June 3, 2019

Realising grand objectives

The following article originally appeared in The Hindu on June 3, 2019.

It is common to assess a country’s foreign policy by examining individual bilateral relationships or specific outcomes. But this risks missing the forest for the trees. While the broad directions of India’s foreign relations — with the neighbourhood, Afghanistan, the U.S., China, Indo-Pacific, Russia, and Europe — have been set over the past several years, the main factors inhibiting India’s performance are ultimately domestic in nature. Three stand out.

The first is trade. It often surprises people that India’s trade-to-GDP ratio is higher than China’s or the U.S.’s. India’s market, and access to it, remains a valuable lever with other countries. But much of India’s commerce involves raw materials and low value-added goods, and is still insufficiently integrated into global supply chains. With global trade stagnant and the World Trade Organization at a standstill, the only way for India to seize a larger share of exports is through well-negotiated preferential trade agreements. India’s past record in this department has been poor, leaving some sectors exposed to dumping and others unnecessarily cloistered. A smarter trade agenda will not only create jobs and drive reforms at home, it could become a potent strategic tool in international affairs.

The second concerns defence. India has the world’s fifth largest defence budget but is also the world’s second largest arms importer. Not only does this compromise national security, it means that India cannot offer an alternative as a defence supplier to countries in its region. Defence indigenisation will require financing for defence capital expenditure; assessments of costs, technology transfer capabilities, and export potential early in the procurement process; and fair competition between the Indian private and public sectors.

The third concerns overseas project implementation. India’s outgoing aid budget has been relatively flat, reflecting a scepticism of grant aid from India’s own experience as a recipient. Instead, it has now started to explore other financing options. Indian overseas credit has increased significantly, with over $24 billion extended primarily to South Asia, Southeast Asia, and Africa. But building on several recent steps will significantly increase the country’s delivery and regional credibility. These include better project planning, more attractive and competitive financing terms, more reliable disbursal of funds, and enhanced coordination and communication with the private sector for implementation.

Many regional policy challenges would be addressed with these three major fixes. None will be easy as they will require tackling vested interests. While the first Modi government made its strategic objectives known and set out a clear direction, key policy interventions in these three areas will now be necessary for India to realise its grander objectives.

May 30, 2019

We need a quality revolution in public policy decision-making

The following article, co-authored with Rahul Tongia, originally appeared in Mint on May 30, 2019. An excerpt is below and the full text can be accessed here.

As a second Narendra Modi government takes office, the demands it will face to deploy its renewed political capital will be immense. In every area of policy priority—from education and financial inclusion, to health and infrastructure, and energy and defence—an impatient electorate will expect it to deliver. But every policy challenge must necessarily confront trade-offs, even before further complications arise from bureaucratic or party politics.

There’s a popular adage in the tech world: “Cheaper, faster, better. Pick any two." This applies widely to Indian policy, a field where it sometimes assumes the form of a variant: “Cheaper, more, better. Pick any two."

Given India’s human development imperatives, the natural policy impulse has usually been to rush towards providing healthcare, energy access, infrastructure and education on a vast scale. Most evaluations of policy have focused on input measures: How much of a certain public good can be built, deployed, or delivered? Recent examples include the opening of bank accounts as part of Jan Dhan Yojana or household electrification. How such bank accounts are being used or how consistent the supply of electricity on a new connection is, are understandably not the immediate priority.

Moreover, given historical resource scarcity, a second Indian government priority has been to focus on achieving its objectives cheaply. In public tender issuing and procurement—which dictates a lot of public service delivery in India—this has manifested itself in a rigid focus on the lowest-cost bids, known as L1. Together, the emphasis on “more" and “cheaper" has almost always meant that “better" has been sacrificed.

But India has changed. In many policy fields, the challenge of “more" is now being addressed: school enrolment is near full potential, there is surplus power generation supply, housing is readily available but remains vacant, allocated capital budgets for defence are not spent in their entirety, and agricultural yields in certain crops have exceeded demand (resulting in drops in prices and farmer distress). The question of limited financial resources, while still a constraint, is less relevant today, in part due to better tax revenue collection, a natural consequence of the goods and services tax (GST) and digitization. The India of 2019 is no longer as resource-starved it was in the 1970s or 1960s.

May 8, 2019

Belt and Road 2.0

The following article originally appeared in The Hindu on May 8, 2019.

