Chapter 6

India as A
Global Power
 CHAPTER - 6
INDIA AS A GLOBAL POWER

International politics, like all other politics, is a struggle for power.

Whatever the ultimate aims of international politics, power is always the
immediate aim. Statesmen and people may ultimately seek freedom, security,
or power itself. They may hope that this ideal will materialize through its own
inner force, through divine intervention, or through the natural development of
human affairs. They may also try to further its realization through non political
means, such as technical co-operation with other nations or international
organizations. But whenever they strive to realize their goal by means of
international politics, they do so by striving for power (Morgenthau and
Thompson 1985, p. 53). As Susan Strange characterizes it, power consists of
four elements. A state commands power if it, possesses the capacity to
defend, threaten, or deny the security of other states from violence; controls
the system of goods and services; determines the structure of finance; and
exerts the highest influence over the acquisition and dissemination of
knowledge (Strange, 1987, p.565). A great power ought to have military and
economic capabilities to choose and shape the structures of global security
and political economy within which other states have to operate (Tammen,
2000, 8-9). To have a subject role in international politics is to be a part of the
dominant power structure that makes, in competition or collusion, the vital
decisions about the fate and destiny of the international system and of the
nations within it. Possessors of such a role are also referred to as major
powers (Nayar 1981, p.117). The term Major power (or sometimes Global
Power) has also been used to describe nations with great power, yet not as
overwhelming as that of a superpower. When there is a superpower, however,
the Global Powers will sometimes find themselves less able to exert their
power. This has been the case during the Twentieth Century, when the
biggest powers gained more control of the world than before and became
labeled as superpowers. As Mearsheimer writes, "There are no status quo
powers in the international system, save for the occasional hegemon that

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wants to maintain its dominant position over potential rivals. Great powers are
rarely content with the current distribution of power; on the contrary, they face
a constant incentive to change it in their favor. They almost always have
revisionist intentions, and they will use force to alter the balance of power if
they think it can be done at a reasonable price" (Mearsheimer 2001,p. 2). It is
now generally accepted that the United States of America is the sole
Superpower, and that there are numerous Global Powers beneath it. By the
end of the Cold War and the era of globalization other nations began to attain
international recognition as global power 'or future great powers. India and
China are examples of such nations. This system forms a type of hierarchy for
powerful nations.

India's Capabilities

The Republic of India, the second most populous country(Table 6.1)

and one of the fastest growing economies in the world, is considered as a
major power and a potential superpower. It is India's growing international
influence that gives it a prominent voice in global affairs.

Table 6.1: Population of Selected countries 1990-2005

Population(m) Rank

1990 2000 2005 1990 2005

China 1,135.2 1,262.6 1,034.5 1 1

India 849.5 1,015.9 1,094.6 2 2

United States 249.6 282.2 296.4 3 3

Indonesia 178.2 206.3 220.6 4 4

Pakistan 108.0 138.1 155.8 7 5

Source: World Development Indicators 2007, The World Bank.

It has been a longstanding goal of Indian leadership to achieve great

power status for the country in the international system (Sahni, 1997,

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pp. 21-41). India has a long history of collaboration with several countries and
is considered as a leader of the developing world. Although Nehru often
spoke against great-power politics, underneath his idealisna lay a submerged
realism about the potential of India to become a great power in the
international system. Such a desire was evident in the pursuit of non-
alignment, in the autarkic economic development strategy which placed heavy
emphasis on the public sector and heavy industry, and in the prominence
given to science and technology. The building up of the nuclear and space
programmes was also driven largely by the desire to become a great power
(Sondhi, 1994, 25-54). India is a rising power by several indicators of
capability, although this power is yet to be fully realized or recognized by key
actors in the international system (Cohen, 2001). In the first four decades of
India's independence it grew at an average annual rate of 3 to 5 percent per
capita. But during the past decade, India has achieved per capita annual
growth rates of 5 to 8 percent. It is projected that if India can keep this rate of
growth it could become the third largest economy in the world by the year
2020, after the United States and China. At the end of 2004, it had already
become the fourth largest economy in the world after the United States, Japan
and China, in terms of GDP. Table 1 shows that if we compare the ranking of
India in GDP it ranks to the 5^^ place in 2005 as compared to 8^^ in 1990.
Economic reforms have led Indian economy to grow at a rate of about 8.1 as
compared to that of 5.7 in 2000(Table 6.2), also is seen a slight decrease in
the inflation rate,from 5% to 4.8% as compared to other countries which saw
an increase in the inflation rate(Table 2)

