Partnering with India can balance out Chinese power
The recently declassified U.S. strategic framework on the Indo-Pacific region shows that U.S. national security policymakers — at least under Trump — envisioned India as a regional balancer to China in the Indo-Pacific.
But the strategy, which deals mostly in conventional security challenges, is missing at least half of India’s potential value in the geopolitical tug-of-war. U.S. policymakers should be working to shift a good portion of the roles China now plays in the U.S. economy — as a market and as a supplier — onto India’s shoulders.
Politically and economically, India is a strong candidate to be a regional balancer in the Indo-Pacific region.
From the macroeconomic standpoint, India has over a billion population and a growing middle class. Over the past five years, the Narendra Modi administration in India has been enacting reforms in land, labor and bankruptcy laws, opening up the socio-capitalist economy to the global markets. The reforms in these sectors have made the economy an attractive proposition for American private equity and asset management firms from Blackrock to Blackstone to diversify and grow their portfolio of investments in the economy.
The economy weathered the global financial crisis in 2008 and is coming out of the COVID-19 pandemic as one of the world’s top recipients of foreign direct investment. For the Indian economy, American investment and enterprise brings with it the much needed capital infusion and technology for its rapidly growing demography.
Politically, India has been a vocal critic of China’s foreign policy initiatives. From the Belt and Road Initiative, to rejecting the Regional Comprehensive Economic Partnership pact, before other nations were talking about economic decoupling from China — India has made it possible to envision an Indo-Pacific order which is not dominated by China. The Modi administration’s vision of a multipolar world, and in particular a multipolar Asia, fits well with a U.S. strategy that seeks to build a coalition and primarily positions India as the regional balancer of China in the Indo-Pacific region. Fortunately for the United States, India’s pre existing territorial dispute and the deteriorating relations with China make it the ideal regional balancing candidate.
Furthermore, in the context of U.S.-China competition, the United States faces an insurmountable challenge of numbers. As Will Roper, the outgoing assistant secretary of the U.S. Air Force put it in an interview, “The scale factors are against the United States in terms of GDP, population and STEM talent.” India has a billion-plus population and a STEM talent that has produced a significant number of technology leaders in America. India’s human capital could supplement the United States muscle power in the region.
However, choosing India over China does have its drawbacks and challenges. First, the issue of size and scale. For the past twenty years, American enterprises have capitalized on the market access to China’s growing middle class. For the American enterprise to prioritize India’s market they’d need a middle class with a higher purchasing power. The purchasing power of the Indian middle class is still not an attractive proposition for many enterprises.
Second, many in the American business world go through an “Indian fatigue” where they wait on and on before their investments can reap any return with the bureaucratic process stalling any form of progress.
Third, India is indeed a “tariff king” as jokingly quipped by former President Trump. India levies exorbitant tariffs on American exports. The Indian government’s import substitution plan of ‘Atamnirbhar India’, or self-reliant India, coupled with its Make in India initiative make investing and reaping returns in the economy an uphill battle for investors and global corporations. Harley Davidson’s untimely exit is a clear indication of that challenge.
While the challenge of size and scale can only be addressed with time, the other two challenges can be resolved with political will and ‘glocalization’ of American ingenuity.
Unlike the socio-capitalist administrations of the past, the Modi administration has implemented several reforms, cutting red tape and bureaucratic processes. With the Modi government enjoying a majority in both houses of parliament, it would be beneficial for the Biden administration to support the Indian economy’s tilt toward free market capitalism and take advantage of its changing attitude toward trade and enterprise.
Finally, it was in India that McDonalds launched its first 100 percent vegetarian menu and Starbucks changed its chai concoction. By partnering with a local manufacturer and glocalizing American ingenuity, American enterprises can address the challenge of import substitution. Harley Davidson’s plan of returning to the country through a partnership with the Indian conglomerate Hero MotoCorp is one another example of glocalizing American ingenuity.
The Trump administration, for all its isolationist measures and foreign policy deficiencies, was proactive in expanding the scope of the US-India partnership through economic initiatives in the Indo-Pacific region, such as the timely initiative of leveraging the world’s largest vaccine manufacturing facility in India in 2020.
It would be prudent for the Biden administration to position the nation providing the solution to the pandemic as the balancer to China, the nation where the virus was first discovered.
Akhil Ramesh is a non-resident Vasey fellow at the Pacific Forum. He has worked with risk consulting firms, think tanks and in the blockchain industry in the United States, India and in the Philippines. His analysis has been widely published across global journals such as The National Interest, The Diplomat, Asia Times and the Jerusalem Post. Follow him on Twitter at @akhil_oldsoul.