This discussion document can be cited as “Anirudh Kanisetti, Anupam Manur et al, India’s Strategies for a New World Order, Takshashila Discussion Document, 2018-01”.

INDIA’S STRATEGIES FOR A NEW WORLD ORDER

A portfolio of initiatives for India to prosper in the likely scenarios for the world over the next 25 years

A Takshashila Discussion DocumentJanuary, 2018-01

Prepared by:Anirudh KanisettiAnupam Manur

Pranay KotasthaneAkshay Alladi

Executive Summary

India’s portfolio of options for the next 25 years

2

What should India be doing?

An agenda of what will hold India in good stead for the next quarter century, regardless of how the world shapes up.

Domestic Economic Reforms

1. Liberalise major sectors, implement labour and factor market reforms. Be an attractive destination for FDI.

2. Focus on the employment elasticity of growth in addition to economic growth. Collaborate with foreign universities for skilling the workforce.

3. Build a social security net to deal with inequality, unemployment, skill obsolescence, and an aging population.

Reforms for India’s engagement with the world at large

4. Three critical military shifts needed: from land to sea, from the physical to the virtual (cyberwarfare); and from manpower to firepower.

5. Champion the cause of globalisation as movement of labour, goods, and services is critical for India’s growth.

6. Retain flexibility in terms of alignment: be open to larger partnerships and global projects, as well as unilateral action.

7. Partner with other middle powers, especially those concerned by G2 dominance.

We imagine 20 New World Scenarios..

.. At the intersection of 5 geopolitical trends and 4 geoeconomic trends

3Geopolitical Trends

Geo

econ

omic

Tre

nds

The Great Disruption

The New American Universe

US-China LLPPragmatic

Competition

New Technology

Race

Digital Westphalia

New Economic Boom

Washington Consensus 2.0

Rush HourClinton-Jiang

ReduxClash of

ProsperitiesThe Delhi

Dream

Secular Stagnation

Obama Reprise

Slow & SteadyStaying on the

RailsThe Great

WallsThe Big Snail

Race

Global Recession

1929 Again Partners in

CrimeSpiralling

DownwardsRace to the

BottomPowerful in

Poverty

US as the sole superpower Cooperative G2 Coopetitive G2 New Cold War

Multipolar world

These 20 New World Scenarios were constructed from 5 Geopolitical Trends 4 Geoeconomic Trends

4

US as the Sole SuperpowerUS returns to its late 20th century role as sole global superpower

The Great DisruptionGlobal economy radically changed by technological advances

Cooperative G2US and China amicably manage the global order

New Economic BoomWorld enters a period of sustained, high growth

Coopetition in G2US and China cooperate and compete selectively

Secular StagnationWorld enters a period of low growth

New Cold WarUS and China openly confront each other, with no immediate rivals

Global RecessionWorld enters a period of negative growth

Multipolar WorldRelative decline of superpowers, a number of regional competing powers

* We foresee that China is unlikely to become the sole superpower in the next 25 years.

Guide to the Reader

1. “The New American Universe”

2. “Rush Hour”

3. “Staying on the Rails”

4. “Race to the Bottom”

5. “Digital Westphalia”

6. India’s Portfolio of Alternatives

7. Appendix

5

A curated list of interesting and most likely scenarios is presented in the next 5 slides.

For each scenario, we analyse:1. The macroeconomic and macro political

trends in that scenario2. The exogenous impact on India3. Possible set of options for India to manage

the scenario.

This is used to construct India’s portfolio of options for the next 25 years.

The Appendix explains the remaining 15 scenarios.

Index

“The New American Universe”What might the world look like? The US dominates the world militarily, and American tech conglomerates dominate the economy. US-aligned states get favourable tech transfers. A global regulatory body for new tech, controlled by the US, is formed. Though clean energy becomes less of a priority, there is massive investment in climate change management technology such as industrial greenhouse cultivation. Globally, conventional conflict becomes insignificant but asymmetric warfare is amplified, global, and much more efficient, primarily directed against perceived American imperialism.

How will this affect India? The Indian economy is radically reshaped. Access to knowledge and markets become vital but rising inequality becomes a major issue - some sectors of Indian industry are well-placed in terms of access to knowledge, while others face a net job-loss situation. There is a backlash against “the West”, and globalised elites. Politically, US is unsympathetic at worst and unreliable at best with regards to India’s concerns.