Table 6.2: Gross Domestic Product 1990-2005

GDP($bn constant 2000) Rank

1990 2000 2005 1990 2005
United States 7,055.0 9,764.8 11,046 1 1
Japan 4,111.3 4,649 4992.8 2 2
China 444.6 1,198.5 1889.9 4 3
Canada 535.6 714.5 809.5 3 4
India 269.4 460.2 644.1 8 5
Source: World Development Indicators 2007, The World Bank.

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Table 6.3: GDP growth and Inflation Rate

GDP growth (%) Inflation Rate(%)

2000-04 2005 2000-04 2005

United States 3.0 3.5 2.4 2.9

Japan 1.3 2.8 -0.5 0.0

China 8.4 9.8 0.8 2.1

Canada 3.0 2.9 2.4 4.8

India 5.7 8.1 5.0 4.8

Source: Central Intelligence Agency, The World Factbook, 1990-2007

India is making its presence felt in the global market place. Backed by
its mind power-five lakh engineers, 2.5 lakh doctors and 75 lakh graduates-
India is seen as having a clear claim at being the software capital of the world,
the business process outsource for the global corporations, and the centre for
cutting edge research information technology and even biotechnology. India is
also the global original equipment manufacturer of auto ancillaries and the
preferred supplier of infrastructure-erection construction skills. India had
83,000 millionares in 2005. The consultants McKinsey & Company found
that in 2005 some 1.2 million well-off Indian households had incomes of
$10,000 a year-the equivalent of more than $45,000 in the United States-
and estimated that the number is increasing by 20 percent a year. About
40 million Indian households-about 200 million people-have incomes
between $4,000 and $10,000 a year-the equivalent of Americans with
household incomes between $20,000 and $45,000 a year. That group
has been growing by about 10 percent a year, should reach 65 million
households by 2010, and has become the prime target for American
companies trying to sell goods in India, according to McKinsey(Bhardwaj,
Swaroop and Vittal 2005).

The information age has provided India a major opportunity to grow

technologically and economically in a short period of time. As has been stated
earlier in the Study of World Systems Approach technology is the central

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factor in positioning a region in core or periptiery. It is to be stated here that, it
has been due to this factor that India is on the way to become a global power.
India is in the throes of the first stage of a revolution, for which it possesses
several advantages over the potential competitors. Information technology
does not require large amounts of capital and physical infrastructure, it does
not create huge environmental problems, it is human-resource oriented and,
moreover, it can improve India's international image. India has already
achieved a high international profile in this area. IT revolution has allowed
Indian companies to integrate with the world's leading companies of all kinds,
as a supplier of software, software services and IT-enabled services. India's
emerging space capabilities are also likely to give it a key role in the future
international system, especially if space becomes militarized and the there is
competition among the major powers for space-based military capabilities.
Just as naval power determined great power status during the past five
centuries, outer space may emerge as the next frontier of great power
competition, and control over this sphere may determine the relative position
of a state. India is well-poised to obtain a leading position in outer space, both
in military and civilian terms, and is among a handful of countries which can
achieve space capabilities necessary for building its own defence systems.

Through its nuclear tests in 1998, India positioned itself as a serious

contender for great power status. The tests proved to be the catalyst for
change. They removed the ambivalence from Indian nuclear policy, thereby
removing the ambiguity surrounding it (Tellis, 2001b, p.61). The existing great
powers were divided in their response to the tests on the basis of their
strategic interests. Russia and France basically accepted India as a nuclear
power, regardless of their own commitment to the NPT, and offered their
enthusiastic support for India's candidacy for a permanent seat on the UN
Security Council. Consistent with its position as a long-time adversary, China
opposed India on both counts. The US condemned the tests and imposed
economic sanctions, but gradually became tacitly reconciled to what seemed
like an irrevocable situation of nuclear possession; however, its position on
the question of UN Security Council seat was marked by ambiguity and
reservations. The UK did not impose sanctions, but other than that it followed

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the US in its response. Despite the differences among the great powers, all of
them at the end entered into a strategic or security dialogue with India. While
India has certainly elevated herself from a peripheral power to become an
aspiring great power, its success in the endeavour to become a full-fledged
great power is not certain. Such success depends on a number of factors,
some under India's control and others not at all. There are both internal and
external imponderables involved, the former relating to capabilities and
patterns of state behaviour, the latter pertaining to the evolving nature of the
balance of power and of international governance.

