Twenty Years of Transformation in South Asia

The conference began with a keynote address by distinguished Columbia University professor Jagdish Bhagwati, a noted scholar on free trade and globalization. Bhagwati, who has been honored by the Indian government for his work, discussed the potential impacts of the Indian diaspora in America on the U.S. relationship with India.

• Unexpressed Desires: Bhagwati argued that the Indian-American community has had a smaller impact than expected for a group its size because its members have not clearly articulated their policy preferences. He suggested that better formulation of these goals would lead to the group’s desired outcomes.


• Economic Policy: One potential area of impact for the Indian-American community that Bhagwati noted was economic policy. He cautioned against the tendency of U.S. politicians to adopt hardline stances against outsourcing, and suggested that greater representation of Indian-American voices might temper the political forces that prompt candidates to embrace such positions.


• Expanding Immigration: Bhagwati also argued that Indian-Americans are largely left out of the current debate on immigration reform, and that the community could leverage its voting bloc to ensure that the focus of immigration policy is not too narrowly tailored to the Hispanic community.

Over the past two decades, India has enjoyed unprecedented economic growth fueled by major domestic reforms. But corruption, limited resources, and fierce Chinese competition all threaten to cut short India’s boom. Four leading experts—Arvind Subramanian of the Peterson Institute and the Center for Global Development, Devesh Kapur of the University of Pennsylvania, and Vikram Nehru and Milan Vaishnav of the Carnegie Endowment—shared their views on the economic challenges facing New Delhi and how policymakers can overcome them to secure India’s future in the region. Carnegie’s Ashley J. Tellis moderated the conversation.

• An Impressive History: Subramanian looked back at India’s economic turnaround, commending New Delhi’s move away from autarky and protectionism in favor of liberalizing reforms and a more globalized economy. These reforms have paid major dividends, he said: Indians have enjoyed an average per capita GDP growth rate of 7 percent since 2000. Major social transformations and reductions in poverty rates have accompanied this transformation, added Subramanian.


• Too Much Too Fast? Subramanian cautioned that, despite these impressive achievements, India still lags far behind comparable economies—including China’s—in key indicators. He pointed out that India has developed its skilled labor capacity and begun exporting foreign direct investment far earlier in its developmental trajectory than most countries. This trend, he explained, has turned India into a service sector powerhouse, but left its unskilled labor force dramatically underutilized. Finally, Subramanian warned that government expenditures have skyrocketed in the last ten years, leading to double-digit inflation that has left India macro-economically vulnerable.


• Expanding Education: Kapur argued that a more robust higher education infrastructure is the key to India’s long-term growth. Echoing Subramanian, he pointed out that India has few natural resources, but abundant human capital waiting to be developed. Despite massive increases in university enrollment, especially in applied fields such as engineering, Kapur emphasized that higher education in India needs to focus on quality and affordability, not just quantity. He explained that the proliferation of lower quality “degree mills” and a brain drain of top academics to the United States threaten to leave India’s universities without a capable corps of expert faculty. The future of Indian education, in Kapur’s view, lies in private universities, online education, and corporate campuses that provide on-the-job training.


• Confronting Corruption: Vaishnav expanded on the traditional narrative about corruption in India, explaining that while it is indeed endemic and requires serious attention, it can also reflect or prompt some positive changes. He pointed out that increased rent-seeking from corrupt officials is in some ways an inevitable side effect of rapid economic growth, and highlighted that greater accountability in government may result in a short-term chilling effect but lead to better governance in the future. Vaishnav called for a systemic approach to combating corruption, not just short-term fixes like fast-track courts for offenders. Finally, he credited India’s independent supreme court and election commission as powerful antidotes to corruption, and praised recent right-to-information legislation as a good first step toward greater transparency.


• Making Friends With the Neighbors: Nehru lauded India’s much-expanded economic partnerships with East and Southeast Asia, but added that New Delhi’s role in the region is dwarfed by China’s tremendous investments in infrastructure and capital. Structural changes in the region’s economic and political landscapes, however, may hold great opportunities for India. With wages on the rise in China, Nehru argued that Chinese businesses may look to India as a source of cheaper labor. Likewise, Nehru cited regional fears of overdependence on China as a motivation for other countries to expand their trade ties with India. But in the end, he cautioned, India will have to make good on its promises to fully reform its trade policies if it is to attract investment from abroad.

