India’s economic troubles are largely of its own making, not as some in India would have it the product of headwinds from global economic malaise. Economic reform has stalled and been mishandled. The government of Prime Minister Narendra Modi has failed to grasp the strategic chance for economic reform, fumbled the execution of the reforms it’s tried to undertake and tinkered at the edges with others. Nationalist and protectionist political sentiment overwhelmed those who sought to lead India on a path of openness and reform, as Modi rejected the advice of top trade officials to join the massive liberalisation of trade and investment promised by East Asia’s Regional Comprehensive Economic Partnership (RCEP) agreement last year.
On present policy settings, a resumption of 7 per cent growth is remote. With the new Union Budget, government projections for 2020–21 fiscal year sit at 6–6.5 per cent growth. And even if growth in per capita incomes picked up to a bit over 7 per cent a year, one should be clear, India would only just about catch up to the per capita levels in purchasing power parity terms in China today by 2030. China’s per capita GDP is currently five times larger than India’s, measured at current exchange rates.
Slowing growth makes the new budget the preoccupation of economic policy attention in Delhi right now, Suman Bery explains, in one of our three leads this week. Yet, says Bery, India will also need to ‘take a clear-eyed strategic view of the emerging international economic landscape and its implications for growth. Even if India’s development path remains largely driven by domestic choices, shifts in the global order will affect its opportunities’.
That means higher priority to thinking about India’s economic diplomacy and not being shy about active plurilateral play into the defence and inclusive reform of a multilateral system that is now under attack. Nor is it in India’s interests, Bery says, to be forced to choose between the United States and China or to succumb to the US fallacy of focusing on trade deficits in its own bilateral trade relationship with China. As G20 chair in 2022, India will have a significant opportunity to shape the agenda with like-minded partners.
The worry is that India now appears preoccupied by other questions — questions of citizenship, sectarianism and the very idea of India as a proud secular state — and headed in an entirely different direction. The political ground has seen a seismic shift with the introduction of a religious criterion to citizenship laws and violent crackdowns on protests that ‘call into doubt the government’s commitment to secular democracy’, says Priya Chacko in another feature this week. As Prime Minister Modi and his Home Affairs Minister Amit Shah have intensified an ideologically-driven policy agenda and their Bharatiya Janata Party (BJP) bids for political domination, India has entered a cycle of protest and violence.
It’s not that the BJP lacks political legitimacy, having won the national elections in 2014 and 2019 under Modi fairly and with an increased majority against its lacklustre Congress party opposition. But after several weeks of protest and unrest, set off primarily by the controversial Citizenship Amendment Act that grants Indian citizenship to undocumented residents who are Buddhists, Christians, Hindus, Jains, Parsis or Sikhs and who came from Afghanistan, Bangladesh or Pakistan before 2015, excluding Muslims, many have begun to worry about where the country is now headed. The protests have invigorated non-Muslim opponents of the BJP’s Hindu nationalist project. A large number of non-BJP states have told Delhi that they won’t apply its citizenship laws in their constituencies and some have joined the constitutional challenge to them before India’s Supreme Court.
Some see Modi pursuing an ideological agenda to undermine India’s secular state. There’s also a touch of hubris that comes from a long stint in power in Home Minister Shah’s declaration that he’ll brook no compromise. The citizenship ruckus though is more likely part of BJP’s standard political fare on sectarian issues that’s gone a step too far. The immediate political target is to take the election next year in West Bengal where there’s a large Muslim minority. Whatever its origins, the chauvinist, inward-looking political milieu that typifies India’s politics today is a toxic mix with economic woes and also has real international diplomatic costs.
Already Japanese Prime Minister Shinzo Abe was forced to cancel his December visit because of the disturbances in Assam. Three ministerial visits from Bangladesh, India’s closest regional partner, have fallen by the wayside. And Modi’s international image, as well as India’s democratic credentials, are under scrutiny. ’The days of making easy distinctions between security and economics and a democratic India and authoritarian China … are long gone,’ says Chacko.
While Australian Prime Minister Scott Morrison’s postponement of his visit to Delhi last month was the result of the homemade bushfire crisis, the burgeoning Australia–India relationship, Chacko argues, needs a hard reality check. ‘The ongoing protests in India against the citizenship laws are unlikely to result in the regime changing its behaviour. Anti-pluralism and intolerance for dissent are intrinsic to its current Hindu nationalist politics’, she says. So these forces are an increasing though less-than-fully considered element in India’s international economic and foreign policy posture.
‘The India–Australia strategic partnership has seen impressive advancements in the last few years’, says Rajeswari Pillai Rajagopalan in our third feature on India this week. ‘The change in the tone and direction of the relationship over the past decade is driven by shared concerns about China’s rise and its strategic implications for the Asia Pacific order’. This narrative that’s key to building a closer relationship between Australia and India has shifted away from economics and towards defence and security cooperation. Yet Australia cannot pretend the political drift in India is not taking place, Chacko says, and will have to deal with it in managing the relationship.
Whether common conceptions of the China problem in India and Australia are serious enough or widely enough held to overcome worries about the ‘unhelpful direction of India’s internal politics’ and nurture the budding India–Australia strategic partnership remains to be seen.
The EAF Editorial Board is located in the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.