How can India maximise its national interest? Tie up with other emerging or middle powers, and trade access to markets for membership in the club that manages the tech globally. A lot of sectors should be liberalised to receiving FDI to facilitate this process - including defence. India should invest heavily in asymmetric weaponry to take advantage of the disruption. Factor market reforms needed to ensure that companies can be flexible enough to deal with disruption - stalling the shift to automation can keep unemployment at bay. A human capital approach to social security must also be developed to address inequality concerns and the ageing population. Invest heavily in R&D, set-up world-class science universities, and collaborate with the best foreign universities.

6

Geopolitics: US as the Sole

Superpower➔ US is unchallenged, committed to an

external balancing strategy

Geoeconomics:

The Great Disruption➔ High but uneven global growth; low

inflation➔ High automation➔ High levels of trade ➔ Rare earth metals become

sought-after resources➔ Low to moderate labour mobility,

high capital and knowledge flows

“Rush Hour”What might the world look like? The international order is maintained by the G2 and their dominance of global institutions. Spheres of influence dominated by the economic system of each superpower emerge. This leads to a decline in the importance of the G20. Relative economic prosperity and the absence of unilateral action leads to reduced conflict. On global issues such as climate change, there is some action, tempered by American and Chinese interests.

How will this affect India? With an economic boom behind it, the middle class is large, aspirational, and assertive. Concerns about inequality and India’s position on the global stage are present, especially due to the sidelining of the G20. Since both the US and China want access to India and other developing markets, there is an opportunity for India to lead a market-sharing bloc of non-G2 States. Export-driven growth becomes a strong possibility. The US is unlikely to develop a closer strategic partnership with India, and China continues its strategy of containment. This means that India must aggressively advance its interests or risk being sidelined.

How can India maximise its national interest? Foreign policy must be trade-oriented, backed up by a larger diplomatic corps, an expanded navy, and more bilateral ties. A sovereign wealth fund should be created and immigration policies negotiated with SE Asia and East African countries. Islands in the Indian Ocean should also be brought decisively into India’s sphere of influence, with a larger naval presence in the Andamans and effective control of the sea lanes to offset the power of the G2. A defence partnership with other middle powers such as Iran & Russia should be considered. Domestically, social reforms, such as investment in healthcare, and education, and institutional preparedness to take advantage of FDI and FII flows, are necessary.

7

Geopolitics: Cooperative G2

➔ US and China carve out an amicable partnership to manage the world in their interest

Geoeconomics:

New Economic Boom➔ High global growth, low to moderate

levels of inflation➔ Moderate automation➔ High levels of trade➔ Slight demand shift to

unconventional resources➔ Relatively high levels of knowledge,

capital and labour mobility

“Staying on the Rails”What might the world look like? The international order is maintained by G2 consultation, but there is underlying tension on many issues. Both superpowers dominate weak global institutions. There is intense competition between smaller powers for favourable trade/investment deals, with a limited degree of protectionism. There are trade wars between the G2 and the blocs that they dominate. Climate action stalls. Conventional conflict is unaffordable, but asymmetric warfare is present to a moderate degree.

How will this affect India? Redistributive demands dominate Indian discourse. There is increasing unemployment. Low global labour mobility leads to resentment in the middle class. There is considerable internal and external pressure to join either G2-led economic bloc, wherein India’s large market would provide opportunities for FDI and allow for favourable trade agreements. Initially, an outright economic competition with other blocs is also likely.

How can India maximise its national interest? The key issue for the Indian government would be creating new jobs in the economy. India must be receptive to trade and FDI, using its market power to get the best possible deals. Good relations should be maintained with both blocs, and India should become part of the BRI, TPP or similar treaties to ensure a steady inflow of capital. It would have to slash taxes, liberalise product and factor markets and promote industry, especially to soak up talent that is unable to migrate abroad. A general push for domestic consumption may help restart growth - which would make it possible to act as a swing power on some issues. India should deepen strategic cooperation with the US while maintaining a near neutral outlook towards China. A social security net should be developed. 8

Geopolitics: Coopetitive G2

➔ US and China cooperate on some issues but fiercely compete in some others

Geoeconomics:Secular Stagnation

➔ Low global growth, deflation or low inflation; low automation

➔ Low levels of trade, somewhat higher within blocs

➔ No major shift in patterns of resource demand

➔ Low labour mobility, capital flows from developed to developing economies.

