China derives its quasi-superpower status from its economy that has grown eight-fold to $11 trillion since Clinton made that remark in the early-1990s. It is a lesson India must learn. China’s economy is now so powerful that countries like Vietnam, which fought and won a short, sharp war against Beijing in 1979, are mending ties with it despite a festering dispute over sovereignty in the South China Sea. The Philippines sued China under the United Nations Convention on the Law of the Seas (UNCLOS). It won the case but has now dropped the idea of enforcing the verdict which China has anyway dismissed with contempt.
Even the United States, with an economy nearly twice the size of China’s, has backed away from confronting Beijing over the South China Sea and North Korea. China’s belligerence against India, raised a couple of notches after the Dalai Lama’s visit to Arunachal Pradesh, derives from its belief that with an economy five times India’s and a defence budget three times India’s, New Delhi has few options but to swallow its pride.
India must counter this with an economic resurgence of its own. There is empirical evidence that this is entirely feasible. A new report by the United States Department for Agriculture Economic Research Service (USDA ERS), based on data collated by the World Bank and the IMF, projects the Indian economy will be the world’s third largest by 2030 with a GDP of $6.84 trillion. The USDA report assumes an average annual Indian GDP growth rate of 7.4 per cent, which is a conservative estimate. Keep in mind too that the estimate of $6.84 trillion is at current exchange rates (not purchasing power parity — PPP) and thus undercounts India’s low-cost, rupee-based GDP. So a $6.84 trillion GDP in 2030 would be equivalent in PPP terms to nearly $15 trillion — in the same range as China’s or America’s GDP (again in PPP terms) today.
To put these figures in perspective, consider the USDA’s projection of the GDPs in 2030 of the following developed countries: Japan ($6.37 trillion), Germany ($4.38 trillion), Britain ($3.60 trillion), and France ($3.44 trillion). India’s GDP (undercounted in non-PPP terms) will in 2030, therefore, be nearly double Britain’s and France’s, far larger than Germany’s and ahead of Japan’s.
The key assumption is 7.4 per cent growth of Indian GDP over 17 years — eminently within reach if sensible economic policies are followed, beginning with the implementation of the Goods and Services Tax (GST), FDI liberalisation, labour reforms, and a thrust on infrastructure, healthcare, and education.
The geopolitical ramifications of a $6.84 trillion GDP are far-reaching. Pakistan strives for equivalence with India at every turn though its GDP today is merely 11 per cent of India’s. By 2030, at even a heightened annual growth rate of 4 per cent, Pakistan’s GDP will be around $500 billion — barely 7 per cent of India’s. Critically, the 5:1 gap in GDP between China and India will narrow to less than 3:1 in 2030 as China’s GDP grows more slowly to $19.20 trillion, according to USDA’s projections. Equally critically, the gap between India’s and Pakistan’s GDPs will widen from the current 9:1 to 14:1.
All this doesn’t mean Pakistan’s proxy terrorism against India will disappear. But if an economically powerful India simultaneously strengthens its military and diplomatic strategy against Islamabad, a change in Pakistan’s criminal behaviour can’t be ruled out. China’s stance too could change. Chinese academics are beginning to question the wisdom of the China-Pakistan Economic Corridor (CPEC) that passes through Pakistan-occupied Kashmir (PoK). They are stressing a closer dialogue with India over disputed PoK which could disrupt CPEC infrastructure there as it has in Balochistan.
But the Chinese, despite their rhetoric over Arunachal Pradesh, see the future with greater clarity than most others. They have studied the USDA’s 2030 projections for India.
The problem is that while clear-headed analysts in Beijing have begun to realise India’s potential, the mandarins in New Delhi, docile as ever in matters of foreign policy, have not. That must change if India is to punch at, not below, its geopolitical weight.