The India Briefing

THE EUROPEAN

FUTURES

OBSERVATORY

The India Briefing

Background

The pivotal point in India’s recent past was the detonation of the first Indian nuclear weapon in 1988. To many observers, this event represents the coming of age of post-colonial India. However, many of the issues faced in 2005 still contained elements that were derived from the imperial past. Since 1948, India had not enjoyed settled territorial borders. Border disputes with both Pakistan and China had resulted in open war. However, the growth of the Indian economy since the mid-1980s had led, by 2005, to growing trade links between India and both of its neighbours.

By the mid-1980s, the Indian Government had turned its back on attempting to run a socialist style economy. The liberalisation of the economy, despite the socialist legacy, had given rise to a world class software industry by 2005. This was complemented by India becoming a leading operator of outsourced back-office facilities for western companies. These two factors, in conjunction with the development of an Indian manufacturing base, had given rise to relatively high rates of economic growth at the start of the twenty first century.

The benefits of this growth have not been evenly spread around the country. The development of the “Indian Miracle” is based in a number of small geographic points around the country, which tend to be highly urbanised locations. These locations tend to be highly congested, whilst there are no appreciable infrastructure assets away from these urbanised locations. Additionally, the relative underdevelopment of the Indian financial markets, coupled with the relative obstacles placed in front of foreign direct investment, have resulted in a corporate system that is concentrated in the hands of a relatively few families.

As the newly created wealth has not spread widely throughout India, there has been, to a certain degree, a democratic backlash against those who are newly enriched. It has almost acted as a democratic brake to economic development as those who are not newly enriched have expressed through the ballot box their desire for a minimum guaranteed lifestyle. In conjunction with an uncertain tax base and an under developed financial system, these factors have come together to create a good deal of uncertainty surrounding government finances.

As great disparities of wealth continue, some question the ability of India to develop an adequate capital base, given the low savings rate and the relatively large population who have very few marketable skills. One demographic bonus is that the working population is set to increase in the coming years, but policies need to be set in place to reap the rewards of this bonus.

One possible solution might be to develop India as a trading nation. However, the largest trading partner is China, which is heavily reliant upon imports of Indian raw materials (particularly cement and iron ore). This trading relationship may be weakened should a commercial rivalry develop into diplomatic tension between India and China. This tension could well manifest itself as instability within the smaller states of the region.

By 2005, the India was facing a number of key challenges to the future:

1. How would India engage China, and at what level?

2. How would India guarantee its territorial borders?

3. How would the US react to Indian transfers of nuclear technology?

4. How would India secure its long term energy supplies?

5. Could India liberalise its financial markets?

6. Could India ensure the prosperity of the whole of its democracy?

The Nationalist Mission

In recent years, India has started to realise some of the diplomatic and political promise that a modern India might display. It is your task, by 2025, to set in motion policies that will consolidate and extend that diplomatic and political influence. Your primary task is to ensure the continued development of an independent Indian economy and the assertion of an independent India on the international stage.

By 2025, you will have:

1. Secured the sources of foreign oil imports for the Indian economy.

2. Ensured that the economic development of India has continued to make progress within a liberal democratic framework.

3. Started to develop a counterbalance to Chinese military might.

4. Ensured that international institutions reflect the sovereignty and stature of India.

5. Promoted Indian led institutions as models for international co-operation.

The Internationalist Mission

In recent years, India has started to realise some of the diplomatic and political promise that a modern India might display. It is your task, by 2025, to set in motion policies that will consolidate and extend that diplomatic and political influence. Your primary task is to ensure the continued development of India as part of the global economy and the recognition of India on the international stage.

By 2025, you will have:

1. Lessened the dependence of the Indian economy on foreign oil imports.

2. Reduced the dependence of Indian society on welfare payments.

3. Integrated India as part of a global collective effort to maintain peace and security under the leadership of the US.

4. Developed international institutions that include an engaged US.

5. Spread economic opportunity and liberal democracy throughout Southern Asia.

EUFO Limited is a not-for-profit company limited by guarantee, incorporated in England.

Reg Number 4947883.

Registered office; 6 Greenways Close, Ipswich, Suffolk IP1 3RB, United Kingdom.