Why India Still Can’t Let Go of Its Cold War Friend

Moscow Russia
The sun rises over the Red Gate Building in Moscow, Russia (Unsplash/Jean Colet)

Indian president Pranab Mukherjee was in Moscow this weekend to join the grand parade marking the seventieth anniversary of the Allied victory over Nazi Germany in the Second World War. This high-profile visit was both timely and significant. India demonstrated a camaraderie with Russia at a time when most Western leaders boycotted Vladimir Putin on account of what they consider his aggressive, destabilizing policies toward Ukraine.

Since the end of the Cold War, when India, despite professing nonalignment, leaned more toward the Soviet Union, the country has gradually shaken off its ideological inhibitions in favor of better relations with the United States. The last two decades have witnessed a cooling in Indo-Russian relations. From India’s point of view, there is no downgrading of its traditional ties with Russia and there are significant overlapping interests that bind the two countries regionally as well globally. But Russia’s inability to alleviate India’s security challenges vis-à-vis China and Pakistan has been one of the crucial factors in moving the latter closer toward the United States. Read more “Why India Still Can’t Let Go of Its Cold War Friend”

Former Ruling Party Blocks India Tax Overhaul

New Delhi India
View of the presidential palace in New Delhi, India, March 26, 2013 (Wikimedia Commons)

India’s former ruling party on Tuesday blocked tax reforms that would have made business easier in the country of 1.2 billion. The delay is the first major setback for the conservative prime minister, Narendra Modi, since he won the election last year.

Modi’s Bharatiya Janata Party commands an overall majority in the lower house of parliament but not in the upper chamber where the leftist Congress has most seats.

On Tuesday, the upper house referred back legislation that would have merged various local and state-level taxes into one national goods and services levy — an overhaul Congress previously supported. Read more “Former Ruling Party Blocks India Tax Overhaul”

India to Rationalize Taxes, Boost Infrastructure Spending

Arun Jaitley, India’s finance minister, unveiled a series of tax reforms and infrastructure initiatives on Saturday in the conservative government’s first full budget since Narendra Modi came to power last year.

Jaitley said a national sales tax would be in place by April next year to replace a complex regime of local fees that hampers business growth.

He also announced a reduction in the corporate income tax rate from 30 to 25 percent and a simplification of the code.

Both measures should help Modi meet his campaign promises to liberalize the world’s tenth largest economy and boost growth rates. Read more “India to Rationalize Taxes, Boost Infrastructure Spending”

Obama Needs India to Make His Asia “Pivot” a Success

Barack Obama Naredra Modi
American president Barack Obama and Prime Minister Modi of India attend a state dinner at the presidential palace in New Delhi, January 25 (White House/Pete Souza)

If Narendra Modi can convince India to break with its nonaligned past and ally with the Pacific’s democracies instead, American president Barack Obama may yet succeed in counterbalancing China’s rise.

Since it was announced in 2011, the American “pivot” to Asia appears to have done little to affect Chinese behavior. Rather, the military component of what was later renamed a “rebalancing” strategy exacerbated China’s fears of encirclement. By raising troop deployments in the Western Pacific, the United States inadvertently confirmed the Chinese in their worst fears: that America intended to block their reemergence as a great power.

China has since pressed its revisionist maritime border claims in the East and South China Seas and bullied its neighbors. Read more “Obama Needs India to Make His Asia “Pivot” a Success”

Structural Impediments to Closer Indo-American Relations

American president Barack Obama and Prime Minister Modi of India attend a state dinner at the presidential palace in New Delhi, January 25
American president Barack Obama and Prime Minister Modi of India attend a state dinner at the presidential palace in New Delhi, January 25 (White House/Pete Souza)

American president Barack Obama’s recent visit to India supposedly saw the conclusion of some far-reaching agreements, including on defense cooperation, specifically missile defense, technology transfer and the operationalization of the dormant nuclear agreement Obama’s predecessor, George W. Bush, negotiated with India in 2005.

All of this cements the image of India’s new prime minister, Narendra Modi, of being both a strategic thinker and a doer.

But this is at the political level. At the operational level, things are controlled by a bureaucracy that remains deeply anti-American and is ingrained in leftist nonaligned thought. It may well fail to implement or even block the implementation of the latest agreements.

