We need a new national interest framework

Hindustan Times

2 days ago

Non-alignment and mixed economy were the two terms which described India's strategic and economic positioning when the generation to which this author belongs was in school. To be sure, the Soviet Union was history and the 1991 reforms had already happened by then, but textbooks and institutional wisdom were still wedded to old values in the Tier-3 town in Bihar where I grew up. The Raisina Hill illuminated during a ceremony in New Delhi (Virendra Singh Gosain/HT Photo)
The next two decades would be transformational. Almost everybody from my school cohort went to a private engineering college in some state in west or south India and landed a reasonably well paying, and more importantly, prospect-enhancing IT job. Many of them went to the US to do 'on-site' jobs and made much more money. They came back and bought houses, cars and many more things. In 2008, India signed the nuclear deal with the US, heralding a new era of strategic alliance with the US even though we never really ended our relationship with the Russians, at least in terms of buying their weaponry. This was very different from the US or West at large which had put sanctions on India after our 1998 nuclear tests.
Children of middle-class families that are in school now mostly aspire to land a high-paying job in the US or West Europe. They are also very unlikely to think about things such as strategic balancing or a hostile West. They are not wrong. This worldview has been shaped by recent experience . The polarising factors for this generation are political debates at home, more substantively about things such as religion in politics, and slightly superficially – because there is not much of a difference between various parties on these issues– about things such as economic policy and caste. The really privileged ones are actually more interested in debates outside than at home.
This generation, unlike mine, and more importantly, previous generations, has not known scarcity, economic vulnerability or strategic arm twisting of India by stronger powers. Sure, China has been an adversary which is becoming stronger by the day, but things have never reached a point of criticality.
None of this is to say that India has not had economic or strategic challenges in the past couple of decades. What is being argued is that the middle class, an extremely important and disproportionate driver of public opinion, and the proverbial glacial source of the downstream river which creates technocrats and future policy makers, was able to detach its material fortunes from the larger structural challenges facing the Indian economy in the post-reform period. The political-economy friction which exists because of the unequal nature of post-reform growth and opportunities which have been generated were left to be negotiated by the political class by way of palliative welfare measures which have proliferated in the post-reform period.
This convenient, even if far from ideal arrangement, will cease to exist now as the West turns more protectionist on account of a working-class backlash because of what globalisation and its largest beneficiary China has done to it. There is good reason to believe that we are now past peak globalisation and the tailwinds it generated for the Indian middle class, which allowed it to decouple its material fortunes with the larger economic transformation problem of the Indian economy.
This challenge will exist whether or not India pivots from a strategic alliance with the US towards a more multipolar attitude in its external outlook. In fact, a multipolar outlook will perhaps be worse for the middle class than a pro-US stance. China and Russia are not going to create opportunities for the Indian diaspora in sectors such as finance or knowledge-based services like the US or UK anytime in the future.
Where does this leave India and its larger strategic discourse? Those who do not agree with the prognosis given above will, of course, say that things can be salvaged with deals and a little bit of give and take in the short turn and perhaps a regime change in the US in a few years. For those who find my arguments convincing, the answer has to translate into a longer-term pivot from the current political economy trajectory of India and the public discourse around it.
To begin with, it requires doing absolutely nothing from our side which jeopardizes the existing economic tailwinds from the external economy. This will require a reasoned, restrained and calibrated response to our external engagements, the exact opposite of how public debate and posturing on this has evolved in the past. India's economic and strategic prowess must be celebrated and sold where it is required, but it must be accompanied with the underlining and amplifying of larger structural challenges facing the Indian economy and the constraints it puts on our ability to accommodate the demands of even our closest external partners. Some might dismiss this as needless tokenism, but one should never write off the appeal of the subjective factor in shaping perceptions and eventually politics in the world. Had we talked enough about these things in, say the US, rather than making it exclusively about the (deservedly praise-worthy) Indian Americans there or the Indian middle class back home, was there a possibility of forming a closer association with the blue-collar MAGA base which is, in many ways, as economically vulnerable and crisis-ridden as the Indian farmer?.
Posturing alone is clearly not going to take care of our larger problems. This is where a larger economic policy, especially in the realm of industry, becomes important. The dogmatic laissez-faire types might scoff at the idea, but the more important debate around it is how rather than if.
Getting such a thing right will take a fundamentally different approach than what India followed immediately after independence via the planned economy approach. Indian capital back then was weak, prone to being outcompeted by foreign capital and operating in an economy which lacked a productive base not just in industry but even in agriculture. Indian capital today is significantly stronger, well-endowed and has enough business opportunities in the home market despite our merchandise trade deficit and import dependence in many critical things. In many ways, like the middle class, it has also managed to decouple its fortunes from the larger structural constraints facing the Indian economy. Also, it is politically far more powerful than it was in the earlier period thanks to the deeper links of political finance and weakening of the rural economy in the larger political-economy bargain.
The larger point is, disciplining this capital to serve the larger strategic interest of the economy, which could require moving away from short-term profit generating activities is going to be more difficult and chaotic than attempting an economic transformation via state-owned enterprises, which is what we did in the planned economy period immediately after independence. The same is going to be the case with the middle class. Imagine how a government mandate requiring people who go to subsidised IITs to serve in state-run or mandated core engineering projects aimed at buttressing the country's industrial prowess for a stipulated time rather than join high paying Wall Street jobs is going to be taken today.
A lot of the points made here are not exactly new and this author has made them on earlier occasions as well. What they are trying to do is weave a simple narrative
Destinies of countries, especially those as large as India, are made or unmade by how they handle contradictions in their larger political economy. At some point of time, handling these contradictions requires deciding on a conflict of individual or group interests with the larger national interest. India was deluded into believing that it had managed to bypass this conflict in the post-reform period where the relatively privileged had the world at large to benefit from and the poor were being offered palliatives out of the crumbs brought home by this 'Shining India'. It was good while it lasted. But a protectionist West, abrasive America and demands that the Indian poor be made to embrace more pain to allow the gains of the Indian elite to continue – this is what demands for opening up agricultural trade essentially are – has put an end to this convenient arrangement which was taken as granted.
There is no reason a country of 1.4 billion people, which will have the third largest GDP in the world in a couple of years, cannot deal with the changed circumstances. But this requires, first and foremost, an admission that the new state of play requires a redefining of our national interest as we understood it in the last couple of decades and working on aligning group interests to this larger cause.
Hopefully, the next generation of Indian children will read a condensed version of these debates in their school textbooks in an India which is more equal and economically secure at the same time.
(Roshan Kishore, HT's Data and Political Economy Editor, writes a weekly column on the state of the country's economy and its political fall out, and vice-versa)