By: Hari Sud
harisud@hotmail.com
May 13, 2004

Let us get the Crystal Ball out and look into India’s future, eleven years from now. Like any future predictions, let us give it +/- 20% accuracy; hence nobody is blamed for being partially accurate. Let us look into the future to see how India has faired politically, economically and from a security perspective in 2015. Let us also see how India has faired in the international arena. Conclusions to be reached are the following 

·         Is India more secure in 2015 than it is now? And, 

·         Can it ward off successfully, military invasions like Muslim invasion in 1192 or economic and military conquest by English from 1757-1857? (Or if you go far back in the history, then Alexander’s invasion in 326 BC) 

Let us see, what the Crystal Ball is telling us. 

Political India in 2015 

A.1             Background 

Today, from the Korakram Pass in Kashmir to Cape Comarin in the Indian Ocean and from Western border with Pakistan to the Burma Border, India is united under one federal government. Provinces rule their local areas, but are watched over by the Federal Government. Democracy prevails, which gives people a chance to eject or retain the rulers every four to five years. State politics is chaotic and beset by personalities. Politics in the Central government is a bit more stable. One party dynastic rule from 1947 to 1994 has ended for lack of charisma in the incumbent leader. The forgoing period heralded the beginning of the cancer of corruption and nepotism.  

With this scenario in mind let us see what the Crystal Ball says about India – 2015 

       A.2       Where do we stand in 2015? 

Politically, three parties have emerged as a political force in the country. All the smaller parties have merged with the larger organizations. The right wing elements have grouped with NDA with BJP as the leader. Center left parties have sort the leadership of the Congress Party, which has re-invented itself after purging dynastic trends. The left leaning parties and Communists have grouped into a new left party. The Elections of 2014 was the catalyst for this change. It helped to knock the smaller personality based parties out of the political system. Moreover very quarrelsome leaders of small parties are dead. New leaders are enjoying the benefits of the rebounding economy, hence preferred merger as opposed to extinction. As the literacy increases, people vote for the good governance. Political corruption is an animal difficult to kill, especially if it wears a suit, speaks softly and pretends working for the welfare of people and the nation. Its demise is not in sight. National integration has improved with language issues dead and communal issues taking back seat as outside forces, which excited the populace, are under check. Nation is being tied into one string politically, economically and culturally. 

       A.3       Is this a good news? 

Plurality of political party is always good for the nation. Successful Multi-party system ensures emergence of leaders and choices before the electorate. Two party systems practiced in US and UK suffers a drawback. It offers the electorate limited choices. Only a highly sophisticated electorate and political parties can make it work. UK and US has that advantage. So far it would appear that by 2015, democracy is maturing in India. 

Economic India 2015 

B.1       Background 

India had languished for 45 years after independence. Economic chaos existed even with eight Five Year Plans and a huge amount of outside economic aid. Growth was less than three percent and there was exponential population growth. Food shortages existed till 1982. In addition money, expertise and resources were drained in three wars with Pakistan & one with China. Unwilling foreign lenders, politically motivated displeasures between businesses and political leadership, regressive laws have discouraged business activity. The general populace went from bad to worst. Economic reforms were overdue. Also, a new breed of politicians was required to manage the economy. Once these changes were made, dividends were immediate. The money position improved and the nation started progress a bit more aggressively. By 1997, the economy had stabilized. A looming Y2K crisis brought the need of highly educated Indian IT professionals to go to US and Europe and bail the world out of the upcoming crisis. Indian graduates were everywhere. Their effort paid off. The Y2K passed without an incident. The good work of the Indian graduates left good memories in the West. The Corporate America and Corporate Europe wanted them back on the job, if possible in India, doing IT work for them. Hence IT outsourcing and back office work outsourcing (loosely called BPO Outsourcing) took its shape. Cost advantage also favored India. This trend began in 2000 and is continuing. It is likely to continue in the next 11 years i.e. till 2015 and beyond. By 2004, about 800,000 people were employed in India in this activity. A conservative estimate puts this to grow to 2 million by 2010 and more after that.   