“Race to the Bottom”What might the world look like? The UN becomes irrelevant and the world separates into alliances dominated by either power. There is ruthless competition between the superpowers to expand their blocs. High global unemployment leads to radicalisation and more non-state actors. Excessive tech disruption is seen as a threat to stability, but military and software research continues. Conventional conflict is mostly low-intensity, over resources, but asymmetric warfare is present to a very high degree.

How will this affect India? High inequality and unemployment lead to demands for social justice, possibly resulting in authoritarianism. Populism and security are the dominant themes of discourse. The security emphasis, however, could lead to marginalisation with internal actors demanding superpower intervention. Simultaneously, India comes under significant pressure from both superpowers to join their blocs or provide market access. If handled delicately, there could be major payoffs by playing off the superpowers.

How can India maximise its national interest? This scenario severely restricts India’s options and a very non-confrontational attitude must be adopted to prevent hostility from either superpower. India cannot lose cheap Chinese exports, nor can it lose American investment. India must intelligently play them off to ensure security as well as investment. Kickstarting domestic production through lowered taxes and market reforms should be the first priority. The indigenous defence industry must be strengthened. Unconventional warfare, such as a nuclear umbrella and cyber warfare capabilities, are a good way to meet security objectives. Allow FDI strategically - align with the US in the defence sphere, and with China in the economic sphere. A human capital approach to social security must also be developed to address inequality concerns. 9

Geopolitics: New Cold War

➔ Confrontation between US and China, without a full-scale war

Geoeconomics:

Global Recession➔ Negative global growth, deflation➔ Low automation➔ Medium levels of trade within blocs,

Very low levels of trade outside them➔ No major shift in patterns of resource

demand➔ Very low labour mobility. Capital

flows only into high performing developing countries.

“Digital Westphalia”What might the world look like? A G10-type scenario emerges with regional “poles”. Disruption leads to the emergence of two global groupings - those with the technology, and those without. There is intense competition over knowledge resources. To protect local economies, free trade zones of countries with technology emerge with high levels of internal trade, but much less externally. Conventional conflict is localised but asymmetric warfare is amplified, global, and much more efficient.

How will this affect India? The Indian economy is radically reshaped. While some sectors of Indian industry are well-placed in terms of access to knowledge, careful management of disruption is necessary to ensure social cohesion. Access to knowledge and markets is vital electorally, but rising inequality is also a major issue. There is a backlash against the most disruptive countries and globalised elites, unless the benefits of disruption are felt. This is also a major concern for countries which rely on conventional resources (such as Russia and Saudi Arabia).

How can India maximise its national interest? The goal should be to bolster the influence of the Indian “pole”. Foreign aid and investments, resource extraction consortiums, sovereign wealth funds, and promoting immigration to and from India can expand our footprint. We should join or form a technology-sharing and market-access bloc, or a global technology management regime. Invest heavily in R&D, set-up world-class science universities, and collaborate with the best foreign universities. In a highly disrupted multipolar world, India should also consider building expeditionary capability in addition to asymmetric warfare capability for security. Domestically, a strong social security net must be developed to address inequality concerns and the ageing population.

Geopolitics: Multipolar World

➔ Relative decline of superpowers, a number of regional competing powers

Geoeconomics:

The Great Disruption➔ High but uneven global growth, low

inflation➔ High automation➔ High levels of trade within blocs➔ Resource demand shifts to rare

earths➔ Low to moderate labour mobility,

high capital and knowledge mobility10

Conclusion:India’s portfolio of options

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How can India’s national interest be maximised?

The best responses for India are the ones that appear across the maximum number of scenarios.

Domestic Economic Reforms

1. Liberalise major sectors, implement labour and factor market reforms. Be an attractive destination for FDI.

2. Focus on the employment elasticity of growth in addition to economic growth. Collaborate with foreign universities for skilling the workforce.

3. Build a social security net to deal with inequality, unemployment, and an ageing population. This net should be focused towards building human capital by allowing for retraining.