Table 6.4: Militiary Expenditure 1990-2000

Expenditure($bn) Rank

1990 2000 2005 1990 2005

United States 293.0 300.5 495.3 1 1

China 11.3 42.0 104.0 3 2

Russia - 60 58.0 - 3

Japan 28.7 45.6 43.9 2 4

India 10.1 14.7 21.7 6 5

Source: International Institute of Strategic Studies(IISS), The Militiary Balance, various

editions.

Evolving Balance of Power

The collapse of the Soviet Union led to a unipolar international system

with the US as the hegemonic power, and India had to adjust to it. There was
enormous pressure by the US throughout the 1990s on India over nuclear
non-proliferation and its relations with Pakistan. While the US continues to be
the hegemonic power, new challenges to its power continue to emerge.
India's assertion of its nuclear capabilities was part of the new challenges that
the US has to take into account. There is increasing evidence of tendencies
toward multipolarity in the international system. There are pressures on the
part of Russia, France and China toward the same end, and India, too, is
determined to be a great power. In an anarchical international system.

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struggles for power occur, sometimes intensely, other times in more muted
fashion or less visibly, especially among states that wield highest levels of
capability (Bull, 1977, 8-20). Typically, established great powers resist the
emergence of a new great power, for to accommodate others in a similar role
is to diminish one's own power, and to that extent lose some control over
one's own national security and welfare, unless the rising state becomes a
substantial addition to the capabilities of some major power in the
international system. The tendency among the established powers is to
extend their own power as far as possible, to exercise domination over others,
and to reduce other powers to the status of objects (Nayar 1981, p.117). The
world then seems to be returning to traditional pattern of several great
powers, even though one of them is hegemonic. That development will
inevitably lead to balance-of-power policies among them. The return to the
shifting pattern of balance of power will open new opportunities for India, as
well as confront it with tough choices.

In the contemporary international order, a state requires

comprehensive and balanced power capabilities in order to claim and retain
great power status. Prudence is the watchword here. As Schweller points out,
how a rising power is dealt with by the established powers will be based on
whether it is risk-taking or risk-avoiding (Schweller 1999, pp. 1-31). A risk
taking rising power will be dealt with by balancing and engagement strategies.
The established powers have little incentive to engage a timid, risk-avoiding
rising power, since it is unlikely to challenge the status quo in any way. India
has been basically a risk-avoiding nation (Tanham 1992), while China, and
even Pakistan, has pursued a combination of risk-taking and risk-avoidance
strategies. India would need to prudently do the same. The task for India,
then, is to use all avenues for engagement to further its major-power
ambitions. The possibilities for engagement will largely be a function of how
the economic and military resources of India affect the interests of the
established great powers and the international order. An economically
powerful India will attract the engagement of other great powers as it will be of
consequence to the world economy and security. A typology developed by
George Liska is useful here (Liska, 1973, 226). Liska holds that great powers

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typically choose from among three policies to follow toward a power that is
preeminent in a region: containment, satellization, and accommodation.
Through containment, great powers help still lesser states to contain rising
powers under the pretence of restraining Third World conflict. In contrast to
containment, the policy of accommodation leads to the devolution of regional
responsibility to constructively disposed rising powers. Satellization implies
acquisition of interventionist capability against the target country. Under a
policy of satellization great powers regard middle powers as regional allies in
context with other great powers and proceed to reinforce them competitively,
possibly as a means to reapportionment by way of reclientization. The central
mechanism in this policy is the acquisition of an interventionist capability in
the internal and external affairs of a target country to provide the great power
with leverage over the country's foreign policy. Satellization operates through
the creation of dependencies in other countries on the subject power. Its chief
instruments are economic aid and military alliances, which are important for
the penetration and dependence they make possible in crucial sectors of the
targeted nation. Finally, there is the policy of accommodation under which
great powers proceed either unilaterally or jointly progressively to devolve
regional responsibilities to apparently constructively disposed middle powers.
A critical consideration for the superpowers here is whether the middle power
is "loyalist" or "rebellious (Nayar 1981,p.118). In relation to India the United
states had pursued the twin polices of satellization and containment over most
of the post-war period. There is an intimate relationship between the two
policies. Where satellization was resisted, containment was pursued and in
the name of containment of some middle powers the United States had
pursued the satellization of others. In turn successful containment persuaded
some middle powers to cooperate with the United States; in other words to
become satellized(lbid., p.127).

