India: an emerging power?

1. India: an emerging power? Mritiunjoy Mohanty IIM Calcutta IEIM, UQAM

2. Preview • There is no necessary convergence of interests between USA and India • Whether India becomes a new power will be depend upon how it copes with internal and external challenges • Indeed coping with these might lead to divergence of interests • And new coalitions

3. The upside: growth and take-off • Economy growing at nearly 9% over the last four years, i.e., from 2003/4 to 2006/7 • Will probably maintain that this year • Per capita income growth has more doubled • Currently at 7.1%, as compared with3.4% experienced during the 1980s and 1990s

10. Investment and savings ratios in the low 30s, which would seem the requirement for modern take-off • Domestically financed, CAD in the range of 2% • Increased inflows of capital • Huge increases in inward market-seeking FDI in the last 4 years • Rising accretion of reserves • Sustainable macroeconomics

11. Private Capital • Indian private capital finally came of age, showcasing itself in the $12 bn takeover of Corus by Tata Steel, catapulting it no.5 globally • Tata Motors, currently no.2 in india in cars, frontrunner in the bidding for Ford brands Jaguar and Landrover • Corporate india on a global buying binge • Outbound FDI now almost equal to inward FDI. Next year it is predicted to be higher

12. Public Sector • A public sector renaissance • Partial privatisation • Privatisation stopped because of political and union resistance • On 21st Jan 2008, 7 public-sector firms in Top20 by market capitalisation and 14 in the Top50 • End of 2000, there were 5 in the Top20 (one of which has been sold) and 8 in the Top50

13. Science and Technology • India’s science and technology, seems finally to find its feet. • In January 2007, ISRO successfully recovered an orbiting satellite. • It is a technology that only China, the EU, Russia and the USA possess. • In April 2007 ISRO commercially launched and Italian scientific satellite Agile into orbit and entered the international satellite launch market. • Two days ago commercially launched an Israeli spy sattelite. • Successful launch of the Geosynchronous Satellite Launch Vehicle, (GSLV-F04), which placed a 2-tonne communication satellite, INSAT-4CR into orbit. • Successfully tested an indigenously made cryogenic engine to power GSLVs • Indian made super-computer ranked in the top-10 in the world

14. The international stage • Major player in the Doha Round of WTO negotiations • Important G24 member: coalition of shared interests • Expanded G8 • The Indo-US nuclear deal and the recognition of India nuclear power without signing the NPT • The distancing from Pakistan • “convergence of interests” • Increase in strategic value – an emerging power

15. The downside • Internal • Unsustainable inequality • Agrarian crisis and land hunger • Poor quality of jobs • Caste inequality related violence • External • Unstable South Asian neighbours • China

16. Unsustainable Inequality • the gini coefficient has gone up from 32.9 to 36.2 between 1993-2004 • Over the same period, the bottom 20% per capita expenditure has grown at 0.85% p.a. while the top 20% has grown at 2.03% p.a. • In China the comparable statistics are 3.4 and 7.1% • That is China’s bottom 20% expenditures rise 4 times faster than India’s. • It is this lack of growth at the bottom which makes increasing inequality potentially unsustainable

17. …. because • An unprecedented agrarian crisis of livelihoods, income, employment and profitability has beset rural India for more than a decade • 86% of India’s workforce is employed in the informal sector, the bulk of whom have gained little from the rapidly growing economy. • Almost 97% of new non-agricultural jobs created between 2000-05 in the informal sector. • 88% of Dalits and Adivasis population, 80% of Other Backward Castes (OBCs) and 84% of Muslims belong to the “category of the poor and vulnerable”. These groups constitute roughly 75% of the population • five years later, victims of the Gujarat pogrom still live in refugee camps and have not been able to return home and there has been no calling to account

18. … and therefore • Land related violence • The resurgence of armed left-wings groups • Caste related violence • Not just social but political as well • In November 2006, a poor Dalit agricultural worker who had been elected the president of village panchayat in Tamil Nadu, was killed because he refused to oblige his deputy, an “upper-caste” vice-president, and become a rubber-stamp president.

19. Unstable neighbours • Pakistan • Bangladesh • Sri Lanka • Nepal • Burma

20. Economies have fared well

21. Democracies and polarisation: Bangaldesh and Sri Lanka • “Convergence of interests”: Pakistan • Nepal • Burma • China

22. Deepening of democracy and lower caste political mobilisation … • Affirmative action in politics • ensured that there were seats for socially disadvantaged groups (including lower castes) in all publicly contested elected bodies, from the parliament downwards to now the panchayat. • Politics of affirmative action – lower caste mobilisation around quotas • Upper caste response – politics of religious identity • It is this political mobilisation and the consequent access to political power that probably explains one of the most truly remarkable aspects of India’s democracy – that in India it is the poor and not the rich who are more likely to vote

23. …. new players and tradeoffs • India’s first low caste (Dalit) chief minister at the head of Dalit majority government • Changing elites – the rise of the urban bourgeoisie and the middle class • Eclipse of the rural bourgeoisie • Deepening agrarian crisis and caste conflict • Agrarian crisis and financial liberalisation • Tradeoffs - land reforms will not be supported by rural bourgeoisie • Tradeoffs - non-agricultural employment for reducing poverty – rural biased growth strategy will not be supported by urban bourgeoisie

24. The 2004 defeat of the BJP-led coalition • The coming of the Congress-led UPA • Rural employment guarantee scheme • Doha: defensive interests • Power of the urban bourgeoisie • Continuing agrarian crisis • Resistance to Indo-US nuclear deal • Pragmatic India and stable neigbours • No necessary convergence • A new coalition of interests

25. Thank You