Reforms for India’s engagement with the world at large

4. Three critical military shifts needed: from land to sea, from the physical to the virtual (cyberwarfare); and from a people-heavy force to a machine-heavy force.

5. Champion the cause of globalisation as movement of labour, goods, and services is critical for India’s growth.

6. Retain flexibility in terms of alignment: side with powers based only on the national interest. Be open to larger partnerships and global projects, as well as unilateral action.

7. Partner with other middle powers, especially those concerned by G2 dominance.

APPENDIX

15 further New World Order Scenarios, organised by geopolitical trends

1.US as the Sole Superpower

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"Washington Consensus 2.0"What might the world look like? A US-dominated UN supervises a capitalist global system, with order maintained by American guarantee and for American interests. Powerful corporations have a major say in global affairs. The source of such power lies in control over resources and knowledge. A continued reliance on conventional fuels results in severe environmental consequences, but there is massive investment in climate change mitigation technologies. There is significantly lower conflict, except when in American interests. This would be primarily conventional conflict, with some actors resorting to asymmetric warfare.

How will this affect India? Development continues to remain the key theme for government policies. The middle class is large, assertive and growing, with an increasingly Westernised/globalised outlook. The US needs access to Indian markets for growth, allowing for chances of regional leadership constrained by US interests. In an American global trading order, though, indigenous industry is at risk. This is an opportunity to collaborate with a weakened China both politically and economically.

How can India maximise its national interest? India should aggressively position for export-led growth to take advantage of Western manufacturing and investment. This calls for significant market reforms (especially in factor markets - land & labor), along with creation of SEZs. China’s reduced importance could allow for the resolution of border disputes and an expanded Indian presence in initiatives such as the RCEP. India could also create an Asian economic bloc to negotiate agreements with US-led blocs. Military spending can be restricted to modernisation and capital acquisition, as the US would guarantee trade security. There is an opportunity to invest heavily in healthcare, education, and skilling to address inequality concerns.

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Geopolitics:

US as the Sole Superpower

Geoeconomics:

New Economic Boom➔ High global growth, low to moderate

levels of inflation➔ Moderate automation➔ High levels of trade➔ Increased pressure on conventional

fuels➔ Relatively high levels of knowledge,

capital and labour mobility

“Obama Reprise”What might the world look like? Order is maintained by US dominance of global institutions. Some degree of global trade liberalisation occurs, and expansionary monetary policies are implemented in the US and EU. Some degree of protectionism and formation of smaller free trade blocs also takes place. Competition is over favourable trade/investment deals. Conventional conflict is nonexistent, and asymmetric warfare is present to a low degree.

How will this affect India? India remains development-oriented, with some redistributive demands. Inequality and unemployment lead to calls for social justice. Expansionary monetary policies abroad provide liquidity, and India’s large market is an opportunity for FDI and allows for favourable trade agreements. There is increased cohesion and trade among members of regional blocs and more treaties to cooperate come into force. The US, however, expects preferential treatment. China is weakened further in this scenario, clearing the way for an entente.

How can India maximise its national interest? India must be receptive to trade and FDI, using its market power to get the best possible deals. Domestic investment and consumption should be stimulated by adopting structural reforms. India should align with the US to magnify its projection of economic strength, as well as being part of regional free trade blocs. American backing should be used to secure peace in the neighbourhood. In the long term, the US would not allow India to become too powerful. This could be offset by entering into an agreement with China, resolving border disputes, embarking on joint projects, or even splitting Southeast Asia into Indian and Chinese economic spheres. 15

Geopolitics:

US as the Sole Superpower

Geoeconomics:

Secular Stagnation➔ Low global growth, deflation or low

inflation; low automation➔ Low levels of trade➔ No major shift in patterns of resource

demand➔ Low labour mobility, capital flows

from developed to developing economies.

“1929 Again”What might the world look like? Order is maintained by US dominance of global institutions, but the world separates into internal free-trade blocs. There is competition over favourable trade/investment deals, which are selectively handed out by the US. Some degree of trade wars occur, as long as the belligerents aren’t US-aligned. Higher unemployment, low migration, and American resource imperialism lead to radicalisation and more non-state actors. Asymmetric warfare is present to a moderate degree.