The clearest sign of the Indian bureaucracy’s ingrained anti-Americanism came from the visible euphoria of officials who were part of the negotiations. This in spite of the fact that no public announcements were made.

The Delhi diplomatic grapevine indicates that the Americans had never met an Indian leader who was so willing to “talk business” and help contain China.

India is a country with an acute governance deficit. Its bureaucracy that has no inkling of modern economic thought and zero experience with information age technologies. This may ultimately prove to be the biggest roadblock to a brave new era in Indo-American relations.

Take, for example, the purported agreement on building American nuclear reactors in India. India’s goal has been to get a first dozen or so reactors from abroad, gradually absorb the technology and then produce the same designs domestically at a fraction of the cost with some of the technological knowledge gained migrating into the military nuclear program.

The issue is that every Western-designed reactor depends on reactor vessels fabricated by Mitsubishi heavy industries in Japan, a country that has a similarly strong bureaucracy ingrained in nonproliferation and is unwilling to conclude a nuclear deal with India for this very reason.

This is not to say that the United States or France would be incapable of independently designing and milling a reactor vessel. But given the miniscule number of new reactors commissioned each year, the economics simply don’t support the creation of industrial facilities to produce, at best, ten to fifteen reactor vessels. As a result, even if General Electric and Westinghouse — the two American energy companies looking to export reactors to India — agree to the compromise reached with India on liability, going forward is an extremely difficult proposition.

The second set of agreements signed had to do with India slowly making its weapons systems more interoperable with NATO standards and transfers of American military technology. Here again the Indian bureaucracy’s lack of economic training could greatly impede operationalization.

Much of what India has invested in is NATO incompatible, specifically its fleet of Russian tanks and warplanes. Indigenous destroyers and frigates are also equipped with Russian sensors and weapons.

As a result, the kind of seamless interoperability that would bring serious synergies to play is largely either out of reach for around 70 percent of India’s armed forces. The remaining 30 percent is too small in terms of quantity to make a major difference, especially now the deal for the French Dassault Rafale fighter plane is now on the brink of collapse.

Moreover, India’s foggy ideas about nonalignment means that interoperability is both “undesirable and unnecessary,” as one senior military officer put it.

The net result is that future Indo-American cooperation at the strategic level is held hostage at three levels — all structural.

The first is the bureaucracy. The second is a largely non-NATO compatible military that does not wish to be NATO compatible. The third is the fact that India is a third-world economy. Its demographic bulge and collapsing education system mean it will have to focus on quantity manufacturing rather that high-value addition, quality manufacturing that Western technology represents.

This, combined with a chronic lack of civil-military integration in the manufacturing sector, means that Indian industry cannot sustain the manufacture of low volumes exclusively for military purposes when it is not properly integrated into global civilian supply chains.

Signs of change in at least one of these sectors, the bureaucracy, are visible. The new government has not hesitated to transfer or sack obstructionist or underperforming bureaucrats and officials who do not agree with its policy. But this represents a change on only one of the three structural plains that will determine the operationalization of meaningful Indo-American relations with the other two seemingly untouched.

Irrespective of Modi’s willingness to cooperate with the United States, his country’s reputation as one failing in terms of governance will likely act as check on meaningful cooperation for the foreseeable future.

India’s Modi Relaxes Labor Inspections, Reduces Compliance

Prime Minister Narendra Modi of India meets Republican House speaker John Boehner in Washington DC, September 30
Prime Minister Narendra Modi of India meets Republican House speaker John Boehner in Washington DC, September 30 (Caleb Smith)

India’s conservative prime minister, Narendra Modi, introduced a new system for labor inspections on Thursday that he said would be the first step in liberalizing the country’s notoriously inflexible jobs market.

Under the new regime, a computerized system will randomly select companies for inspections. Labor monitors will no longer be allowed to check on businesses at their own discretion, a procedure that is vulnerable to favoritism and abuse.

Inspectors, moreover, will have to upload their reports within three days and will not longer be able to modify their findings thereafter.

Companies should also soon be able to submit a single compliance form for sixteen separate labor laws — online.

“Let’s start with trust,” said Modi in New Delhi where he unveiled the measures. “Ease of business is the first and foremost requirement if ‘Make in India’ has to be made successful.”