A very good economic growth rate of 8.4% achieved in last two quarters of 2003 has set the trend for better things in the future. Economy is looking up, but has its ups and downs. Without money this high growth rate is not sustainable in next 11 years. Economic reforms are slow to come as political compulsions keep some of the important reforms on the back burner. NDA victory in upcoming elections in 2004 may speed up a few reforms, but dumping of the past 45 years of mismanagement takes time.  

With this background let us examine Year 2015 

         B.2       Where do we Stand Economically in 2015 

Economy grew at an average 7.5% from 2004 to 2009 as few economic reforms (post 2004) took hold. By 2009, economy added $225 Billion worth of goods and services or 50% to its total to its credit. The Elections of the 2009 were a watershed event, where the incumbent ran out of ideas, hence lost the elections. The new government empowered by the new mandate pushed ahead with more economic reforms. Corporate India rejoiced. A growth rate of 9.5% was achieved till 2015. In next six years after 2009, additional $450 Billion has been added to the national economy. Hence the Indian economy became a more than a trillion dollar economy (my estimate $1,132 Billion by 2015).  

FDI was maintained at a rate of about $8 to $10 Billion a year (2004-2015). It is double the amount of FDI in 2003 and approximately quarter of what China gets every year. 

BPO maintained its momentum with roughly 2 million jobs by Year 2009, despite American opposition.  Further increase in IT and BPO outsourcing got arrested by 2010 because of rising rupee exchange rate and legislative pressure on Corporate America. BPO has made a significant contribution to the Indian GDP and exports. Further GDP growth is achieved thru clever investment in high value added industry with eye on exports. These include Pharmaceuticals, auto parts, jewelry, construction contracts abroad, computer hardware, textiles etc.  

By 2015, the foreign reserves reach a $200 Billion mark, but borrowing for investment in the above new industries has added a fresh debt load. Total debt stood at $300 Billion as opposed to about $108 Billion in 2004. Foreign reserves have been aided by remittance from expatriate Indians living in Middle East, UK, USA and Canada. A lot of high interest debt acquired previously from 1992 to 2005 has been retired. Exports have tripled from $50 Billion in 2003-4 to $ 150 Billion in 2015.  This is a healthy 10% increase every year commensurate with the investment.  

Infrastructure investment lagged behind till 2008. Power shortage, lack of transport, bad government procedures, and lack of cheap land for new and incoming industry, skilled labor shortage created a crisis. This crisis came to a head in 2008 when delayed power projects resulted in severe power shortage.  Also clogged seaports and airports resulted in shortfall in exports. The incumbent government lost election on this issue in 2009. The new government made improvements in infrastructure as its first priority.  

            B.3       Agriculture in 2015 

Agriculture accounts about 21% of the GNP and is the only segment which keeps the rural area prosperous. Monsoon vagaries, which make or break a particular year, are less of a factor than it was in 1966 or 1986. Each year since 2002, dependence on Monsoon is less and less. A good agriculture year like 2003-04 is a significant factor in the buoyancy of the GNP growth.  A bad Monsoon year shaves 2% from the GNP growth. To add fresh acreage under agriculture, the much-heralded river-linking project, is under way modestly. Its cost at $120 Billion is prohibitive, but it is major rural and urban welfare project, hence after much debate the first ground to link the northern rivers to the southern rivers was turned in 2008. Its cost will be spread over 25 years. Additional acreage under cultivation and higher yields, control the flood situation, additional power generated are its bonuses. Financing has been arranged thru the World Bank. 

Technology is playing major role in higher agriculture production. The farms are more mechanized, high yielding seeds production has increased. Crop protection has received a better understanding by the farmer as chemical usage has multiplied. The rural welfare has resulted in schools, hospitals, roads, power, and drinking water at the village level; hence it has arrested the migration of people from village to the cities. 

In 2015, the food grain production reached a total of 300 million tons with a growth of 2-5 –3% per year. The foregoing includes two drought years in 2008 and 2014, where food grain production dipped by 4% and recovered a year later. 