The intent, of course, is to reduce the international influence of the

middle power as a claimant to a subject role, to subordinate its foreign policy
to the requirements of the great power or to raise the costs of its foreign policy
autonomy, and to prevent its rise to the status of a subject power. Not
surprisingly, containment may lead to expansionism; indeed, expansionism is

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the other side of containment. The key to the containment of middle powers is
the creation of a balance of power in the region favourable to the great power.
Such a regional balance may be implemented through a policy of alliances,
either tacit, explicit, or both, whereby the great power in one way or another
aligns its influence and power with that of some local or extra regional power
to balance off the targeted middle power. This may be supplemented by the
direct military presence of the great power in the form of bases in the region.
Undoubtedly, the international role of a state is a function of its power
capabilities. Not unexpectedly, however, a certain ambiguity characterizes
India's role and status in the international system. However, foreign policy
behaviour is often influenced not only by a country's objective status but also
by its elite's perception of its desired role. In India's case such a perception is
not an ideal hope but stems from an appreciation of the country's potential as
a great power. Indeed, Indian foreign policy may be said to constantly
confront the tension between the country's role aspiration based on its
potential for a great power role in international politics and its present
weakness in material and military capabilities (Ibid. P.121).

Nuclear Weapons Program and UN Security Council

Membership

In the contemporary era, since the possession of nuclear weapons and

their delivery systems is the defining characteristic of great powers, such
powers tend to seek to deny or deprive other powers of such instruments,
often under the garb of concern for world order and international stability. On
the other hand, for those powers that have the potential to become great
powers, entrance into the exclusive club of nations is also a compelling goal.
Inconsistency between aspirations and ascribed status puts pressure on the
rising powers to work toward the alteration of the system. The resolution of
this conflict between the great power system and the challengers to that
system as it exists represents a significant problem for study in international
relations (Nayar and Paul 2003, p.5). For India, the nuclear arsenal is an
integral part of world power status. American experts assume that India is
developing its nuclear program to check hostile Pakistani and possibly

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Chinese ambitions. But there is much more to it than that. During President
Clinton's visit, Prime Minster Vajpayee said it was not "realistic" for India to
give up its nuclear weapons in the face of Pakistan's nuclear proliferation
China's nuclear might(Sammon 2000).India is developing its minimal nuclear
deterrence for purposes that for the most part have little to do with Pakistan.
India can successfully deter Pakistan, which is no match for India's military, by
using its superiority in conventional forces. New Delhi's real goal is to have a
sufficient arsenal to deter any aggressor, even the most powerful country in
the world. It is not possible for India to give up its nuclear weapons in the face
of Pakistan's nuclear proliferation and China's nuclear might, but it is the
United States, with its global reach and superior power, that India wants to
deter. It should be noticed that India considers not one but three foreign
countries (Pakistan, China, and the United States) as potential adversaries
(Gobarev 200, p. 13). Thus, at its core, India's determination to keep its
nuclear weapons until universal nuclear disarmament has little to do with
Pakistan, much to do with China, and everything to do with America. This
Indian view may seem entirely unreasonable to most Americans. But if the
United States wants to dramatically improve relations with India, it cannot
build them on false assumptions.

India is organizing rather extensive, sophisticated intelligence

operations for gathering as much information as possible on U.S. military
plans, actions, and programs. The Indians are well aware of the
achievements, scope, and sophistication of U.S. military programs. For
example, the extensive and mostly successful use of space in the U.S.-led
interventions against Yugoslavia and Iraq has shown India that satellites can
secure domination of an attacking side over a defending one. Since the
Kosovo conflict, Indian policymakers have come to believe that U.S. missiles
and bombers, navigated from orbit by satellites, may well threaten India. India
especially worries that the United States might use its vast military power to
impose a solution to the Kashmir dispute. The mistakes of U.S. policy toward
India will contribute to India's drifting toward forming a Russia India-China
axis, which would be implicitly aimed at checking U.S. power. India is also
considering various options. Given the defensive nature of India's national

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security and defence strategies, the likelihood of New Delhi's participation in
an anti-U.S. alliance will depend almost entirely on how the Indian
government assesses Washington's geopolitical designs toward India.