With ten million Indians joining the jobs market every year, the country can ill afford to stifle business growth.

High compliance costs also deter small companies from formally employing workers. Estimates are just 8 percent of India’s workers have a formal job with benefits and security. The vast majority is employed informally.

Modi, a Hindu nationalist, was elected in May on promises to restore high growth rates and liberalize the world’s tenth largest economy.

Shared Values Don’t Make an Indo-American Alliance

India’s new prime minister, Narendra Modi, is confident his country can deepen ties with the United States, given the cultural and political similarities that exist between the world’s two largest democracies. But after more than a decade of trying, it should be clear to strategists in both countries that shared values aren’t enough to make an alliance.

In an interview with CNN’s Fareed Zakaria that was broadcast on Sunday, Modi said, “America has absorbed people from around the world” while “there is an Indian in every part of the world. This characterizes both the societies,” he said. “Indians and Americans have coexistence in their natural temperament.”

Modi, who took office in May after his conservative Bharatiya Janata Party won an absolute majority in parliamentary elections earlier this year, admitted that the Indo-American relationship had seen its “ups and downs” through the last century. But “there has been a big change” in the last twenty years, he said. “Our ties have deepened. India and the United States of America are bound together, by history and by culture. These ties will deepen further.”

In what way, Modi didn’t say. Read more “Shared Values Don’t Make an Indo-American Alliance”

Putin at Ease in Asia’s Power Politics

Presidents Vladimir Putin of Russia and Xi Jinping of China observe a military ceremony in Shanghai, May 20
Presidents Vladimir Putin of Russia and Xi Jinping of China observe a military ceremony in Shanghai, May 20 (Kremlin)

There is an expression in Japan: kumo o tsukamuyou. It translates roughly into “like grasping a cloud.” We might call it “wishful thinking.” The proverb springs to mind when reading Japan’s former defense minister Yuriko Koike’s recent commentary.

In it, Koike presents her perspective of the challenges Japan has to face in East Asia. She believes these challenges are easy to enumerate for they all depend on one factor alone: liberal democracy. Those closest to it are under pressure by those farthest from it. China, Russia and North Korea are problems, Japan, the United States and their allies are the solution.

Koike’s is an ideal world in which the leader of the world’s biggest democracy could only possibly choose to ally with likeminded democratic powers and thus India’s new prime minister, Narendra Modi, is dutifully expected by Koike to team up with the alliance being formed to contain China’s assertiveness in the East and South China Seas.

Yuriko Koike, though, might have another thing coming. Not only is Modi not the obvious ally she believes him to be; the government in Tokyo itself may very well have other plans. Read more “Putin at Ease in Asia’s Power Politics”

India’s Modi Wins Decisive Mandate for Economic Reform

India’s conservative opposition decisively ousted the ruling Congress party in an election that concluded on Monday, results released on Friday showed. Narendra Modi, the chief minister of the western state Gujarat, won an absolute majority of the seats in the lower house of parliament for his Bharatiya Janata Party, giving him a clear mandate to push through economic reforms.

With most of the votes counted, Modi’s party had crossed the 272 seats needed for a majority in parliament. His alliance, which includes smaller right-wing parties, won almost 38 percent of the votes, giving it 318 seats.

Congress, by contrast, looked set to win less than fifty seats of its own, down from 206. Its United Progressive Alliance got less than 24 percent support nationwide. Read more “India’s Modi Wins Decisive Mandate for Economic Reform”

India’s Modi to Unseat Congress, Exit Polls Show

Four exit polls released on Monday showed India’s conservative leader Narendra Modi on track to become the country’s next prime minister. The ruling Congress party, by contrast, could post its worst result in decades.

India’s staged election concluded on Monday with voting in the states of Bihar, Uttar Pradesh and West Bengal.

A CSDS poll conducted for the CNN-BIN television network put Modi’s alliance at 270 to 282 seats while giving between 92 and 102 to the coalition that is led by Congress.

A Nielsen poll for ABP News had the right at 281 seats while a third, by Cicero for the India Today group, predicted Modi and his supporters would take between 261 and 283 seats. 272 seats are needed to form a government. Read more “India’s Modi to Unseat Congress, Exit Polls Show”