            B.4       The Population Bomb 2015 

By 2015, India’s population has increased to 1.35 Billion souls. Growth at 2% rate has added 300 additional mouths to feed, cloth and shelter.  This is a serious challenge to any planning. The irony is that 60% of the total population is under 40 years of age. India has become a nation of young people. Their requirement for goods and services is tremendous. They are not prepared to take no for an answer. Failing to get, what they need is partially responsible for dumping of the old and aging leadership in 2009 elections. This demographic shift is mainly responsible for setting up of new priorities for the nation. Old and corrupt leaders are history. Young leadership decided to make decisions, which eluded the old guards. Economy growth accelerated from 2009 to 2015. The nation is breathing a bit easier with less political debacles. Young men, who mean what they say, without excessive use of diplomatic language, suddenly confront foreign leaders, which previously found easier to manipulate old men in power. In fact they are respecting them and learning to do business with them. 

            B.5       Oil Production 2015 

The situation of oil is very precarious. India is perpetually dependent upon imported Middle East oil at high prices. Effort to find oil, inland and offshore has only been partially successful. The current oil import of $32 Billion in 2004 has increased to $75 billion in Year 2015. The oil price situation is still out of control. The Muslim Middle East is maximizing value of its oil exports. Middle Eastern wars are not helping.  

The alternative gas purchases from Iran via Pakistan are a no go. The much talked about oil and gas imports from Central Asia via Pakistan have not materialized. This Central Asian gas has gone west with well-developed Russian pipeline system. The crossing of HinduKush and reaching Karachi In Pakistan was not a preferred choice for the investors. 

            B.6       Technology in 2015 

This intellectual property is still a Western monopoly. India is dependent upon them for most of its needs. Research In Agriculture, Pharmaceuticals, Biotechnology, Information Technology, and Defense & Space etc. is under way in India, but overall import of technology for industry continues.  

A major R & D effort began in earnest in 2008 with tax incentives given to industry and research organizations. Patent and copyright regime has been strengthened and intellectual property rights of the West given a boost by modifying copyright laws. New research organization has been set up in 2008 to incubate new ideas. The old regime of Council of scientific Research has been dumped. With new beginning, it is a possibility that R & D will reduce India’s dependence on the west by 2030. 

            B.7       Trade and Trade Competition 

India and China are competing for the market share in the world. China has a stranglehold on the merchandise trade in the world. India has managed to get going on BPO, pharmaceuticals, and auto parts, diamonds and jewelry and other high valued industry. Disputes to get a larger share have resulted in strained relations between India and China. The WTO entry of India and China has made resolution a bit easier. But the West is playing a bit of game by offering both the rivals the same piece of the pie. China has a strategic advantage over India as it has a better infrastructure, more modern manufacturing, but this advantage is being eroded by Indonesia and Philippines with cheaper labor. India with a troublesome neighbor in Pakistan is having difficulty getting all the advantages it needs. Hence trade growth is a bit lopsided as opposed to exponential Chinese trade growth. In East Asia, Chinese have managed to block some trade opportunities for India with favorable treaties with Singapore, Philippines, Indonesia, Thailand, Korea and Japan. But there is a silver lining. Cash rich Middle East has become India’s customer. 

India’s Status Internationally in 2015 

The BPO and trade is giving India a good standing internationally. India’s brainpower is respected and Indian graduates are welcomed in corporate headquarters in Europe and USA. Indian products are sold not at the retail level but are part of everyday life in the west. The merchandising crown belongs to China, but Indian products are making a difference. The image of sixties and seventies of India with a begging bowl has been replaced with Call Center and Back Office work force images.  

The most coveted position for India to become one of the permanent members at the UN Security Council is still doubtful. The West and the Chinese are playing games with India and denying this status to India. A significant effort made by the new Government of India in 2010, to find its rightful place in the World community was unsuccessful.  Pakistan and Muslim world is used as tool to browbeat Indian effort. Dejected India decides to showcase India by staging Olympic games in 2020 in New Delhi or Banglore.  

Security situation in the Western countries has worsened with Osma Bin Laaden look alike terrorizing them. The Eastern Asia is firmly in the grips of China. US are considering withdrawal from Korea and Taiwan. This has offered India a bit of a chance to increase presence at China’s doorsteps. India- Pakistan peace is a non-starter. India has decided to enmesh Pakistan in an arms race to drain its resources. This has helped a bit but America has stepped in to subsidize Pakistan’s finances, hence diplomatic relations between India and US are not progressing well.  

Africa, Latin America and South America have only diplomatic contact with India.  