How will this affect India? High inequality, unemployment, and a lack of global opportunities lead to demands for social justice. Populism and redistribution with a high degree of state involvement are the dominant themes of governance. India’s large market provides opportunities for FDI and allows for favourable trade agreements. However, there is some degree of US-led pressure to maintain austerity in return for investment. Friendly ties with them would allow for continued export of goods, if not labour. China is weakened and vulnerable, creating an opportunity for India and the US.

How can India maximise its national interest? It may be necessary to ally with the US and get into their military-industrial complex, aligning with them on most issues. This would clear the way for forceful resolution of border disputes with China, supporting the independence of Tibet and Xinjiang, and entering into areas formerly under Chinese influence, turning India into the regional hegemon under American dominance. All sectors should be opened for FDI and FII and good macroeconomic fundamentals should be maintained to remain an attractive destination. High domestic consumption-led growth and strong institutions are vital, since global consumption would be low. This could be kickstarted with lowered taxes and regulations. 16

Geopolitics:

US as the Sole Superpower

Geoeconomics:

Global Recession➔ Negative global growth, deflation➔ Low automation➔ Low levels of trade ➔ No major shift in patterns of resource

demand➔ Very low labour mobility. Capital

flows only into high performing developing countries.

2.Cooperative G2

17

“US-China LLP”What might the world look like? The global order is maintained by G2 consultations and tech dominance. Concerns over inequality lead to the emergence of strong alliances of third-world countries, as well as Chinese and American blocs. There is a major shift in trade patterns, with a strong possibility of neo-colonialism. Competition is over knowledge resources, monopolised by the G2. Conventional conflict is nonexistent but asymmetric warfare would be used by smaller actors struggling with the effects of disruption and G2 dominance. Climate improves.

How will this affect India? Some sectors of the Indian economy are already well-placed in terms of access to knowledge and FDI inflows, but disruption leads to radical changes in others. More capital-intensive industries cause higher unemployment. This might lead to a backlash electorally. The G2 are interested in India only for its market, and restrict it otherwise.

How can India maximise its national interest? Invest heavily in R&D, set-up world-class science universities, and collaborate with the best foreign universities. India should bank on its existing technological prowess and focus on using it to build competence in new technologies to contain China’s influence. The Indian Ocean bed should be mined for rare earths and expeditionary capacity should be built up to reduce dependence on Chinese rare earth resources. Defence and technology partnerships with other middle powers should be cultivated, especially those whose economies depend on conventional resources. India must be extremely selective in providing market access, especially to the G2, until its technology is competitive. A strong social security net must be developed to address inequality concerns.

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Geopolitics:

Cooperative G2

Geoeconomics:

The Great Disruption➔ High but uneven global growth, low

inflation; high automation➔ High levels of trade, except between

some blocs➔ Resource demand shifts to rare

earths➔ Low to moderate labour mobility,

high capital and knowledge mobility

“Slow & Steady”What might the world look like? Order is maintained by G2 consultation and dominance of institutions. These weak global institutions supervise internal free-trade blocs. The growth slowdown prompts the US, China, and the EU to indulge in a monetary and fiscal stimulus. Competition is over favourable trade/ investment deals. Some countries resort to competitive devaluation and increased trade barriers. Higher unemployment leads to radicalisation and more non-state actors. Conventional conflict is nonexistent, but asymmetric warfare would be present to a moderate degree.

How will this affect India? India is development-oriented with some redistributive demands. Inequality and unemployment lead to calls for social justice. The global monetary and fiscal stimulus provides liquidity and investors look for growing economies to invest in. India’s large market provides opportunities for FDI and allows for favourable trade agreements. However, we face increased cohesion and trade among members of G2-led blocs, and some pressure to join either bloc. In addition, economic competition with China is a risk.

How can India maximise its national interest? India should align politically with the US, and economically with China. G2 guarantees should be used to secure peace and trade in the neighbourhood. India should strategically liberalise some sectors of the economy, and be receptive to trade and FDI, using its market power to get the best possible deals. Strong macroeconomic fundamentals are a must. There should also be a push for domestic consumption and import substitution. India can also focus on building charter cities and creating SEZs to create employment.