By admitting India in the nuclear club, Washington will formally

recognize India's world power status. Further, the United States should
propose, and wholeheartedly support, India's candidacy for a permanent seat
in the UN Security Council (Gorabev 2000, p.21). Such actions would cause
positive reactions around the world, since India is regarded as a leader of
developing nations. America would get a strategic partner of the highest
calibre. Most important, such a policy would dramatically shift the global,
geopolitical, and geostrategic balance in favour of the United States
(lbid.,p.22). The geopolitical balance in Asia would be especially tilted in
America's favour. India could help the United States contain expansionist
threats from China to maintain order and stability in East and Southeast Asia.
In addition, America would move further from the brink of nuclear
confrontation with China over the Taiwan issue and other potential sources of
friction. China would be less able to contemplate a confrontation with either its
neighbors in East Asia or with the United States if Beijing had to worry about
India's response. Benefits to U.S. national security interests would occur on a
global scale if the United States and India became strategic partners. A
foreign policy and national security strategy based on Washington's
willingness to accept India's world power status, including accepting New
Delhi in the nuclear club, is the only realistic way for a breakthrough in U.S.-
Indian ties.

India's Global Aspirations

The collapse of the Soviet Union in 1991, and the subsequent
reorientation of India's economic and foreign policies, created the opportunity
for significant improvements in Indo-American relations. This improved
relationship culminated in the Bush administration's declared policy to "help
India become a major world power in the 21st century" (Twining 2007). The
Bush administration is interested in India's strategic potential for US interests:
as it stated in the 'National Security Strategy' (2002), 'today we start with a

226
view of India as a growing world power with which we have common strategic
interests'. This is perhaps the most explicit statement of an American
perception of India as a global player. The fact is that the US has shifted the
focus of its attention away from Europe and the Soviet Union to the volatile
crescent that stretches from Palestine to Indonesia - and to the presence that
looms over this geographical curve, China. From a US perspective, India,
positioned at the heart of this crescent, offers a potential anchor against
extremism, as well as a curb on China.

Making U.S. relations with India truly beneficial to America will require
political wisdom, courage, and vision. Wisdom is needed because for many in
the American foreign policy community it is hard to comprehend that building
good relations with India, often an uncomfortable partner because of its non-
Western culture, is more important for America over the long term than are
relations with many of Washington's current allies. Vision is needed because
the U.S. political establishment must look beyond America's immediate and
near-term concerns to consider its long-term foreign policy and national
security strategy for India—and how that component fits into America's overall
security strategy (Gobarev 2000,p.5). With one of the largest economies on
the planet, one-fifth of the world's population, booming high-tech sectors, a
credible nuclear arsenal, long-range strategic missiles, a sophisticated space
program, and a high-tech conventional military, India is a major global power
and is willing to play its role in global affairs. Turning this nuclear-armed giant
into an adversary of the United States would severely weaken American
positions not only in Asia but also in the rest of the world. Conversely, making
India an informal strategic partner'would enormously strengthen them (Ibid.,
p.7). India bears directly on several important U.S. national security interests.
For example, India's joining ranks with China and possibly Russia in an anti-
U.S. alliance would be a disaster for America's global position, since over time
US and NATO military dominance will erode. Theoretical work in the field of
international relations also provides modest support for an India-U.S.
alignment in the future, especially as India contemplates an increasingly
hostile China on the horizon. For India, China poses the greatest long-term
threat along a variety of dimensions. More to the point, China's increasing

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aggregate power, its geographic proximity, its growing offensive power, and
its aggressive intentions all conspire to drive India toward aligning with the
United States(Walt 1987, pp. 22-28).As has been noted by many scholars,
alignments and alliances are an integral part of the functioning of the balance
of power(Morgenthau 1959, p. 185). As one country feels threatened by
another country, it has three basic options; to build up its own domestic
capabilities to deal with the threat, to seek security cooperation with a third
country similarly threatened by the second, or some combination of the
two(Walt op.cit., pp. 22-26).