Security & Defense in 2015 

Internal security situation in India has worsened a bit. Blame it on terrorists coming across the border or homegrown terrorists. The Kashmir issue has not been resolved and unlikely to be resolved in a next generation or two. Pakistani nuclear missiles have become more accurate, hence more lethal. In addition China, considers India as a trade and economic adversary hence maintains a friendly posture towards Pakistan, Bangladesh and Burma. Tibet is still occupied; hence slopes of Himalayas are still a source of military tension. North East is unstable with terrorists and illegal migration as the main issues. Overall Indian military forces have acquired a punch, which will dissuade anybody from thoughtless action. 

            D. 1      India vis-a-Vis Pakistan 

A more militarily capable Pakistan, aided and supported by the West is the most serious threat to India’s security. In years 2002-2015, Pakistan received $4 Billion in military aid $8 Billion in economic aid from America. This amount is slowly making Pakistan more belligerent, especially after the receipt of 40 F-16s in 2007. The peace initiative of 2004 died as unworkable in the absence of timetable to hand over Kashmir to Pakistan. The Line of Control has basically slipped into a “Line to Cross for Jehad” i.e. LCJ. Best Indian military effort to contain crossing of Pakistani terrorists into Kashmir has failed. Pakistan has acquired technology to neutralize Indian capability to detect infiltration. Occasional foray is made by Pakistani based terrorists to reach Bombay, Gujarat and Delhi. Anti terrorist actions by Indian security forces have been highly successful and has prevented a few major incident, but a few happen anyway, adding to the tension in the continent. 

Technically, huge dumping of weapons by America has not dramatically shifted balance of power in Asia. The Pakistani Army has been kept busy in the mountains bordering Afghanistan, where aging Mullah Omar of Taaliban fame and Osma Bin Laaden of Al Qaeda fame still preach violence against America. Desperate attempts to catch them in 2004, 2005 and 2008 were unsuccessful. Now America is providing help to Pakistan to do its dirty work.  

Pakistan is firmly in America’s clasp. Its nuclear tipped missiles are patrolled by USA. Its Major Non NATO Membership has forced it into loosing its sovereignty over its military recruitment, training, promotions and nuclear weapons. The US supported Pakistani army managed to defeat a political effort made in Pakistani Parliament to walk out of the MNNM status in 2008. Result, the nation has been left divided. The Mullahs are strongly anti American, But the Army and the Civil Service is pro American. Hence the divide has a great negative influence on economy and day to day working of Pakistan as a nation.  

Pakistan’s defense expenditures have escalated to about $15 Billion a year in 2015 from roughly $7 Billion in 2004. This is a huge increase. But it is being sustained by improved economy, which is growing with American aid, at about 5% a year and direct grants from the benevolent America.  

But the Pakistan’s military position with respect to India has declined. Indian Armed forces have dramatically shifted the balance of power in its favor. It is partly due to huge increase in Defense spending increases from $14 Billion in 2004 to $29 Billion in 2015 (6% growth in expenditure per year and at about 2.5% of GNP) and influx of American & Israel’s technology. The concept of heavy armor based mobile warfare to defeat Pakistani forces in the plains of Punjab and Rajasthan has been replaced with a quick reaction action comprising of Army’s Special Forces, Navy and Air Force. This has been designed for a quick response for any terrorist acts against India and prevent Pakistan reaching for the nuclear button. This concept was tested in 2010, when Pakistan decided to grab Rann of Kutch again to prevent India from exploring oil in that region. Karachi was threatened and two intruding Pakistani naval vessels were sunk near Indian port of Dawarka. American satellites watching the maneuvering advised Pakistan against the misadventure as India could very quickly cripple Pakistan’s only port. Also in 2008, the terrorists blew up the Kashmir assembly building and in a quick reaction; Indian Air Force cut the only communication bridge between the so call Azad Kashmir and mainland Pakistan. Angry Pakistan relented on terrorist activities temporarily. 

Hence uneasy peace prevails. Terrorists still commit violent acts in Kashmir and India. Pakistani nuclear button is in American hands and balance of conventional forces has shifted in favor of India. All this has not helped Pakistan. 

