Economic heft and foreign policy posturing

India's foreign policy options are circumscribed by its relatively inadequate economic size and technological capabilities

China’s economic rise and technological excellence are well recognised in world capitals. It has been less acknowledged till very recently that China’s economic heft has contributed to its aggressive external posturing, including armed intrusions into Indian territory, extravagant claims over all of Arunachal Pradesh and now even when interacting with the West. The Indian government has at times not sufficiently factored into its foreign policy calculus the changes in the economic size, trade, foreign direct investment-related numbers and military strength of neighbouring and major powers. Among other causal factors, this is mainly because the Indian Ministry of external affairs (MEA) and that of commerce and industry, and finance tend to work in silos except for coordination meetings usually prior to heads of government meetings in Delhi or foreign capitals. At the same time, there is better coordination between the MEA and the Ministry of Defence and hopefully by now it includes scenario analysis about future developments along the Line of Actual Control with China. 

The past animosity between the West and the Soviet Union has continued into the 21st century, albeit with some dilution against Russia. For reasons that have to do with the fears of the Baltic republics, Ukraine, Poland and Russian intervention in Syria, the US and west European countries have exaggerated the dangers stemming from Russia. Western concerns did sound somewhat legitimate following the 2014 Russian occupation of Crimea in Ukraine. However, the West needs to understand that Russia too is nervous about the European Union’s expansion towards the East to include former Warsaw Pact countries. The Economist’s November 13 issue carries an article titled “Vladimir Putin — Russia’s new era of oppression —It will lead to confrontation with the West”. The Economist is typical of Western publications in justifiably condemning Mr Putin’s violations of human rights within Russia, such as the targeting of Alexei Navalny. Russia’s military technology prowess is cited too, which is evident from the fact that India and China have recently bought the S-400 missile defence system from that country. However, Russia’s enormous economic potential gets limited coverage in the English media since its trade and investment interactions with the rest of the world have remained mostly that of a significant source of oil, gas and minerals. 

By contrast, the West has a tendency to overlook China’s oppression of millions of people living within its own borders, for example the Uighurs and Tibetans. Obviously, this difference in the West’s posture towards China and Russia is because Western real and financial sector companies continue to profit enormously by having invested in mega-scale production of goods and services in China. This makes economic sense because China has the largest adequately trained workforce in the world at wage levels which are way below those of developed economies and Russia too. This wage-cost advantage enables China to be a huge exporter of a range of engineering products. China’s international clout is also due to its huge investments around the world and because it is currently the highest importer of commodities such as coal, iron-ore, oil and agricultural products.  

Any country’s revenue collections and hence capacity to invest and grow is primarily determined by the size of that country’s economy and its composition. In this context, the table provides a listing of the gross domestic product per capita from 1990 till 2020 and projections for 2025 for China, India, the US and some of India’s neighbours, Bangladesh, Pakistan, Nepal and Myanmar. 

From 2010 to 2020, China’s per capita income rose from 16.2 to 27 per cent to that of the US. Since the time of the Soviet Union’s break-up in 1990-91, Russia’s per capita had decreased from 53.1 to 44.3 per cent that of the US by 2020. Yet, even in 2020, China’s per capita income is only 61 per cent that of Russia. Simple per capita comparisons need to be complemented by several other indicators such as integration with inter-country value chains and technological tie-ups with global corporations. Effectively, the sophistication and international competitiveness of domestically produced goods, military equipment and services provide a measure of a nation’s economic well-being, and concomitantly foreign policy options. In addition to China’s higher per capita income, it has left India far behind in technological achievements. 

Economic and military strength combined with internal factors have led to an increasingly belligerent China. Consequently, the insidious menace to democracies, and particularly in Asia, is from China. Given Russia’s dependence on China as a voracious consumer of its fossil fuel exports, it is surprising that the West keeps pushing Russia towards China. The 19th century Russian playwright and short story writer Anton Chekhov is believed to have remarked, “Any idiot can face a crisis – it’s day to day living that wears you out”. It is similar for foreign policy issues. After the Chinese intruded into Indian territory in 2020, the Indian armed forces rose heroically to the challenge. However, it was anticipatory intelligence-foreign policy analysis and corresponding military preparedness that was lacking. Former foreign secretary A P Venkateswaran is rumoured to have remarked when the then prime minister Rajiv Gandhi had asked the MEA to do more to bolster India’s image that “the image cannot be brighter than the original”. In a similar vein, the bottom line about Indian strategic thinking is that howsoever well-conceived it cannot make up for the country’s systemic economic-technological deficiencies and societal schisms. 

j.bhagwati@gmail.com .The author is a former Indian ambassador, World Bank head of corporate finance and currently distinguished fellow at CSEP