Indian Option in the Emerging World Order

Fundamentalist Islamic terrorism aside, the emerging twenty-first

century world order is unprecedented: never before have the affairs of nations
depended so heavily on economic compulsions rather than simply the
realpolitik of individual governments. The days of rigid enmities and alliances
based on ideology have given way to a more worldly pragmatism of
advancing national economic interests, dictating the economic and foreign
policies of nations big and small. Yet India will need to calibrate its relations
with many other nations in the world to be able to further her growing global
stature. India also needs to handle the complications of dealing with old
partner Russia, especially since India's sudden economic and military affinity
with the United States and the emerging Europe an Union seems to further
threaten the once warm Russia/India ties. There are four powerful forces that
are engaging the joint attention of the American administration and the Indian
establishment and which they, as the two largest democracies, need to look at
while engaging with the world in the next few decades. These forces are: the
rising tide of global Islamic terrorism; the race for dwindling energy supplies;
the impact of intensified globalization on weaker nations and calls for
protectionism; and the growing threat of all unstable, non transparent China.

India's options in this emerging world order are; firstly to stay

nonaligned, not becoming tied to any of the major power blocs emerging in
the twenty-first century, which would be unwise-as is apparent from India's
own decades of experience with nonalignment. Clearly, isolation does not pay

228
any dividend. The second option is to forge an alliance with Russia and China
and challenge the domination of Annerica, reinforcing the romantic notions of
many anti-imperialists, of Asian countries together ruling the world in the
twenty-first century. But it is difficult to imagine India and China trusting each
other to a point where they can become strategic allies any time in the near
future. The third option is to become a close ally of the European Union. The
EU does remain a powerhouse in the twenty-first century and can offer
tremendous opportunities to India, both in terms of technology and markets.
However, many analysts are skeptical about the future of the EU. Recent
events in countries like France and the Netherlands have clearly shown that
nationalistic tendencies are far stronger than the dream of a unified Europe
and suggest that local politics will prevent EU countries from adopting policies
that can l.llce advantage of globalization. The last option is the only viable
one for India, the one India is aready beginning to exercise: partnering with
the United States. On key global issues, India shares converging interests
with the United States Research in energy conservation and clean fuel-
including clean coal energy plus alternative renewable sources of
nonconventional energy like solar and wind-are areas where U.S.
and Indian interests converge. Plus, their fates are already bound
together in so far as containing terrorism is concerned. And, of course, the
United States and India are already together in working to keep trade routes
open globally while keeping at bay any demands for measures that would be
overly protectionist. A strategic partnership between India and the United
States will help in fighting terrorism, in'tackling a possible problem of a China
with expansionist goal, and in enabling capital and technology to flow freely to
help solve global energy insecurity and provide handsome benefits of
globalization to all.

India and China: Emerging Global Powers

After the United States, China will remain the second most important
country for India. However, India's foreign policy establishment is quite wary
of the real intentions of China. Sustained economic grov\/th at home and
increasing assertiveness abroad will likely return China and India to the

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positions of international prominence that tliey held prior to the 19th century
(Maddison 2003,p.261). For the last few decades, the Chinese seem to have
been brilliantly successful in a strategy of containing India that would impede
India's rise as a global power: opening military bases in Burma, open and
continued support to Pakistan including providing it with nuclear technology,
the courting of Bangladesh, all these tactics have been played by China to
contain India. Yet for the two nations to reap the benefits of globalization in
the twenty first century, this adversarial stance needs to be transformed. By
far the biggest thread stringing the futures of China and India together is the
unparalleled economic rise of the two Asian powers in the twenty-first century.
Trying to capture an accurate picture of how the two economies compare
today, and the trajectory each is on, poses a set of fascinating challenges. In
2030, Demographers predict, India will become the most populous nation
on Earth, overtaking China around the point when both reach 1.45 billion
people. Also in 2030, economists predict, India will surpass Japan to
become the world's third-largest economy after the United States and
China. And in 2030, India will have by far the largest workforce in the
world because 68 percent of its population will be of working age-a
particularly high percentage of workers compared with retirees and
children dependent on workers' incomes. India will have 986 million
working-age people in 2030, an increase of 270 million from 2006.
Demographers call this a "demographic dividend" phase, a kind of
demographic sweet spot that normally helps a nation's economy grow
faster because its large The challenge is vast: by 2050, India is expected
to have a population of 1.6 billion people, more than China's 1.4 billion.
Demographers project that India will have 230 million more workers than
China and about 500 million more than the United
States(Meredith2007,p.113). In 2030, India and China combined will
account for 28 percent of the world's economic output, up from 18
percent in 2001. Although Americans will remain far richer per person,
the U.S. economy by 2030 will have declined in relative terms from 21
percent of the global economy to 18 percent.. But as India and China
rejoin the global economy, three big issues, besides jobs, are coming to