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Geopolitics:

Cooperative G2

Geoeconomics:

Secular Stagnation➔ Low global growth, deflation or low

inflation; low automation➔ Low levels of trade➔ No major shift in patterns of resource

demand➔ Low labour mobility, capital flows

from developed to developing economies.

“Partners in Crime”What might the world look like? Order is maintained by G2 consultation. Weak global institutions supervise regional free-trade blocs. The recession prompts the US, China and EU to undertake a monetary and fiscal stimulus. Competition is over favourable trade/investment deals. Many countries resort to competitive devaluation and increased trade barriers. Higher unemployment leads to radicalisation and more non-state actors. Conventional conflict is nonexistent but asymmetric warfare is present to a moderate degree.

How will this affect India? High inequality and unemployment lead to demands for social justice. Populism and redistribution with a high degree of state involvement are major themes for governance. Countries are interested in trading with India, depending on its relationship with the G2. India’s large market provides opportunities for FDI and allows for favourable trade agreements.

How can India maximise its national interest? India should make concessions to ensure investment from the G2. India’s best bet is to be receptive to trade, using its market power to get the best possible deals and possibly investing in strategically vital countries. A larger diplomatic corps may be necessary to cultivate bilateral ties. G2 cooperation is also an excellent opportunity for India’s involvement in global infrastructure projects and in getting FDI. High domestic consumption-led growth and strong institutions are vital. The US relationship should be cultivated, and peace with China maintained. Military expenditure should be curbed in favour of developing economic power.

20

Geopolitics:

Cooperative G2

Geoeconomics:

Global Recession➔ Negative global growth, deflation➔ Low automation➔ Low levels of trade ➔ No major shift in patterns of resource

demand➔ Very low labour mobility. Capital

flows only into high performing developing countries.

3.Coopetitive G2

21

“Pragmatic Competition”What might the world look like? Order is maintained by G2 consultation. Weak global institutions dominated by either superpower supervise blocs organised around access to tech and markets. There is a major shift in trade patterns depending on who has access to the best technology, and competition will be primarily over knowledge resources. Conventional conflict is almost nonexistent, but asymmetric warfare would be amplified, global, and much more efficient.

How will this affect India? Access to knowledge and markets are vital electorally. Rising inequality and unemployment are major threats, and there is a backlash owing to a new degree of globalisation. All countries are interested in friendly ties with India for market access. India is well-placed in terms of access to knowledge but disruption leads to radical changes in India’s economy, which need to be managed.

How can India maximise its national interest? Bank on our existing technological prowess and focus on using it to build competence in new technologies, especially cheap manufacturing to reduce dependence on China. Japan and the US can be induced to help explore rare earth reserves in the Indian Ocean for the same purpose. India should invest heavily in R&D, set-up world-class science universities, and collaborate with the best foreign universities. India should also join or form a technology-sharing and market-access bloc that collectively negotiates with the G2. Access to markets should be traded for access to resources. Strategically allow for 100% FDI in defence and invest heavily in asymmetric weaponry to take advantage of disruption and maintain security. A strong social security net must be developed to address inequality concerns.

22

Geopolitics:

Coopetitive G2

Geoeconomics:

The Great Disruption➔ High but uneven global growth, low

inflation➔ High automation➔ High levels of trade➔ Resource demand shifts to rare

earths➔ Low to moderate labour mobility,

high capital and knowledge mobility

“Clinton-Jiang Redux”What might the world look like? Order is maintained by G2 consultation. Weak global institutions dominated by either superpower supervise economic blocs specialising in secondary or tertiary manufacturing. There are high levels of trade in G2-led blocs, possibly less between blocs, with no major shift in patterns or resource demand. Some degree of trade conflict is present between G2-led blocs. Competition is over knowledge resources and market access. Climate action depends on the G2, but is likely. Conventional conflict nonexistent but asymmetric warfare would be present to a low degree.

How will this affect India? India is highly development-oriented. The middle class is large, aspirational, and assertive. As always, there are some concerns about inequality. All countries are interested in friendly ties with India, especially the G2, for strategic and economic reasons. India is well-placed in terms of access to knowledge and size of its market.

