IS INDIA THE NEXT SUPERPOWER?

Dr. Muhammad Mohiuddin

Asstt. Professor of International Business
School of Business and Economics
Thompson Rivers University, Kamloops, BC
900 McGill Road, British Columbia, Canada
Presentation Plan

 What is Superpower?
 Pre-conditions to become superpower
 Analyzing India’s :
 Economic rise,
 Military capability,
 Geo-strategic position and,
 India as a Country: Next Superpower?
 Conclusion
Defining Superpower
Superpower means
 Thesuperpowers, and emerging powers, are the most powerful
and wealthy nations
 They have both economic and political power, often globally
 Powerand wealth shift over time and this topic explores these
changes
 Changingpatterns of power have global implications, which
need to be explored and understood
Definition of a - Superpower
A country that has the capacity to project dominating power
and influence anywhere in the world, generally characterized
by strong growth rate, defense power and foreign influence
and so may plausibly attain the status of global hegemon.
 Some Examples :
Who are the superpowers?
 Superpowers are countries, or grouping of
countries, with global influence and power
 They have economic, cultural, military and geo-
political influence
 Economic wealth (see graph) is only one aspect of
superpower status
 One way to group the world's most powerful is:
The geography of power

 In terms of superpower status, size is not

2008/09 data Total military
everything Total Population spending ($
(millions) billions)
 Some ‘demographic superpowers’ have China 1,334 84
relatively little economic power India 1,174 30
EU 500 280
 Military spending (see table) is one form of USA 308 607
Indonesia 231 4
power, as it allows superpowers such as the USA Brazil 192 15
to have global military reach Pakistan 168 4
Bangladesh 162 1
 The USA is a highly influential power in Nigeria 154 1
Russia 141 59
economic, military, geopolitical and cultural Japan 127 46
terms Mexico 107 4
Gulf States 40 40
 Only the EU comes close to the influence of the
USA, but the EU is a federation of 27 nation
states who do not always agree Use a data website such as www.wri.org to
experiment with ranking power and status
using different data types
Changing patterns of power
 Superpowers shift over time; the Uni-polar world of the British Empire
gave way to the Bi-polar cold war world
 In 1990, as the USSR collapsed, a new USA dominated Uni-polar world was
ushered in; the EU has grown to be increasingly powerful also
 Many people think the future will be a more complex, fragmented and
regional multi-polar world
 It is important to recognise that power can decline as well as grow
The role of Superpowers
 In the past, superpowers such as the British Empire and other Imperial
powers maintained direct control over territories
 This era of colonialism ended in the period 1945-1980 when colonies
gained independence
 A characteristic of a superpower is the ability to take control, through
war, of troublesome regions believed to threaten superpower security
 Whilst rare, superpowers still take direct military control over territory:

Invasion of Afghanistan 1980, USSR

Invasion of Panama 1989, USA

First Gulf War (Kuwait, Iraq) 1990, USA, UK, Egypt , Saudi Arabia and others

Bombing of Bosnia 1995, NATO

War in Afghanistan 2001, NATO led coalition

Economic Rise of India
 BASIC FACTS OF INDIA
 5,000 years old ancient civilization.
 325 language spoken- 1,652 dialects.
 22 regionally official language.
 29 states, 7 union territories.
 3,287,590 km2 area- 7th largest.

 Parliamentary form of Government.

 Sovereign, socialist, secular, democratic Republic.
 Worlds largest democracy.
 3rd largest economy in terms of GDP(PPP) and 7th largest in terms of GDP(Nominal) in
2016.
 In 2016 India’s GDP growth rate is 7.5%, currently the fastest growing big economy.

 World-class recognition in IT, Bio-technology and Space.

 2nd largest English speaking nation in world.
 3rd largest standing army, over 1.5 million strong.
 2nd largest pool of scientists and engineers in the World.
India Economic Drivers
 Reform of the Indian labor market
 Reform of the tax system
 Young, skilled and low cost labor force with a high level of English
fluency
 Investment in Infrastructure & Logistics
 Strong government efforts to allow India to compete globally:
 Proactive FDI policy
 Well developed banking system
 Liberalized trade policies
 Strong and independent judicial system
 Reform of over regulated economy

 Increasing domestic consumer demands

 E-commerce booming industry
 Make in India initiative
To promote India as the most preferred global manufacturing destination to propel
sustainable growth; facilitate investment, foster Innovation, enhance skill
development, protect Intellectual property and build best-in-class manufacturing
infrastructure by
Making India the easiest and simplest place to do business

Eliminating paperwork, processes, procedures, rules & acts

Using technology to leapfrog

Converging & integrating Government departments

Facilitating investment

Fostering Innovation

Enhancing skill development

Protecting Intellectual property

Building best-in-class manufacturing infrastructure.

