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Is India's growth story losing the plot?
Publication Date : 03-09-2012
The authors of The India Story have hit a writer's block.
Barely two years ago, United States President Barack Obama declared that the Asian country was not an emerging one, but a power that had already emerged. Earlier that year, then Australian Foreign Minister Stephen Smith said his government had placed India firmly in the front rank of the country's international partnerships. Recognising its growing potential, they hoped it could play a balancing role against an emerging China.
Since then, slipping growth projections and policy paralysis have made even the most optimistic India watchers a bit sceptical.
Among them is Rory Medcalf, a friend of India and someone who "has tended to emphasise India's ability to change the world in this century". The director of the international security programme at Lowy Institute, Australia's No. 1 think-tank, says it is time for a reality check.
Medcalf, a close follower of Australia-India relations, held a round-table seminar titled Second Thoughts About A Powerful India in Singapore last week.
Before a select audience at the International Institute for Strategic Studies (Asia), he noted there were several reasons for governments, including Australia, to correct their expectations of India.
The courting of India by countries such as the US and Australia as a strategic partner was based on its strong growth rate following economic reforms in the 1990s, its growing role as a provider of public goods and a big source of human capital, and its emergence as a strong trade and investment partner.
Now, India is facing endemic corruption and fading hopes of a second wave of economic liberalisation before the 2014 general election. There is also uncertainty about what the next government will look like, a dissatisfied middle class and limited diplomatic capacity, said Medcalf, who served at the Australian High Commission in New Delhi from 2000 to 2003.
Still, he cautioned governments that there was great danger in "overcorrecting their assessment of a rising India".
"Despite all its flaws and inequalities... unless India stumbles badly and in multiple ways, it will be one of the top three economies in this century and a force to be reckoned with," he said.
He suggests that governments adopt a realistic middle way of engaging India, by not expecting major breakthroughs. He says they should not put all their eggs in the security or military basket; they should engage the private sector in wider geopolitical issues and encourage a greater degree of diplomatic reciprocity.
Medcalf's views, which he said were still a work in progress, come at a time when there is a fierce debate in Australia about whether Canberra must accept China's growing might.
The debate has been fuelled by a new book by Dr Hugh White, formerly a senior Australian defence official. In The China Choice: Why America Should Share Power, he says the US, Australia's long-time ally, must be ready to share power in the region with China, Australia's top trading partner, and Canberra must accept China's larger role.
The book sees India's economy growing larger, and says India along with China will be the world's economic centres. It also says India, Japan, China and the US will form a quartet or a concert of powers that will set the rules for Asia.
Despite such visions, many are frustrated by the slow pace of growth and reform in India.
Indian businessman N.R. Narayana Murthy hit out at inconsistent policies, stalled economic reforms and graft scandals that have hurt investor expectations.
"The world expected a lot from us," the chairman emeritus of software firm Infosys told TV channel ET Now on Saturday, a day after government data showed India's growth at a three-year low of 5.5 per cent. "We have fallen far short of expectations, and it's no longer possible to sell the India story."
There is disappointment among well-wishers of India, Professor Robin Jeffrey of the Institute of South Asian Studies, told The Straits Times. "In so many ways, the country underperforms... In terms of education, infrastructure, effective government and social equality, India has the potential to achieve much more than it does."
For now, he said: "Realistic expectations for the next five to six years would be that India bumps along at a minimum growth rate of 5 per cent, with stop-go economic and social advances and lots of political horse-trading."