Six years after it was unveiled, China’s Belt and Road Initiative (BRI) assumes another avatar. In its initial form, it was all things to all people, a catch-all for China’s international engagement. But in fact it had multiple, layered objectives. The first concerned domestic economics: exporting surplus industrial capacity and cash reserves overseas to keep China’s economy humming, its industrial output flowing, and its employment levels high. The second concerned domestic politics: a signature foreign initiative to associate with Chinese President Xi Jinping. The third concerned security: stabilising Western provinces and the Eurasian hinterland. And the fourth concerned strategy: leveraging China’s new-found economic heft for political objectives in Asia, Africa, Europe, and the Indian and Pacific Oceans, and creating new standards and institutions in a bid to challenge U.S. leadership.

But Beijing may have moved too soon and too quickly. As the second Belt and Road Forum (BRF) concludes, a paradox has become apparent at the heart of its ambitious initiative. On the one hand, there has been a strong backlash. The economic viability of Chinese projects is now viewed with considerable scrutiny. In capitals around the world, the port of Hambantota in Sri Lanka is being described as a warning sign. The BRI’s sustainability is called further into question as Chinese debt, especially that held by state-owned enterprises, mounts. Additionally, security concerns have begun to predominate as far afield as in the European Union, the South Pacific and Canada. The role of China’s state in its business dealings is being deliberated openly. China’s military base at Djibouti has injected an overtly military element to its external engagement. And political pushback to Beijing is also discernible, whether in Zambia, the Maldives or Brazil.

Yet, despite these obvious deficiencies, the allure of the BRI remains strong. Many countries still see China as an attractive alternative to slow-moving democratic bureaucracies and tedious lending institutions. There are also political motivations at play: a minor agreement on the BRI is a useful tool for Italy’s Eurosceptic government to send a strong political message to the EU. Beijing has also become more flexible, the tone of this year’s BRF less triumphalist. Chinese overseas financial flows have slowed since 2017, and the focus has shifted away from massive infrastructure projects to realms such as digital technology.

Given these contrasting trends, the future of the BRI is more uncertain than ever. For India, which boycotted the BRF for the second time on grounds of both sovereignty (the China-Pakistan Economic Corridor traverses Pakistan-occupied Kashmir) and unsustainability (particularly in the Indian Ocean), it means continuing to monitor China’s international engagement closely.

April 22, 2019

The four “I”s undermining democracy

The following article originally appeared in The Brookings Institution's 'Order from Chaos' blog on April 22, 2019.

It will be an important year for democracy around the world. In April and May, India heads to the polls in what will be the largest organized political activity in history. Israel, Indonesia, and Ukraine just held very contentious elections while Spain, Australia, Canada, Tunisia, Argentina, Sri Lanka, and the European Parliament are set for important votes later this year. Meanwhile, the 2020 U.S. presidential campaign season is already underway.

These electoral contests come at a tough time for democracy, not just because of notable instances of resurgent authoritarianism and populism, but also disruption and corruption in places like France, Brazil, South Africa, and the Philippines. But it would be premature to conclude that democracy is in crisis. Pessimists often forget the tumult that democracy in the United States, France, and India experienced in the 1960s and 1970s. Most large-scale assessments of democracy suggest stagnation in recent years rather than decline: Today, over two-thirds of people living in democratic societies are outside the West and in many countries in Africa, Asia, and Latin America democracy is broadening and deepening. And public opinion about democracy remains strong in India, Africa, and Northern Europe, even as skepticism is growing in the United States, Middle East, Japan, and Australia.

First, consider the role of identity in contemporary politics. Whether in the United States, Canada, the United Kingdom, Germany, India, Indonesia, or Myanmar, the deepening of identity in political organization and discourse is becoming more pronounced, whether among religious majorities, ethnic minorities, or regions such as Scotland or Catalonia. This is occurring despite prior expectations that globalization would lead to great cosmopolitanism and the dilution of strong collective identities. In the United States, Europe, or Australia the question of identity is largely grounded in debates about immigration. In India—or other post-colonial states such as Indonesia, Bangladesh, Sri Lanka, or Kenya—identity politics have deeper roots, and relate to the distribution of power among various sub-national groups. Nonetheless, a shared challenge that all democracies will have to face is how to negotiate political pluralism in a globalized world.

A second shared challenge relates to inequality, especially real and perceived inequality of opportunity. Despite consistent economic growth in many parts of the world and improvements in human development indicators among most developing economies, the perception of growing inequality has tested the functioning of democracy. Populist nationalism is consequently interspersed with populist economic policies: Consider the interspersing of white nationalism in the United States with stagnant wages among blue collar workers. Economic malaise among youth or the aspirational middle class can also be exploited by populists. Finding ways to improve the semblance of equality of opportunity will be a common challenge among both developed and developing democracies, particularly with the advent of new technologies that could contribute to productivity increases and capital gains. These factors risk disproportionately benefiting wealthier investors at the expense of employment opportunities for the poor and middle class.

