March 05, 2018

India Reaches the Top Spot for Economic Growth Again

Source: Aman Thakkar, Newsletter

India Reaches the Top Spot for Economic Growth Again

GDP figures released this past week show that India grew at an annual rate of 7.2% in the last quarter of 2017, narrowly beating China’s 6.8% growth to regain its spot as the fastest growing economy in the world. The news arguably reverses the recent slowdown in Indian economic growth, which analysts argue occurred as a result of the Goods and Services tax reforms and the demonetization decision. The uptick in growth also comes at an opportune time for Prime Minister Modi, who will likely tout the growth as campaigning for the 2019 General Election heats up in coming months.

Bigger Picture: Rising economic growth is something all governments tout as an achievement, as they should. But for India, it is important to look beyond the numbers to see if economic growth is translating into development for India’s poorest. One in five Indians continues to live in the most abject, gut-wrenching poverty anyone could imagine, and the jury is still out whether rapid economic growth (and any government measures to generate such growth) are actually enhancing the lives of these poorest individuals.

A Saffron Wave in India’s Northeast

This weekend saw results roll in for state assembly elections from three Northeastern states in India: Tripura, Nagaland, and Meghalaya. The results provided nothing but good news for the BJP, which has historically never been competitive in this region. Let’s take a look at the news from each state at a time.

Tripura: The BJP won a huge victory in this state, earning a decisive majority and dislodging the Community Party of India - Marxist (CPI-M), which had been power in the state for 25 years under the leadership of Chief Minister Manik Sarkar, who wasfamously known as the “poorest Chief Minister in India” and had a Mr. Clean reputation. Hindustan Times journalist Prashant Jha alsopointed out how far the BJP has come in this state, noting the contrast between the majority and its results in “the previous state elections in 2013...[where] the BJP secured just 1.5% of the vote.”

Nagaland: The BJP “emerged as both the king and the kingmaker” in Nagaland, where no single party won a majority. In addition to its own impressive performance in the state, the BJP is now beingcourted by, both, its local ally, the Nationalist Democratic Progressive Party (NDPP), and the local opposition, the Naga People’s Front (NPF). Whoever forms the government in the state, the BJP is clearly going to be the winner.

Meghalaya: While on the surface, the BJP may not have looked like the winner in the state, it was, indeed, victorious in Meghalaya as well. While the Indian National Congress won the most number of seats, it did not win a majority, and the BJP beat the Congress to announce an alliance with local parties on Sunday.Book Recommendation: I have been reading “How the BJP Wins: Inside India’s Greatest Election Machine” byPrashant Jha, who was recently named Political Editor/Chief of Bureau. The book is incredibly insightful, detailing into the BJP’s political machinery, strategy, and operations, and I’d highly recommend the book to those interested in learning more in light of these election results.

After India Trip, Justin Trudeau’s Nightmare Rages On

Despite leaving India on Feb. 25th, Canadian Prime Minister Justin Trudeau’s gaffes on his trip continued to haunt him. Last week’s Indialoguecovered how Canadian diplomats had to rush to revoke a party invitation for Jaspal Atwal, a Canada-based Sikh separatist who convicted of attempting to kill an Indian Cabinet minister. However, after Trudeau returned to Canada last week, a Canadian official, later revealed to be Canada’s national security advisor, Daniel Jean, toldCanadian sources in a background briefing that certain factions within the Indian government were behind the move to invite Atwal to the Canadian high commissioner's reception in Delhi.Jaspal Atwal with then-Liberal Leader Justin Trudeau at a South Asian Media Roundtable press conference  in May 2015.

When asked about the statement by the opposition in the Canadian Parliament, Trudeau said "Our professional, non-partisan public service does high quality work and when one of our top diplomats and security officials says something to Canadians, it's because they know it to be true.” India, meanwhile, called the allegation “baseless and unacceptable.” Atwal, the man at the center of all this, further complicated matters by sayinghe was friend with Trudeau and “withdrew himself to avoid embarrassing the PM.” Trudeau has denied that they are friends. He also went on to contradict Trudeau, saying the Government of India had “nothing to do with anything” in his latest visit to India. Well, with friends like these...

Why This Matters?: This is truly a ridiculous scandal, but it does highlight important concerns for the bilateral ties. The Khalistan movement, which calls for a separate Sikh state to be carved out of India, is a significant concern for the Indian government. A Canadian administration that is seen to be in support of such a movement would lead to worsening ties between the two countries, both of whom have expressed a desire to expand their trade relationship currently totalling $8 billion, as well as make progress on a long-pending free trade agreement that has been stalled.

Broken Procurement Process is Broken...

Reports emerged last week about a presentation made by Minister of State for Defence, Subhash Bhamre, to the Prime Minister’s Office, where he admits that India’s defence procurement process is broken and stymied by huge delays. Bhamre reportedly said that, despite FDI liberalization and the launch of the Make in India initiative, India’s acquisition process continues to “languish at the altar of procedural delays and has failed to demonstrate its true potential.” In particular, the report pointed out how procedural delays led toan average processing time of 120 weeks to clear files after a tender or RFP (request for proposal) is finalized, with the worst cases taking almost eight years before progress is made. The report also pointed out the need for greater synergy between the Army, Navy, Air Force and Coast Guard, as well as the need to break out of a siloed nature of working within the Ministry of Defence.

Union Minister of State for Defence Subhash Bhamre

Insight: Prime Minister Modi has laid outa goal to modernize India’s military while also boosting domestic military production. Over and above the fact that sometimes these two goals come into conflict, a broken procurement process hurts both ambitions at a time when progress is becoming increasingly critical for India.

...But It’s Not All Bad News on Defence

Despite the report from Minister of State Subhash Bhamre, there was some good news this week. India’s indigenous Light Combat Aircraft, Tejas, successfully conducted a hot refueling trial. Hot refueling, according to Hindustan Aeronautics Limited (HAL), the manufacturer of the aircraft, “is a process by which a fighter aircraft is refueled (in between sorties) while its engine is in operation... This capability is highly desired in combat situation which basically puts aside the need for the pilot to park the aircraft, power down and exit the cockpit for refueling to begin.” The successful trial also puts the Tejas closer to operational clearance after a delay by multiple years.

A Brief Self-Promotional Interlude

Last week, The Diplomat published an article I wrote. In it, I analyze President Macron’s trip to China this past year, and make the case for an upcoming balancing act when he heads to India later this month. I also consider whether he will speak for the EU as he attempts such a balancing act. Read the article here.

Stories you might enjoy:

As Vietnamese President Tran Dai Quang visited India late last week, Abhijit Singh writes “India must quickly come to terms with the fact that Vietnam’s concerns on the looming security crisis in the South China Sea will lead Hanoi to search for new partners. India has no option but to fortify its relationship with this key Southeast Asia state.”

Samir Saran notes that “The competition over values, norms, ethics and influence, both within Asia and around the world, will continue to exacerbate tensions between India and China.”

Arun Sukumar analyzes the consequences of the recent announcement that “the soon-to-be launched payments system from WhatsApp would integrate the Unified Payments Interface (UPI) developed by the National Payments Corporation of India (NPCI).”

Catherine Putz interviews Alyssa Ayres, who says “Indian leaders want to see their country counted as one among the world’s powers in a multipolar world. This ambition in fact is not new, as I chart in the book. But India is now closer to attaining that ambition than at any time in the past.”

Harsh V. Pant argues “India’s talk of an “Act East” policy or an Indian Ocean presence sound hollow when its ability to shape outcomes in its own neighbourhood is so palpably limited.”

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