As India’s capabilities evolve, so, too, do its old rivalries and strategic interests abroad. Panelists Ashley J. Tellis of the Carnegie Endowment and Jack Gill of the National Defense University analyzed two traditional fronts of Indian foreign policy—China and Pakistan. Carnegie’s Frederic Grare commented on India’s expanded focus on the entire Asia-Pacific region and Milan Vaishnav moderated the discussion.

The Sino-Indian Military Balance

• Conventional Wisdom: In assessing the military balance between China and India, popular assumptions usually favor China. Tellis challenged that assumption, explaining that while China’s aggregate military might is by far the greatest in the region, India has long maintained the advantage along its northern border. China, he said, has adopted a defense-in-depth strategy that would trade territory for time and requires few regular forces stationed in the Tibetan plateau.


• Tilting the Scales: But in recent years, Tellis went on, China has undertaken a massive military expansion and modernization. While these efforts do not target India specifically, Tellis identified some major consequences for the conventional land balance. China has expanded its transportation infrastructure in Tibet, a move that Tellis said would allow the People’s Liberation Army (PLA) far greater mobility in a crisis. He added that the PLA now enjoys more centralized logistics operations and command and control, so it could bring to bear a wider range of forces and support a more ambitious campaign.


• Dogfights and Doctrine: Tellis observed a similar trend in the Sino-Indian air balance, noting that China’s inventory of later-generation aircraft alone now outnumbers the entire Indian Air Force (IAF). China has also begun adapting to destroy aircraft on the ground or degrade their capabilities in the air, a move that Tellis said challenges the IAF’s traditional focus on air-to-air combat.


• Powerful Partners: To keep its quantitative and qualitative edge, Tellis advised India to enhance its relationships with powerful actors like the United States. Tellis explained that Indian investments in frequent bilateral and multilateral exercises and military-to-military partnerships can help produce a more experienced and robust conventional force.

Pakistan

• Unstable Stasis: Gill argued that there is room for cautious optimism in the Indo-Pakistani conflict: the enduring ceasefire in Kashmir and expanded cross-border trade are both good signs. But the recent violence across the Line of Control is a worrisome reminder of this peace’s fragility, he added. With elections approaching in both countries, promised trade and visa reforms on hold, and the American withdrawal from Afghanistan looming, Gill lamented that a major breakthrough in resolving the conflict is unlikely in the next few years.


• Persistent Problems: Gill identified two major obstacles to a stable Indo-Pakistani relationship: terrorism and nuclear weapons. He explained that terrorist groups operating within Pakistan create grave uncertainty and mistrust in India. Both nations, he added, maintain nuclear postures that threaten to undermine traditional deterrence: Pakistan continues to explore tactical nuclear weapons, India aims to develop missile defense systems, and both countries are contemplating sea-based nuclear platforms.


• Management, Not Resolution: The most realistic outcome, Gill concluded, is for both countries to aim to manage their differences and avoid major hostilities. To do so, he advised more comprehensive diplomatic engagement, expanded confidence-building measures and military-to-military relationships, and a meaningful dialogue on Afghanistan. The international community should realize, Gill added, that its influence in the conflict is limited and that any real change will depend on India and Pakistan.

The Asia-Pacific

• Why Look East? Grare explored the genesis of India’s Look East policy, which began in the 1990s as a strategy for greater economic engagement with Southeast Asia. Since then, he explained, the policy has expanded in geographic and strategic scale: it now includes the entire Asia-Pacific region and involves security partnerships as well. Grare argued that the Look East policy has always had a geostrategic component aimed at balancing Chinese power in the region.


• Know Your Limits: Grare identified several factors that could potentially constrain India’s engagement with the region. Political transitions in Bangladesh and Myanmar remain unpredictable, he said, and there are doubts throughout Asia about India’s ability to realize its commitments to its neighbors.


