Questions like this – Is India relevant for the Asian century? – understand two things. Firstly, will it be an Asian century and secondly, how relevant is India in this respect. As a businessman, I believe in being positive but realistic. That’s what I’m going to try to be by looking into this question, without falling into wishful thinking.
It stands to reason that due to both demographics and the rate of economic growth that we have, Asia will have a greater economic and political role to play in the world in the coming decades. Today, in purely monetary comparisons, Japan ranks 2nd, China 7th and India 12th in the world in terms of GDP. When we adjust for purchasing power parity, China is No. 2, Japan is the world’s third largest economy, and India is the fourth largest economy. So in the top five economies in the world, on a purchasing power parity basis, there are already three from Asia. What more can be said?
But will the 21st century be the Asian century? I wish it were so. In my opinion, however, even though Asia will be increasingly important economically, it might be an exaggeration to say that this will be the Asian century. Creating a powerful block requires clear direction. There are three major economic zones: NAFTA in the Americas; the EU, very well represented for many years by Pascal Lamy; and Asia. I said Asia, not ASEAN. In NAFTA, the United States is the undisputed leader. Within the EU, there is a Franco-German axis which provides joint leadership. In Asia, there has been no clear leadership and the conditions do not seem conducive to its emergence.
Asia has not been and probably will not be a monolithic entity. There are at least three poles, if not more: China, Japan and India, in that order. ASEAN and South Korea have a balancing role to play. We could, of course, see Korea united sooner rather than later. But these poles look in different directions and then there is the not so invisible hand of the United States in Asia.
Japan has traditionally not acted as an Asian country or as the leader of Asia. In my opinion, it has worked hard to obtain and maintain its status as a developed country safely under the security umbrella of the United States. And its record of the Second World War makes its relations with Asia difficult. India’s self-image and acceptance of its leadership by other countries in the region are at odds. The only countries, I’m sorry to say, with which we haven’t had any problems in the vicinity are Bhutan and the Maldives.
This leaves China to take on the mantle of leadership. But India and Japan will not accept this easily. In this they would be ably supported, I believe, by the United States because it is in the interest of the United States to keep Asia divided as it was in the interest of the United States to see a united Europe. Moreover, apart from a lack of political and social foundations, Asia even lacks economic foundations. The road to the stomach of Asia passes through the United States. Economic growth in Japan, ASEAN and China has been and is fueled by exports to the United States and investment in those countries by American companies. The United States is also India’s largest trading partner and Indian IT and IT-based services thrive on the American umbilical cord.
The pattern of trade within Asia is also changing. China now imports more from Asia than Japan. A recent study by the US National Bureau of Economic Research concludes that China is, overall, likely to have a negative impact on the economies of all Asian countries other than Japan and South Korea. .
Thus, Asia is unlikely to challenge the American and European duopoly in the political or economic spheres. There may be an opportunistic shift of alliances by the United States, China, Japan, India and Russia in various combinations on various issues. It is worth telling a story – a Chinese man boasts to an Asian American of the coming century. The American begs to differ. Why, asks the Chinese. Because our Asians are better than your Asians, replies the American.
I would like to rephrase the proposition of “Is India relevant for the Asian century?” to “Is India Relevant to Developments in Asia?” and my answer to the latter is an emphatic yes. This could not have been the case even 10 years ago. Then discussions on Asia excluded India. They meant East Asia and that included ASEAN, China, Taiwan, South Korea and Japan. Now the focus is on China, Japan and India, while ASEAN, South Korea and Japan are sidelined. This change has occurred due to the growth of the Indian economy due to liberalization and the resultant response of entrepreneurs, both domestic and foreign, and the growing competitiveness of Indian industry. There is also a realization within ASEAN, led by the shrewd Singaporean leadership, that they need an economic and political foil to China. Despite its continued investment in China, the United States appears to be changing its view of China from a strategic partner in the Clinton years to a strategic competitor.
The recent report of the US-China Economic and Security Review Commission to the US Congress states: “A number of current trends in US-China relations have negative implications for our long-term economic and national security interests”.
The United States seems to want to build a coalition in Asia to counter China. This will include Japan and South Korea with which the United States has security pacts. Maybe also some ASEAN countries and maybe India. We seem to believe in India that we don’t have a place on the High Table, but we could hold the balance in Asia between the United States and Japan on one side and China on the other. We should follow a policy of friends with everyone even if, strategically, our interest may be more in the US-Japan axis than in China. The starting point must be the realization that East Asia needs us as much, if not more, than we need East Asia and this will result in a more confident approach to their respect.
In the economic sphere, our self-doubt has led to unnecessary FTAs with ASEAN members and Thailand, in which we have little to gain, but which can create avoidable difficulties for Indian businesses. An FTA with China is on the cards, with a joint task force already in place. I have reservations about whether this will be in the interest of Indian industry and economy. I know what the United States is doing, but I believe in multilateralism within the framework of the WTO.
The United States and China will probably use the Pakistani map and we heard Shaukat Aziz today to keep us in check. This is why it is important that India and Pakistan move forward in the process of rapprochement, however difficult it may seem. If we want to be relevant in Asia, we must practice a sophisticated and real policy. It means a confident, aggressive yet flexible response to different developments, not the hesitation and moral delicacy that we sometimes exhibit. This does not mean unscrupulous behavior. However, it means having the courage to set aside the principles for a short time if they are a long-term obstacle to furthering our national interest.
The deepening of economic relations is an important component of global relations today. A country is an ally if it sees economic benefits in a relationship. Economic benefits between countries largely occur through business investment and the importation of goods by businesses. This becomes particularly advantageous for a particular country when its national companies engage in it. When Tatas go to Bangladesh or Lakshmi Mittal goes all over the world, India also benefits politically. The strengthening of national enterprises is important. The developed world has always done this. Fortunately, many large companies in India are strengthening their global orientation.
In conclusion, as long as we continue to strengthen the national economy and national enterprises and pursue a policy of enlightened self-interest, our importance in the world, and not just in Asia, will continue to increase.
We are one of the few countries in the world with which people generally have an affinity. Our soft power of civilization, an inherent tolerance for diversity, democracy and even Bollywood have been around for quite some time. We now have to marry them off to the hard economic power that unfortunately the world today respects more than anything else. For this, we need exceptional and astute political leadership, a favorable business environment and a very strong partnership between government and business.