 Make In India
National Manufacturing Policy (NMP):
NMP Objectives:
• Promote investments in the
manufacturing sector
• Make India a hub for both domestic and
international markets
• Increase the share of manufacturing in
GDP to 25% by 2022
• To enhance global competitiveness of
India’s manufacturing sector
• NMP proposes setting up of National
Investment and Manufacturing Zones
(NIMZs) which are located in areas with
contiguous land of 5,000 hectares.
• NIMZs would be a combination of
production units, public utilities, logistics,
environmental protection mechanism,
residential areas and administrative
services.
 MAKE IN INDIA – TURNING VISION INTO REALITY

An initiative designed to facilitate investment, foster

innovation, protect intellectual property, and build
best-in-class manufacturing infrastructure Aimed at
creating 100 million jobs over the next decade
and bringing manufacturing up to 25% of Indian
GDP
MAKE IN INDIA- ACHIEVEMENTS PAST 1 YEAR

48%
The Increase In Year-on-year Growth In Foreign Direct
Investment Inflows Recorded For The Period October
2014 To April 2015 – PIB, India, 2015

1 India's Position in the Rating of The World's Fastest Growing

Economies – IMF report, April 2015

1 India's Rank Amongst The World's Topmost Investment

Destinations, From 110 Countries polled – Baseline profitability Index,
2015

1 India's Position Amongst 100 Countries On The Growth,

Innovation And Leadership Index – Frost & Sullivan, 2015

3 India's Position Amongst World’s Best Prospective Investment

Destinations – UNCTAD report, 2015

20 The Number Of Government Services That Can Be Availed Of By

An Investor At A Single Window Online Portal
MAKE IN INDIA – KEY IMPACT – GROWTH IN FDI

As per the FDI Markets, a Top 5 destinations —

Financial Times, London data H1 2015
service -India has surpassed Country Capex ($bn)*
China and the US to take the India 31
pole position in attracting China 28
largest FDI in the first half of US 27
2015 UK 16
Mexico 14
Source: fDi Markets.

India is in pole position to pass both China and the

US in the FDI league tables this year
MAKE IN INDIA – KEY IMPACT – IMPROVING COMPETITIVENESS

India has jumped 16

places in the World
Economic Forum’s Global
Competitiveness Report
2015-16 - a result of the
positive way in which the
current government is
viewed by investors.

The rankings show India

ranked 55 out of 140
countries - an improvement
over last year’s 71 out of
144
INDIA AT THE HEART OF FRUGAL ENGINEERING
Low cost but not low tech!

Renault KWID will do much better than any other car because it has
Indian Genes – Carlos Ghosn, chairman & ceo Renault

General electric’s Mac 400 electro cardio graph (ECG) Machine

{1500$ instead of 10000$ for its predecessor. Cost of ECG just 1$}

Heart surgery costs between 2000$ & 5000& as compared to 20000-100000$ in US

Jaipur foot for US $45 and jaipur knee for US $20 - 50 top inventions
of the world – Time magazine

Mangalyaan – Mars orbiter mission US 73 Million – 1/10th the cost of any previous Mars
mission.
India - an innovation lab for companies combining technology, design, innovation
INDIA ON GROWTH PATH SUPPORTED BY KEY
REFORMS AND HIGHER INVESTMENTS
GDP growth at factor cost ( per cent) 14 GDP and components – growth ( per cent)
9.7 12
9.2 9.3
8.4 10

6.8 8
6.7 6.4
6
4.5 4.7 4
2
0
-2

GDP at factor cost Agriculture, forestry & fishing

Industry Services

According to the World Bank, Indian economy is estimated
to expand 6.4 per cent during FY15
Higher investment in the infrastructure sector, key reforms
in taxation, coal mining auctions, among others would boost
the economy
Current decrease in crude prices would support narrow
deficits
The government plans to spend USD1 trillion on
infrastructure during FY12–17
Growth in the Indian economy is mainly supported by
growth in the service and industry sectors
The government would introduce Goods and Services Tax
(GST), which would create substantial savings for
companies on logistics. This would positively affect on
industrial production
Major contributors were the finance and real estate sectors,
which witnessed double-digit growth in the last 7–8 years