• Autonomy and Leverage: The Look East policy provides a telling microcosm of India’s broader strategic direction, Grare added. New Delhi continues to emphasize “strategic autonomy,” a doctrine that Grare described as designed to leverage the capabilities of partners whose interests converge with India’s own, while maintaining autonomous decisionmaking power. As Asia grows more geopolitically polarized, Grare contended that the Look East policy will continue to be a valuable strategy for India, but added that New Delhi will have to assuage its partners’ doubts if it is to realize the policy’s full potential.

Carnegie Stanton Fellow Iskander Rehman joined Neil Joeck of the Lawrence Livermore National Laboratory for a panel exploring the precarious nuclear environment in Asia. Carnegie’s George Perkovich moderated. 

• Short Fuse: Joeck and Perkovich emphasized that despite the appearance of improved relations, the possibility of war in South Asia remains very real. Joeck argued that though both sides would prefer to avoid war, several scenarios could drive them toward open hostilities without careful planning and third party intervention. 


• New Technology, New Models: Joeck suggested that Pakistan’s development of theater nuclear weapons, or tactical nuclear weapons, has changed the strategic landscape for India. Rehman pointed out that both countries are moving toward naval deployment of nuclear technology and weaponry. In response, the panelists observed that new models of deterrence would be necessary to analyze the conflict between India and Pakistan, and that each country will need to update its nuclear doctrines to reflect these new realities. 


• Chain Reaction: Several panelists pointed out that the major threat of escalation at the moment lies in the possibility of a conventional strike by India against Pakistan in retaliation for a sub-conventional attack originating within Pakistan, like the Mumbai attack in 2008. Such a move might be considered outright aggression by the Pakistanis, triggering a nuclear response. Joeck proposed that authorities in each country need to develop signaling mechanisms to demonstrate restraint should tensions flare.


• Threat Triangles: Perkovich pointed out the potential for the arms race to intensify based on two overlapping triangles of competition in the region. In the first, Pakistan is seeking to compete with India, who in turn is seeking to compete with China. China, however, forms part of another triangle in competition with its rivals Russia and the United States. Perkovich warned that these formations might inadvertently incentivize the less powerful members to seek more nuclear assets than they otherwise would.  

The conference concluded with a round-up of the very different trajectories followed by Afghanistan, Pakistan, and Bangladesh. Carnegie’s Sarah Chayes joined Georgetown’s Christine Fair and Maneeza Hossain of the Hudson Institute for the conversation, in which each panelist discussed the governance challenges facing these countries. Frederic Grare, director of Carnegie’s South Asia Program, moderated.

Afghanistan

• Nation Building? Chayes said that as the United States moves toward withdrawal in 2014, its efforts at state building have failed. Instead, Chayes argued that what has taken root in Kabul is a sophisticated, vertically integrated criminal syndicate.


• War in Peace: Discussing the prospects for Afghan society after the withdrawal, Chayes theorized that the criminal infrastructure may lend itself to a kind of stability after U.S. troops are gone, but that the resulting society would be anything but peaceful.

Pakistan

• Autocracy with Friends: Fair emphasized that in Pakistan, the army has never been able to rule alone, and has always needed political accomplices to stabilize its rule. 


• Unlikely Alliances: Despite the role that the Supreme Court played in ousting President-General Musharraf, Fair argued that the court may now be allied with the military in a move calculated to keep the ruling Pakistan People’s Party (PPP) in check. The success of this move has been limited, ironically, by the PPP’s main electoral rival, the Pakistani Muslim League-Nawaz. That party’s leader, Nawaz Sharif, has declined to cooperate with the military’s maneuvers, Fair said.

Bangladesh

• Slow Progress: Hossain said that in recent years slow but visible progress has been made in improving the quality of life in Bangladesh, in particular with respect to infrastructural improvements.


• A Third Way: Caught between two feuding, dynastic parties, Bangladesh’s best hope for improved governance may rest with the country’s dynamic youth, who are exploring the development of a third political party that would give Bangladeshis an alternative option, Hossain said.