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the forefront. First, as the two giant nations go through industrial
revolutions, their appetites for natural resources are skyrocketing. The
new demand is leading to higher world prices. Their growing thirst for
petroleum, along with newfound economic strength, is causing shifts in
political alliances around the world. In addition, now that both nations
are richer and have new technology, both are quickly modernizing their
militaries, causing powerful shifts in geopolitics not seen since the end
of the Cold War. Finally, as India and China industrialize, their already
dire pollution is worsening. The result is blackened air and water for
them, along with danger for the world's environment
((Meredith2007,p.162). Perhaps the greatest success of China's
extraordinary economic resurgence has been the transformation of a
poor, largely rural economy into a semi-industrialised, middle income
country with 40%per cent of its GDP coming from manufacturing, over a
100 million factory jobs and over $ 500 billion of manufactured exports. In
contrast, India's manufacturing sector has stagnated at around 16 percent
of GDP, employs only about 6 million workers in the organised sector
(and perhaps, another 50 million in small, unorganised units with less
than 10 workers) and exports around $ 60 billion of goods. Quite clearly,
the growth of manufacturing output and employment has been much
weaker in India than in China. In particular, India's manufacturing sector
has failed to provide a large number of good 'blue collar' job opportunities
as the labour force grew and the share of agriculture in GDP fell from
over 50 per cent to just over 20 per cent, at present. As a result, nearly 60
per cent of India's 400 million strong labour force remains 'stuck' in low-
productivity agriculture, severely compounding the problems of poverty and
regional disparities (Acharya 2007, p.37).

The India Advantage

China has less chance for innovation in its relatively closed, state-
controlled market. India has a democracy, a free market, and a free press,
which empowers its people to be innovative and creative, even at the
grassroots level. India's growing workforce of people below the age of twenty -

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five is a secret weapon in her arsenal, the benefits of which will soon start
trickling in. China's one-child policy, on the other hand, while reducing the
pressure of a population growing too fast, is making the nation age faster.
Many Indians speak English; most Chinese don't. Further Indian advantages
lie in the country's proven scientific talent, research capability, enterprising
attitude, niche managerial prowess, and great service-orientation. Comparing
the relative strength of India and China, the two rising powerhouses of Asia, is
complicated by the tangled strengths and weaknesses of each. With its
continued focus on soft infrastructure, India is set to soon surprise everyone
with a growth modelmore sustainable than that of China, and that the positive
payoffs to the American people accruing from their direct participation in the
grov\rth of the Indian economy may become the largest single factor for a
major shift in focus of U.S. companies and their managers in the visible
future.

While the Chinese state is making an all-out effort to conquer the IT

and outsourcing arenas, and is making headway. But India remains a chief
competitor because of her inherent strengths: English language skills, IT and
management education, and hands-on experience since the earliest days of
the age of personal computing. Global management consulting firm A.T.
Kearney's 2005 ranking of the most attractive off shoring locations places
India at the very top of the list, with China in second place. But according to
the report, China is so far behind India that the gap between them is "larger
than the gap between the next nine countries combined." (Rai and Simon
2007,p.244). Beyond the arenas of IT and outsourcing, where India is the
clear winner, the arena of high-end manufacturing is also being dominated by
India. In sectors as diverse as automobile manufacturing and auto parts,
telecom, hardware, engineering goods, steel, packaging, even fashion and
jewellery, India is emerging as a competitive manufacturing hub. Delhi's
emphasis on creating more and more Special Economic Zones for
manufacturing across the country is further boosting the country's
manufacturing boom. India's other strengths are its entrepreneurship, the
global perspective of its leaders and managers, and its ability to manage
complex global businesses. Bill Emmott also subscribes to the strong

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conviction that the United States has clearly become a supporter of India's
growing strength, of her standing as a benevolent power in Asia and a
stabilizing influence across the world-as a government that will take the same
stance as the United States in protecting sovereign nations against
dictatorships and any nation or group that chooses terrorism as a weapon.
Even Japan is now pushing for India's growth as a superpower, as a major
balancing force to Japan's natural enemy, China. Israel similarly is backing
India as a stabilizing influence in the face of the ever-present reality of Islamic
terror attacks and larger threats(Ra( and Simon 2007,p.247).