Source: Monthly Economic Report, Ministry of Finance, Aranca Research; PE: preliminary estimates ;1R: First Revision; AE: Advanced Estimates
 RISING INVESTMENTS IN INFRASTRUCTURE AND
DEVELOPMENT PROJECTS
 Outlay of USD3.8 billion is planned for highways for the current year

Road and  Infrastructure development worth USD19 billion is planned during 2012–17
Highways  Completed 100 public private partnership projects (PPPs) and 165 more PPPs are under construction
 Investment of USD31 billion in national highways is expected in the next five years

 Indian Railways plans to award projects worth USD1 trillion through the PPP model
 Budget 2015 lays emphasis on diamond quadrilateral network of high-speed rails to connect major metro cities and business
Railways
centres
 Projects worth USD40 billion have been approved for establishing rail connectivity between major ports

 Investment worth USD1 trillion is planned for the infrastructure sector during FY2012–17
 Investment worth USD650 billion is estimated in the urban infrastructure over the next 20 years
Construction
 The government is under process to launch urban development mission to develop 500 cities with a population of more than
100,000

Thermal
Power and  The government is targeting a capacity addition of 88.5 GW by 2017 and 86.4 GW during 2017–22 in the thermal power sector
Renewable  The government aims to have 20,000 MW of solar power by 2022
Energy

Source: Make in India, Aranca Research

INDIA – TO LEAD THE GLOBAL GROWTH WAGON

Improving Business sentiments Pace of reforms

One stop online portal for
business clearances
Reduction in repo rate by 25
bps to boost economic
activities
Increasing investment in start-
ups shows the confidence in
economy
9 GDP growth rate( per cent) Deregulating diesel prices
Ordinance on Insurance
8
Ordinances on mines
7 Make in India campaign
6 Labor reforms
Increasing FDI caps
5
4

3
`
2
Macro-economic factors Increased Investment
Inflation dropping below the 1 USD1 trillion investment in infra
RBI’s target of 6 per cent 0 USD1 trillion worth of projects to
before scheduled be awarded by the Indian
-1
As per World Bank, GDP Railway
2013 2014 2015 2016
growth rate of India is Investment worth USD101 billion
estimated to out pace China India China United States pledged by US, China and
IIP growth of 3.8 per cent Japan
Eurozone Japan Brazil
beats the estimate in
November’14

Source: Economic Times, Aranca Research

POVERTY AND MIDDLE CLASS
Demographic dividend 2010 2050
Top 10 Top 10
economies by economies by
 Many emerging powers face a future demographic
dividend
GDP GDP
USA China
 They have youthful populations now – sometimes even
troublesome ones (Egypt) China India
Japan USA
 ...but their fertility rates are falling
Germany Indonesia
 Soon, they will have a window of opportunity with a large France Nigeria
workforce, but without either a large young or old population
UK Brazil
 By 2050, big winners will enjoy combined population growth
+ economic growth
Italy Russia
Brazil Japan
 Compare the former economic powers where demographic
growth rate is slowing India Philippines
Canada UK
Citigroup 3G study, 2011
Philippines +1.9%
Germany -0.2% India +1.3%
Japan -0.01% Indonesia +1%
Russia -0.01% Nigeria + 2.5%
(annual pop growth %)
CITI FINANCIAL SERVICE AND INDIA’S GROWTH
TRAJECTORY (2001)

Rank 2050 Country 2050 2040 2030

1 China 70,710 45,022 25,610

2 United States 38,514 29,823 22,817

3 India 37,668 16,510 6,683

25
 IMPORTANT TAKE-AWAY FROM ECONOMIC RISE OF INDIA
• Huge untapped market potential: Rapid urbanization fostering growth; Growing
domestic consumer base; Urban population will double from 2001 figure of 290 million
to 590 million by 2030 (McKinsey).
• Regulatory Framework: Visionary strategic direction; Strong economic reforms,
Progressive simplification and rationalization of Direct and Indirect Tax structures.
• Political Stability: Robust banking and financial institutions; Investor friendly policies &
incentive based schemes;
• Strength Sectors: Pharmaceuticals; Food Processing; Textiles; Automobiles and Auto
Components; Industrial Equipment & Machinery; Infrastructure Development.
• Growth Sectors: IT & Electronics; Chemicals & Petrochemicals; Aerospace & Defence;
Construction Equipment, Materials & Technology.
India’s infrastructure needs

