As Lines Between Security, Politics, And Economics Blur, India Navigates Through Waters Of Uncertainty

When nothing is certain, everything is possible. Such profound words rarely make sense, unless we see their message playing out in real life. And then, many don’t believe what they see or are too preoccupied with the short-term agendas to see the change.

India’s domestic politics falls in the second category. Nothing else explains the key Opposition leader, Rahul Gandhi’s recent decision to raise questions on India’s inherent unity and integrity from foreign soil in the most turbulent phase of world history after World War II.

Prime Minister Narendra Modi has been consistent in alerting Indians that the world order will change after Covid. But most of us, who didn’t see the World War, couldn’t relate to the sentiment. The bigger picture is now emerging, and it's scary.

From the deployment of the US Navy’s Seventh Fleet in the Bay of Bengal at the onset of the 1971 India-Pakistan war to the Asian financial crisis in 1997, the global financial crisis in 2008 and others – India spent many agonizing hours, for reasons beyond the realms of domestic and/or bilateral issues, over the last seven decades.

The scope and scale of the current crisis surpass them all. We are practically in the middle of an untold war, fought mostly without arms. That doesn’t mean arms are out of context. The world is in a rush to stockpile deadly arsenals to scare each other.

No one is daring to breach the equilibrium. But everyone is anticipating its collapse. Unipolar global politics is fading out. A new order will emerge. In the interim period, the world will remain extremely uncertain in every sense of the term.

In the past, we saw crises on select fronts. Now all fronts are open, and all rules are meant to be broken. We are neither unipolar nor a multipolar world. No one knows where we are. It is time to hedge every risk from political, defence, and food to loan defaults.

The unrest will end but till then, there will be waves of shocks.

The old power centres of Europe who enjoyed good life without much regard for production and productivity are equally susceptible to a debt crisis as the smaller Asian nations who were making the most of the India-China rivalry.

The world is already rattled by food shortage, energy shock, semiconductor crisis and many more. The Ukraine crisis may have had a smaller role in it when compared to the wider disruptions starting from logistics to politics.

All known theories are falling apart to explain or assess the risks. Since the end of the Cold War, the US always stood by China and vice-versa for mutual interests. The world had a vested interest in ensuring the status quo.

Now when China is fumbling, others are watching from the sidelines. Like the typical e-commerce rush to burn cash in the hope of emerging as the last man standing; all prominent powers in the world are in a race to protect or enhance the political hegemony.

Economics is not unimportant. But when compared to political risks, it’s a lesser priority.

Japan, Australia, South Korea, New Zealand and ASEAN countries - like Malaysia, Singapore, Thailand and Vietnam - joined the 15-nation Regional Comprehensive Economic Partnership (RCEP) in 2020. China was the untold leader in RCEP.

The agreement was the result of years of negotiation when South Korea and Japan were heavily invested in China and, Beijing didn’t impose an unofficial embargo on imports from Australia.

The RCEP agreement came into force in January. But this week, Australia, Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, and Vietnam joined the 13-member US-led Indo-Pacific Economic Framework for Prosperity (IPEF).

IPEF is not a ‘typical trade block’ but its focus encompasses critical economic areas like trade and supply chain issues.

There is more to it. All four members of the Quadrilateral Security Dialogue (QUAD), including India, are founding members of IPEF. Interestingly, QUAD recently joined hands to secure semiconductor and 5G technology supply chain.

Not to forget the Chinese dominance in the supply chain and the contest between China and the US in the telecom technology space.

Clearly, many members of RCEP and IPEF will be working at cross-purposes, if not in letter, then in spirit. The more crucial question is: if security groupings start promoting trade and investment what will be the future of trade blocks?

The Association of South East Asian Nations (ASEAN) thrived in the post-Cold War unipolar world. Can they survive the prevailing tug-of-war? With the distinction between security, politics and economics reducing, how long can they keep politics out of context?

And, that’s a new reality where trust is the biggest casualty. Everyone is going with the flow and everyone is waiting for the right opportunity. The same US that ruled out IPEF a few years ago is now anchoring it.

India is not a part of RCEP (the decision became a blessing in disguise in the changed circumstances). As the virtual caretaker of the Indian ocean and a top military power, Delhi is the second most crucial member of QUAD after the US. Now it joined IPEF. There is not much conflict of interest in it.

However, it doesn’t mean either that India joined the US camp. Only recently, Delhi took a neutral stance on the Ukraine-Russia conflict much to the discomfort (read anguish) of the rest of the QUAD members, particularly the US.

The war of words ended in an Indian snub to the US's insistence to stop energy trade with Russia. (India was not alone, Saudi Arabia, once an unquestionable ally of the United States, took an independent stance on issues about Russia.)

Unlike the bipolar Cold War era, the current status of global politics is fluid. The US was unhappy with Delhi’s recent ban on wheat exports, arguably to ensure the availability of strategic reserves, leading to a spike in global food prices. Beijing supported India.

To be precise, India is bargaining for its rightful place in the emerging global order. It missed the opportunity in the past. The pandemic created new possibilities and Modi is aiming to grab it with both hands.

The job wouldn’t be easy. The world is looking for a new growth anchor that can help reduce dependence on China. The immediate task for India is to claim a leadership position in terms of growth and investment, without compromising its fiscal balance.

India has been the fastest-growing economy in the financial year 2021-22 (FY22). Foreign direct investments were at a record high. The production-linked incentive (PLI) scheme and sustained focus on domestic manufacturing of defence and strategic equipment (like telecom) has started delivering.

In all likelihood, India will clock high growth in the global inflation year of FY23 as well. A look at the inflation data of the G-20 will tell that India is in a relatively comfortable position in terms of inflation.

The recent duty adjustments in energy, steel, sugar etc further prove that the government is not taking any chances and is determined to ensure that the market of 140 crores keeps consuming, even if the rest of the world slips into a recession.

It will be an arduous task, no doubt and requires united effort with which Rahul Gandhi is evidently not in agreement.

India’s risks lie in the fiscal gap. While the federal government didn’t let India’s (government) debt-GDP ratio slip even in the pandemic years; the fear lies with the States, particularly the Opposition-ruled States, who are not ready to apply fiscal prudence.

Of the top four most debt-ridden States – Punjab, West Bengal, Andhra Pradesh and Bihar – three are ruled by the Opposition. Punjab doesn’t have money to buy electricity or coal, but it waives the electricity tariff.

West Bengal doesn’t have money to fill huge vacancies or offer fat incentives to attract industry, but it doles out cash to every woman irrespective of their financial background.

It would have been good if the Opposition sided with the government in this critical period. If that doesn’t come and India can survive the test, the Opposition will lose all claim to have contributed to India’s growth.