USA, China and India

CAMBRIDGE – When Indian Prime Minister Narendra Modi invited US President Barack Obama to attend his country’s Republic Day ceremonies earlier this year, it signaled an important change in relations between the world’s two biggest democracies. Ever since the 1990s, three American administrations have tried to improve bilateral relations, with mixed results. While annual trade between the countries has soared during this period, from $20 billion to more than $100 billion, annual US-China trade is worth six times more, and the political relationship has had ups and downs.

The two countries have a long history of confusing each other. By definition, any alliance with a superpower is unequal; so efforts to establish close ties with the United States have long run up against India’s tradition of strategic autonomy. But Americans do not view democratic India as a threat. On the contrary, India’s success is an important US interest, and several factors promise a brighter future for the bilateral relationship.

The most important factor is the acceleration in India’s economic growth, which the International Monetary Fund projects will exceed 7.5% through 2020. For decades, India suffered from what some called the “Hindu rate of economic growth”: a little more than 1% per year. It might more properly have been called a 1930s British socialist rate of growth. After independence in 1947, India adopted an inward-looking planning system that focused on heavy industry.

Market-oriented reforms in the early 1990s changed that pattern, and annual growth accelerated to 7% under the Congress party, before slumping to 5%. Since the 2014 general election brought Modi’s Bharatiya Janata Party to power, the government has reversed the slowdown.

And prospects for continued growth are strong. India has an emerging middle class of several hundred million, and English is an official language spoken by some 50 to 100 million. Building on that base, Indian information industries are able to play a major global role.

 

Moreover, with a population of 1.2 billion people, India is four times larger than the US, and likely to surpass China by 2025. Its sheer scale will be increasingly important not only to the global economy, but also to balancing China’s influence in Asia and managing global issues such as climate change, public health, and cyber security.

India also has significant military power, with an estimated 90-100 nuclear weapons, intermediate-range missiles, 1.3 million military personnel, and annual military expenditure of nearly $50 billion (3% of the world total). And, in terms of soft power, India has an established democracy, an influential diaspora, and a vibrant popular culture with transnational influence. Bollywood produces more films every year than any other country, out-competing Hollywood in parts of Asia and the Middle East.

 

But one should not underestimate India’s problems. Population alone is not a source of power unless those human resources are developed, and India has lagged well behind China in terms of literacy and economic growth. Despite its progress, around a third of India’s population lives in conditions of acute poverty, making the country home to a third of the world’s poor. India’s $2 trillion GDP is only a fifth of China’s $10 trillion, and a ninth of America’s $17.5 trillion (measured at market exchange rates).

 

Likewise, India’s annual per capita income of $1,760 is just one-fifth that of China. Even more striking, while 95% of the Chinese population is literate, the proportion for India is only 74% – and only 65% for women. A symptom of this problem is India’s poor performance in international comparisons of universities, with none ranked among the world’s top 100. India’s high-tech exports are only 5% of its total exports compared to 30% for China.

 

India is unlikely to develop the power to become a global challenger to the US in the first half of this century. Indeed, even in terms of soft power, a recent study by the Portland Consultancy in London placed India outside the top 30 countries. China ranked 30^th, and the US came in third, behind the United Kingdom and Germany.

 

Nonetheless, India has considerable assets that already affect the balance of power in Asia. While India and China signed agreements in 1993 and 1996 that promised a peaceful settlement of the border dispute that led them to war in l962, the issue has heated up again, following Chinese actions in recent years.

 

India and China are fellow members of the BRICS (along with Brazil, Russia, and South Africa). But cooperation within that caucus is limited. While Indian officials are often discreet in public about relations with China, and wisely want bilateral trade and investment to grow, their security concerns remain acute. As part of the group of Asian countries that will tend to balance China, India has already begun to strengthen its diplomatic relations with Japan.

 

It would be a mistake to cast the prospects for an improved US-India relationship solely in terms of China’s rising power. Indian economic success is an American interest on its own. So is the open approach taken by India and Brazil on issues such as governance of the Internet, at a time when Russia and China are seeking more authoritarian control.

 

No one should expect an Indian-American alliance any time soon, given historical Indian public opinion. But one can predict a relationship in the coming years that will be both sui generis and stronger.

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