 By 2030
 700-900 million square meters of commercial and
residential space (a new Chicago every year)
 2.5 billion square meters of roads
 7,400 km of metros and subways
 $1.2 trillions investment needed

28
Diversity in India
 What makes India diverse…

Diwali
1.25 billion people

Hundreds of festivals
All the world religions co-exist together

Holi
 Indian Languages…
Sanskrit (the parent
language; 梵文)

Hindi Malaylam
Urdu Gujrati
Bengali Kashmiri
Punjabi Marathi
Tamil Manipuri
Telugu Assamese
印地语
Kannada English

…and 140+ more with

>500 dialects
孟加拉语
Religions in India…
INDIAN POLITICS
India’s Political Climate

 Secularism and Democracy can be traced through the ancient

cultural times.
 Parliamentary Democracy ( British style): Prime Minister MODI
is the Executive Head
 Federal Republic: States have less autonomy
 Politically Stable ; Peaceful transition of power
 Corruption: Hot issue

34
Challenges facing India
1. High level of subsidy (3% of GDP).
2. “TAX System”
3. Lack of proper Infrastructure
4. Persistent High inflation( double digit)
3. Rampant corruption
4. High levels of (female) illiteracy
5. Poverty: 400 millions ($0.64/day)
6. Inadequate Public Health System

35
 Evaluating India
Strengths Weaknesses
The least developed
• Education • Infrastructure overall of the BRICs,
• English language • Energy and water supply with huge rural
• Youthful population • Poverty poverty, but also
• IT and Software • institutional weakness huge potential

Opportunities Threats
• Huge domestic market • Tensions within southern Asian
• Vast growth potential region e.g. Pakistan
• Urbanisation • Resource / food crises
• Red tape/ bureaucracy
Geo-Strategic Position
India and geopolitics

Does India matter?

 Yes: It is one of the largest and fastest growing economies;
member of G-20
 Yes: because it is the largest democracy in the world and a
peaceful country
 Yes: To maintain balance of power in Asia: to contain China

38
Different ranking systems
Comprehensive National Power (CNP), Chinese Government

Score 2007 Score 2011

USA 91 USA 100
UK 65 China 75
Russia 63 Russia 60
France 62 France 35
Germany 62 Germany 35
China 59 Japan 30
Japan 58 UK 25
Canada 57 India 25
S Korea 53 Brazil 20
India 50 Turkey 20

 Two different ranking systems

 Both attempt to quantify hard (military) & soft (economic, cultural) power
 The CNP has changed hugely since 2007
 European countries have lost out; China, India and Brazil have moved up
 3 countries (USA, China, Russia) have pulled away from the rest
Military capability
Current boundaries
Pakistan claim
China’s claim
India Claim
India: To be Superpower?
 India’s capacity to deploy a powerful military as well as to
attract admirers internationally will depend fundamentally on:
 Ability to durably achieve multidimensional success: sustaining
high levels of economic growth, and wider regional integration.
 Acquire effective military capabilities for power projection
coupled with wise policies for their use.
 Building effective state capacity, and
 Strengthening its democratic dispensation.
 REALIZING UNFULFILLED POTENTIALS

Several Handicapped:

 An overly regulated economy

 Inadequate state capacity
 Burdensome state-society relations, and
 Limited rationalization across state and society writ
large
From Balancing to Leading Power?

 India’s non-alignment aimed mainly at preventing US-Soviet

hostility from undermining its security, autonomy, and well-
being at a time when the country was still relatively infirm.
 “Self-reliance” contributed to relative economic decline.
 “Swing State”. (Not an independent pole but can strengthen the
group. East Asia/ SE Asia .
 Shared democratic values
 Limited success thus Far: Economic growth +7%
From Balancing to Leading Power?

 Confronting weaknesses in National Performance

 Post-independence policy leads to lost opportunity to build wide
efficient markets that would encourage innovation, competitiveness
and growth.
 Speedy adjudication of disputes
 Absence of states in people’s life
 Competitive politics: Man vs. nature.
 Colonial history, NOT Local initiatives, Values etc.
 National rationality and Power accumulation
WHAT INDIA MUST DO TO BECOME A LEADING POWER

 Complete the structural reforms necessary to create

efficient product and factor markets

 Create an effective state to leverage India’s capacity to

build national power

 Foster a strong relationship with the United States

 Indian Soft power.
Conclusion & Questions