The third shared challenge is the new information environment. Although the availability of information via digital telecommunications had been expected to bolster democracy, it has also paradoxically resulted in the undermining of democratic functioning. This appears to be the result of a number of factors, including online political echo chambers, misinformation (“fake news”), and increased political theater. Digital democracy has recreated elements of direct democracy, undermining the mechanisms for deliberation and compromise that are necessary for representative democracy to function. In India, for example, online propaganda has become a major battleground for democratic politics, but as in other countries, it risks compromising informed decisionmaking, one of the essential criteria of a functioning democracy.

Finally, while less uniform, all democracies remain vulnerable to interference by external actors. This has become a particularly contentious issue in the United States and Europe. While a country like India has so far been relatively immune to external interference in its political processes—thanks to an innovative Electoral Commission and tight controls on foreign involvement in academia and the media—this phenomenon has started to be well documented in other more vulnerable countries, often through the use of economic leverage. In Sri Lanka, for example, a Chinese port construction firm made large payments towards the re-election campaign of President Mahinda Rajapaksa (who narrowly lost in 2015). Rajapaksa had earlier approved onerous Chinese lending terms for an unprofitable but strategically located port, and China offered to waive the resulting debt in exchange for equity in the project. Similar interference has been documented in other democratic systems, while various other forms of direct political interference have become hotly debated, whether in Washington, Paris, or Canberra.

There are no easy solutions to these collective challenges. While identity politics can be managed in various ways it will require leadership and compelling narratives. But it cannot be entirely ignored, as cosmopolitan elites have been wont to do. Populist measures to address inequality—tax hikes for the wealthy, stimulus packages, and job guarantees—may provide seductively easy solutions that appeal to voters. But as the extreme example of Venezuela reminds us, such steps can be taken too far. Meanwhile, addressing misinformation opens up the Pandora’s box of censorship, which is difficult given various countries’ laws and norms concerning freedom of expression. And while electoral systems can be hardened against foreign interference, countermeasures can also result in subjective, arbitrary, or seemingly discriminatory decisions.

For now, the democratic community could do more to cast a wider net and learn from each other’s experiences. In the near future, democracy won’t be the same. But all democratic polities, if they are to evolve, will have little choice but to learn and adopt best practices from each other.

March 29, 2019

What the world thinks

The following article originally appeared in The Hindu on March 29, 2019.

There are many ways to assess a country’s role in the world. Outcomes are one of them, including economic exchanges, political decisions, and military cooperation. Resources – whether economic, military, diplomatic, or cultural – are another. But public perceptions should not be discounted. While the attention devoted by other countries’ leaderships and the growth of the Indian economy since 1991 suggest that India’s standing in international affairs has improved, what do the public think?

On March 25, the Pew Research Center released a study of India, based on surveys conducted over the past year. Among the findings were 27 countries’ public views on India’s rise. The U.S. (40%), the U.K. (46%), France (49%), Japan (48%) and Australia (40%) thought that India played a more important role in the world compared to 10 years ago, and only a minority (4 to 17%) felt it was less important. Similar patterns were discernible in Canada, Germany, South Korea, Sweden, and the Netherlands. The perception of India as a rising power in North America, Europe, Northeast Asia, and Australia should be little surprise, given that these are the places with the most active Indian businesses, diasporas, and government-to-government relations.

On the flip side, very small numbers in Southern and Eastern Europe and Latin America perceived India playing a more important role, with respondents more likely to see India’s position declining. Only 17% in Poland, 21% in Brazil, and 14% in Mexico saw India’s role as having enhanced over the past decade. This too is not surprising. India’s presence is less likely to be felt in Latin America. Southern and Central Europe is also a more crowded space, with the U.S., the EU, Russia, and (increasingly) China jostling for influence.

Somewhere in the middle of the pack are Russia (where 22% saw India playing a more important role, and 21% less) and Africa, where the numbers are mixed in Kenya, Nigeria, and South Africa. This should be expected, given their priorities and the vector of relations with India, particularly relative to other powers.

From an Indian perspective, there are two points of concern. One is Israel, where only 27% saw India playing a more important role and 31% less. This is surprising only because that relationship has appeared to be on a positive trajectory over the past decade. Defence ties, technological relations, and political links have been consolidated. Recent years saw the first presidential and among the first prime ministerial visits by Indian and Israeli leaders to each other’s countries. India also remains a popular destination for Israeli tourists.

The other, more minor, surprise concerns South-East Asia, particularly Indonesia. That only 21% of Indonesians and 15% of Filipinos perceived India as a rising power means that India’s Act East policy remains a work in progress.