Since the end of the Second World War, the global order has seen two major transitions. After the War, a bipolar world, led by the U.S. and the Soviet Union, emerged.
Following the disintegration of the Soviet Union in 1991, unipolarity replaced bipolarity, with the U.S. being its centre. There have been discussions for the past several years whether American unipolarity has passed. Now, there are more signs, from China’s rapid rise to Russia’s aggressive foreign policy, to suggest that the global order is undergoing another (third) transition.
While many governments, including India, Russia and China, welcome multipolarity, the U.S. remains the world’s most powerful military power. But the U.S.’s ability to shape geopolitical outcomes is clearly in decline, as was seen in its withdrawal from Afghanistan after 20 years of war or the Russian invasion of Ukraine, challenging the post-Cold War security equilibrium in Europe.
These changes actually leave the world in a flux. There’s a lack of clarity on which direction the world is headed, which makes policymaking harder for middle powers like India.
Non-alignment success
When India became independent, the Cold War was still in its early stages. For a newly free country with enormous challenges in an ideologically and geopolitically divided world, managing its foreign policy itself was a daunting task.
But a long view of India’s foreign policy trajectory would tell us that India, which adopted non-alignment as a foreign policy doctrine, did well in managing most of its challenges. The conventional wisdom about India in the Cold War period was that it was too idealistic.
But that is a simplistic way of reading India’s foreign policy choices. India has actually been flexible in readapting itself to the changes in the global and regional equations.
If in the 1950s, Jawaharlal Nehru had opposed Zhou Enlai’s proposal for a permanent Afro-Asian Secretariat saying it would create yet another bloc, the same Nehru would support turning non-alignment into a movement in the 1960s, after CENTO (Central Treaty Organization) and SEATO (Southeast Asia Treaty Organization) were formed.
If in the 1950s and 1960s, India maintained equidistance from both blocs, living up to the true spirit of non-alignment, in the 1970s, after China fell out with the Soviet Union and started moving closer to the U.S., it started tilting towards the Soviet Union, but stayed out of any Soviet-led military alliances. When the Soviet Union collapsed, India sought to transform its ties with the U.S. and integrate itself with the global economy in the new era of globalisation. But it also maintained close defence and strategic ties with Russia and built a vibrant economic partnership with China.
Present tense
But in making choices, India faces an entirely new set of challenges in the new global disorder. If the centre of the Cold War was Europe, the arena of the looming U.S.-China great power contest is Asia. It is unfolding right in India’s neighbourhood, and even if it stays out of it, it will feel the heat.
Second, during the Cold War, India didn’t have hostile relations with any of the opposing superpowers. Today, India would be tempted to join the American bloc as it faces the China problem.
The power imbalance between India and China, which shared similar economic clout in the 1970s, has widened in recent years. China has also developed a strategic partnership with Pakistan, and is raising its influence in other South Asian and Indian Ocean countries.
Besides, the decades-long border peace between India and China collapsed in 2020 when Chinese troops attacked Indian soldiers in the Galwan Valley in the Himalayas. So on all fronts, India faces the heat of China’s rise. And with China and India rising further, this friction is likely to get more heated.
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Steve Ovett, the famous British middle-distance athlete, won the 800-metres gold medal at the Moscow Olympics of 1980. Just a few days later, he was about to win a 5,000-metres race at London’s Crystal Palace. Known for his burst of acceleration on the home stretch, he had supreme confidence in his ability to out-sprint rivals. With the final 100 metres remaining,
[wptelegram-join-channel link=”https://t.me/s/upsctree” text=”Join @upsctree on Telegram”]Ovett waved to the crowd and raised a hand in triumph. But he had celebrated a bit too early. At the finishing line, Ireland’s John Treacy edged past Ovett. For those few moments, Ovett had lost his sense of reality and ignored the possibility of a negative event.
This analogy works well for the India story and our policy failures , including during the ongoing covid pandemic. While we have never been as well prepared or had significant successes in terms of growth stability as Ovett did in his illustrious running career, we tend to celebrate too early. Indeed, we have done so many times before.
It is as if we’re convinced that India is destined for greater heights, come what may, and so we never run through the finish line. Do we and our policymakers suffer from a collective optimism bias, which, as the Nobel Prize winner Daniel Kahneman once wrote, “may well be the most significant of the cognitive biases”? The optimism bias arises from mistaken beliefs which form expectations that are better than the reality. It makes us underestimate chances of a negative outcome and ignore warnings repeatedly.
The Indian economy had a dream run for five years from 2003-04 to 2007-08, with an average annual growth rate of around 9%. Many believed that India was on its way to clocking consistent double-digit growth and comparisons with China were rife. It was conveniently overlooked that this output expansion had come mainly came from a few sectors: automobiles, telecom and business services.
Indians were made to believe that we could sprint without high-quality education, healthcare, infrastructure or banking sectors, which form the backbone of any stable economy. The plan was to build them as we went along, but then in the euphoria of short-term success, it got lost.
India’s exports of goods grew from $20 billion in 1990-91 to over $310 billion in 2019-20. Looking at these absolute figures it would seem as if India has arrived on the world stage. However, India’s share of global trade has moved up only marginally. Even now, the country accounts for less than 2% of the world’s goods exports.
More importantly, hidden behind this performance was the role played by one sector that should have never made it to India’s list of exports—refined petroleum. The share of refined petroleum exports in India’s goods exports increased from 1.4% in 1996-97 to over 18% in 2011-12.
An import-intensive sector with low labour intensity, exports of refined petroleum zoomed because of the then policy regime of a retail price ceiling on petroleum products in the domestic market. While we have done well in the export of services, our share is still less than 4% of world exports.
India seemed to emerge from the 2008 global financial crisis relatively unscathed. But, a temporary demand push had played a role in the revival—the incomes of many households, both rural and urban, had shot up. Fiscal stimulus to the rural economy and implementation of the Sixth Pay Commission scales had led to the salaries of around 20% of organized-sector employees jumping up. We celebrated, but once again, neither did we resolve the crisis brewing elsewhere in India’s banking sector, nor did we improve our capacity for healthcare or quality education.
Employment saw little economy-wide growth in our boom years. Manufacturing jobs, if anything, shrank. But we continued to celebrate. Youth flocked to low-productivity service-sector jobs, such as those in hotels and restaurants, security and other services. The dependence on such jobs on one hand and high-skilled services on the other was bound to make Indian society more unequal.
And then, there is agriculture, an elephant in the room. If and when farm-sector reforms get implemented, celebrations would once again be premature. The vast majority of India’s farmers have small plots of land, and though these farms are at least as productive as larger ones, net absolute incomes from small plots can only be meagre.
A further rise in farm productivity and consequent increase in supply, if not matched by a demand rise, especially with access to export markets, would result in downward pressure on market prices for farm produce and a further decline in the net incomes of small farmers.
We should learn from what John Treacy did right. He didn’t give up, and pushed for the finish line like it was his only chance at winning. Treacy had years of long-distance practice. The same goes for our economy. A long grind is required to build up its base before we can win and celebrate. And Ovett did not blame anyone for his loss. We play the blame game. Everyone else, right from China and the US to ‘greedy corporates’, seems to be responsible for our failures.
We have lowered absolute poverty levels and had technology-based successes like Aadhaar and digital access to public services. But there are no short cuts to good quality and adequate healthcare and education services. We must remain optimistic but stay firmly away from the optimism bias.
In the end, it is not about how we start, but how we finish. The disastrous second wave of covid and our inability to manage it is a ghastly reminder of this fact.