foreign policies.

To date, India has benefitted from foreign direct investment and
a large pool of cheap labor. Yet, when it comes to America’s ability
to exert its foreign policy in South Asia and the Indian Ocean, India
is not currently, nor will be soon, an overwhelming regional hegemonic
threat. There are far too many internal issues for India to resolve
first. Obama’s recent trip and his administration’s advocacy of
India’s ascension to the UN Security Council reflects our choice of
making India a regional business and security partner rather than an
adversary.