            D.2       China & India 

Military rivalry of sixties and seventies has given way to economic rivalry. China had a 3% growth advantage over India from 1982 to 2002 (Indian economy grew at about 5.5% as compared to 8.5% for China). Over twenty years this translated into China having its GNP double than India (assuming India and China had roughly same GNP in early eighties). With India recording 7.5% growth from 2004 onwards and China’s FDI based growth slowing a bit, the balance has shifted in India’s favor. Also entry of Indonesia in merchandizing trade has cut margins for Chinese exporters. Indian economy has been growing up as a service economy to serve the world. Chinese have concentrated on high volume but low priced manufactured goods. This situation has unnerved the Chinese. Commercial tensions have heated up and by 2010, China encouraged Pakistan for a misadventure in Rann of Kutch. This, the Chinese calculated will lead to a nuclear war and benefits to China. Thanks to the American effort, the war did not happen.  

Just as China had secured favorable trade treaties in Eastern Asia to cut Indian products out, India secured all the possible trade treaties in Indian Ocean Littoral states. Thereby Chinese goods here were not as well priced as previously.  This rivalry did not translate into war, but became a lesson for Chinese that India is power in Indian Ocean.  

            D.3       India and SAARC 

This is an organization not worth wasting time on. The smaller nations like Ceylon, Bangladesh, Bhutan, Nepal and others instigated by Pakistani propaganda come only to ask for money from big brother India during SAARC meet. If they do not get it, they cry foul on everything. Their attitude is completely unlike Mexico or Canada, who border USA and wish to get a piece of the economic pie with convergence of economic policies. Issues like a bigger share of benefits for Nepal with India’s North – South rivers link or support for Ceylon’s government for its own problems or flood situation in Bangladesh keep the forum busy in trivia pursuit. No meaningful progress is ever made on any issue. Hence this organization 2004-15 was basically ignored. 

     D.4       India & USA – 2015 

India – US relationship is having difficult time growing up into a full strategic relationship just as with Europe or with China and Japan. India has tried very hard to build this relationship. The hard line managers of the US policy for Asia think India as obtuse and failing to recognize the realty of US power. They wish, India to give up nuclear weapons, open up bases for US ships and Air Force and hand over Kashmir to Pakistan. After 1999 strategic dialogue between India and USA, there was a ray of hope. But it has become dimmer with time. Other strategic dialogue held in 2006 and 2010 did not succeed, as some of the above central issues were not resolved. Whatever said in the diplomatic language in public between India and USA is not the true state of India – US relations. Whatever remained unsaid is the truth.  

But US policy makers did not stand in the way of BPO Outsourcing or purchase of limited amount of defense and strategic technology from USA. The two way trade between India and US crossed $60 Billion level by 2012, riding the wave of BPO Outsourcing and Corporate America sourcing high valued products from India. These include automotive parts, pharmaceuticals, jewelry and other merchandise. In return US got everything it wanted to protect its copyrights, tightening of controls on strategic export, removal of tariffs on a few of American products into India etc.  

Military situation in Indian Ocean for America has become difficult as India has flexed its muscle and checkmated the proposed American invasion of an Axis of Evil state. America tolerated this pressure from India as India and USA have become dependent upon each other for trade and mutual strategic support. 

Conclusion – India 2015 

As discussed above, India politically is in safer hands. Communal and corrupt forces are under check. Nation building and national integration is being achieved with the demise of divisive internal politics.  India economically is more secure in 2015 with high end, high valued goods and services for export. Food production is at the highest level.  Social welfare with education, village transport, hospitals, and drinking water has been achieved. Pressure on environment is higher with population increase. 

Militarily India is secure to dissuade any adventurism on its territory by an outside power. The homegrown terrorists and outside terrorists are a different matter. They are able to penetrate the best security apparatus and subject the nation to a trauma time and again. As regards to its neighbor, India has left them behind in every conceivable field. India’s acceptance as a global player is still not forthcoming as US is holding that as a hostage to India’s possession of nuclear weapons and handing over Kashmir to Pakistan. 

Neighbors and Indian Littoral states are unhappy and happy respectively with India’s emergence as a power in the region. The former hold India responsible for everything wrong in their countries. The latter are happy because India has offered security and peace in the shipping lanes of Indian Ocean and has become a warehouse for cheap goods and services for them.

Hari Sud