India has 1.3 billion people to take care of, a large number of which are poor. With a vulnerable economy, unsafe borders and unwillingness of the West to back India at crucial junctures limits India’s choices
The West is criticising India for not siding with the democracies of the world on the issue of Ukraine vs Russia. There’s no scholar, journalist or a public intellectual from the Western ecosystem who is not questioning India’s morality over the country’s decision to abstain from voting at the UN Security Council against Russia’s war on Ukraine.
War is always bad for the world. But its cost is always paid by the poor nations. Starting from World War I in the 20th Century, dozens of other battles have been waged by developed nations. But their end cost has always been borne by countries that are dependent upon the West for growth or survival.
In World Wars, Britain and other European nations used soldiers and the resources of their colonies with impunity in the name of fighting fascism, even though that ideology was just an extreme version of imperialism practised by the Western democracies for centuries.
Coming back to Russia’s invasion of Ukraine, it is important to understand how India is placed in the world economy and why it makes no sense for the nation of 1.3 billion to take an antagonistic stance against a country that has backed India’s interests since its independence.
Despite being the fifth largest economy in the world, India’s per capita income is just a third of the global average. It was only in 2018, when Nigeria overtook India in being the home of the world's largest number of poor. The Covid pandemic has worsened the situation, and even though there are no official numbers available, chances are that India once again is number one from bottom while dealing with extreme poverty.
India opened its economy in 1991, after the disintegration of the USSR, believing in the idea of Western capitalism, opening up its industries to competition from foreign companies backed with foreign capital. It was a great story for the first 15 years, when foreign direct investment created high-paying white collar jobs in the urban economy, unleashing the animal spirit of the country’s private sector. But numbers suggest that the euphoria and the hype has been dying a slow death ever since. Even though the country's policymakers have vouched for removing all restrictions on foreign trade to make India a “superpower”, the result of such policies has unfortunately been negative on the ground, pushing India’s current account deficit to dangerous levels. And the absence of jobs—even the low paying ones—has started hurting to an extent that Indian politicians are getting forced to resort to banning the movement of labourers within the country.
Studies suggest that since 2011 the economy has not been able to absorb the additional workforce that enters the job market, leaving a large number of people dependent on schemes like MNREGA that pay less than $4 a day for just 200 days in a year.
All the foreign trade agreements signed with various European economies have gone against India, resulting in the country’s exports value remaining stagnant around $330 billion (achieved in 2018, which may go up to $400 billion in 2021-22). In 2019, India accounted for just 1.7 per cent share in global exports and ranked 14th behind all top four economies (the US, China, Japan and Germany). Even other smaller economies from Europe, like the Netherlands, Italy and France had a higher share in exports than India.
The cost of every financial crisis needs to born by the country of its origin. But, in 2008, when the subprime crisis wrecked the US economy, its price was paid by others. It launched a quantitative easing programme (a US Dollar printing spree), which helped the US economy pass the cost of damages caused by its greedy corporate sector on to other economies, by fuelling inflation in commodities and asset prices, making it unaffordable for the poor of the world to improve their standard of life. Between 2008 and 2015, the US central bank’s balance sheet rose from $900 billion to $4.5 trillion. To deal with the Covid-19 shock in 2020, while governments of the poor cut down their expenditure, the US government went on an unprecedented dollar printing movement, taking the balance sheet of the US Fed to $7.4 trillion. The US government can claim that printing dollars helped it create jobs in the economy, but its real impact is felt across the world in the form of rising inequality. India stands out as the worst performer in the global inequality report, with its top 11 per cent taking away 89 per cent of the country’s wealth.
It was the Gulf War of the 1990s that brought India on the brink of bankruptcy in 1991. After exhausting its foreign exchange in purchasing expensive crude oil in the international market, the P.V. Narasimha Rao government was forced to take a loan from the International Monetary Fund after pawning the Reserve Bank of India’s gold.
Since then, despite opening up its energy sector to global explorers, India has failed to become energy secure. It imports more than 80 per cent of its energy needs and is vulnerable to every global energy crisis, like the one we are seeing today, with crude oil prices crossing $110 a barrel. Interestingly, the US, which was also dependent upon imports for meeting its energy needs in the 1990s, is now the largest producer of oil in the world and immune to the vagaries of price fluctuations that are mostly the result of geopolitical tensions. Over the years, the US has forced India to reduce its imports from countries like Iran and Iraq by levying sanctions against those countries. India, like all other nations with no say in deciding the global order, have obliged to the US diktats by changing the basket of their oil imports.
Over the next few decades, India’s energy needs are set to grow exponentially and can only be met by diversifying the import basket of the country. Russia is the largest exporter of natural gas and second largest exporter of crude oil in the world. By going against Russia, India will only jeopardise its future growth prospects, as no country can generate jobs without providing fuel to its industries.
There are no permanent enemies in the world. Therefore, Indians may be asked to forget the fact that the US helped Pakistan in the 1971 war for the liberation of Bangladesh against India. But, even in recent times, the US has failed to support India strategically to help it consolidate its position against China, or even Pakistan, on the issue of cross-border terrorism or territorial integrity. In 2020, when border skirmishes between the Indian and the Chinese forces took a dangerous turn, it was Russian president Vladimir Putin who pressured China to not escalate the matter. The situation remains tense between the two Asian neighbours, with India depending upon Russia for close to 50 per cent of its defence imports. France, a NATO member, has provided Rafale fighter jets to India recently, but the West has not done enough to help the Asian democracy secure its borders in the post-Cold War era.
Given the fragile economy, India, despite being the world’s fifth largest in this category, is vulnerable due to hostile borders in the east and the west. The nation or intellectual who expects India to vote just in the name of democracy does not understand the role economy plays in a country’s foreign policy. Such people and entities wrongly believe that the current government, just because it has a strong aversion to Nehruvian policies, can be motivated to go against the principles of the Non-Aligned Movement that were developed to safeguard the interest of vulnerable nations from the vanity wars of the rich in the name of democracy, free world and morally superior cultures.