India-Toward Economic Superpower and Beyond

Indian Prime Minister Manmohan Singh, speaking at the end of his first
year in power, articulated this point: "Our relations with major powers,
especially the U.S. and more recently China have increasingly been shaped
by economic factors. Who could have imagined that China would emerge as
our second Largest trade partner? In the case of the U.S., an acceleration of
people-to-people contact and the consequent business-to-business
interaction has forged closer state-to-state relations. Shared values and
growing economic links have enabled a closer strategic engagement"(Singh
2005). While our engagement with the world economy has increased
substantially since 1991, we are still far from being a serious economic
power in global trade and finance. Our share of world goods exports
may have doubled since 1991 from 0.4 to 0.8 per cent in 2004. By
2025,India's share of the world GDP, will have risen from 6 to 13 percent,
making it the third largest economy in the world(Das 2002, p.360). A tragic
result of our timid approach to global economic opportunities (coupled
with rigid labour laws, small-scale industry reservation policy and bad
infrastructure) has been the slow growth of our industrial output and
employment. In 2003, there were hardly 5 million workers in organised
manufacturing out of a labour force of over 350 million. In contrast,
Chinese factories employed over 100 million workers((Acharya
2007,p.21). We have come a long way from 1990 but we have a long,
long way to go. What does the future hold for us? Our potential is

233
enormous. We are the only big country where the proportion of working
age people in total population will continue to increase for the next thirty
years. Rarely in the history of the world has any nation ever risen
economically as rapidly as India has over the past few decades

India, particularly like North America, is endowed with a rich and

diverse topography. Especially important is that almost 60 percent of its land
is arable, including the fertile Ganges plain. Instead of the basket case that
India ended up becoming in the 1960s when it had to import countless tons of
grain from the United States, it now has the potential of itself being one of the
world's bread baskets, with food grains one of its most important exports. No
less important is the Nation's vast coastline, and the wealth of resources
supplied by the surrounding oceans. As for its buried treasures, India is
plentifully supplied with iron and manganese, which accounts for the fact that
its critical steel industry is currently booming. It has the world's largest store of
titanium, used these days in everything from weaponry to golf clubs. It has the
massive reserves of bauxite, or aluminum ore, aluminum manufacturing is
another industry poised for take-off. Beryllium, an important alloy in copper,
and monazite, a radioactive element used, among other things, for nuclear
energy, are also abundant. As for India, consider these words from former
President A P.J. Abdul Kalam: "We need to play the multilateral game,
attract foreign investments, have joint ventures and be an active international
player. Still, we have to remember that those who aim high, have to learn to
walk alone, too, when required"(Kalam 2002, pp.24-25).

The Goldman Sachs analysis that puts the United States in third place
economically by 2050, behind India and China, while it seems so unlikely to
many, seems more logical when you recognize that the brightest twenty-five
percent of the Indian population outnumber the entire population of the United
States(Rai and Simon 2007,p.248).The opportunity that gives their
multinational corporations is incalculable and all the more so because, today,
the world's emerging economies are also fastest-grovwng. Goldman
Sachs'2003 report, "Dreaming with BRICs: The Path to 2050," predicted that
within four decades (by 2043) the total GDP of the four emerging BRIC
nations (Brazil, Russia, India, and China) would likely surpass six of the eight

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geopolitical giants(G-8): the US, the UK, Germany, Japan, France , and Italy.
The fact is that as G-8 domestic markets mature, advanced economies are
slowing down. The United States remains the steadiest of the advanced
nations with its unspectacular 3 to 4 percent annual grov\/th. Emerging
economies are hot, and this development too plays right into China's and
India's hands. As the Goldman Sachs report puts it."As today's advanced
economies become a shrinking part of the world economy, the accompanying
shifts in spending could provide significant opportunities for global companies.
Being invested in ... the right markets-particularly the right emerging markets-
may become an increasingly important strategic choice"( Wilson and Roopa
2003).

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