How can India maximise its national interest? Markets should be opened to all countries, and a strong social security net developed to address inequality concerns. Friendly relations must be cultivated and issue-based diplomatic coalitions formed. A strategic defence partnership with the US can be pursued, and its help used to resolve border disputes. Defence deals should be struck with Vietnam and other SE Asian countries to contain Chinese influence. Simultaneously, India should pursue immigration treaties, create a sovereign wealth/foreign aid fund, and start international infrastructure projects to expand its influence. Military strength should be ramped up quickly to project power in the neighbourhood. Product and factor market reforms will help India take advantage of the global economic boom. 23

Geopolitics:

Coopetitive G2

Geoeconomics:

New Economic Boom➔ High global growth, low to moderate

levels of inflation➔ Moderate automation➔ High levels of trade➔ Increased pressure on conventional

fuels➔ Relatively high levels of knowledge,

capital and labour mobility

“Spiralling Downwards”What might the world look like? Order is maintained by G2 consultation. Weak global institutions dominated by either superpower supervise internal free-trade blocs. Trade barriers are competitively imposed by many countries. Higher unemployment leads to radicalisation and more non-state actors. Conventional conflict is nonexistent but asymmetric warfare would be present to a moderate degree.

How will this affect India? The electoral system would favour nationalism, populism and redistribution, with a high degree of state involvement. High inequality and unemployment lead to demands for social justice. Meanwhile, all countries are interested in friendly ties with India for economic reasons. This means that India must walk a fine line between protecting its industries and obtaining investment and trade.

How can India maximise its national interest? India must be receptive to trade and FDI, using its market power to get the best possible deals and investing in strategically vital countries. The diplomatic corps should be expanded and states pushed to engage in foreign policy under the aegis of the Union. A social security net would be necessary to ensure domestic political stability. Domestic investment and consumption will gain importance, which means that there will be a need to reform product and labour markets.

Internationally, India must cultivate the US, and remain at peace with China. Its economic strength can then be used to project power in unprecedented ways. There is a chance for India to create a G3 world by using its economy to obtain global influence and taking advantage of G2 coopetition.

24

Geopolitics:

Coopetitive G2

Geoeconomics:

Global Recession➔ Negative global growth, deflation➔ Low automation➔ Low levels of trade ➔ No major shift in patterns of resource

demand➔ Very low labour mobility. Capital

flows only into high performing developing countries.

4.The New Cold War

25

“New Technology Race”What might the world look like? The UN becomes irrelevant, and the world separates into alliances and Internets dominated by either power, who control access to technology. Sovereignty is eroded and neo-colonialism emerges. There are high internal levels of trade within alliances. The climate comes under major pressure due to economic arms races. There are protracted proxy wars, cyber warfare, propaganda, espionage, and terrorism, as well as new forms of conflict including drone warfare and even biological weaponry.

How will this shape India’s society and economy? Disruption leads to radical changes in India’s economy and society. Access to knowledge and markets is critical to our survival as a sovereign state. Meanwhile, rising inequality is an existential threat, and there is a backlash against the superpowers owing to their technological and economic dominance. The superpowers, however, are interested in friendly ties with India for market access. This should not be easily granted owing to their overwhelming technological edge. India’s weakness on this front means that it will be necessary to align with one of them.

How can India maximise its national interest? Align with the American bloc, partner with US tech giants, and support the independence of Tibet, Xinjiang and Balochistan to weaken the Chinese axis. A “Look West” policy should be adopted, befriending Middle Eastern countries for investment and developing a naval chokehold on the Arabian Sea to counterbalance Chinese power in the Southeast. Indian corporations can mine African rare earths under the aegis of the US. To handle the economic backlash from China, India must invest in cheap manufacturing technology. India’s existing technological prowess must be aggressively converted into competence in new technologies, especially for unconventional warfare.

26

Geopolitics:

New Cold War

Geoeconomics:

The Great Disruption➔ High but very uneven global growth➔ High automation➔ High levels of trade within blocs, low

between blocs➔ Resource demand shifts to rare

earths➔ Capital and knowledge mobility high

within blocs. Low labour mobility

“Clash of Prosperities”What might the world look like? The UN becomes irrelevant, and the world separates into alliances dominated by either power. Sovereignty is eroded and neo-colonialism emerges. Each superpower invests massively in its allies, leading to a growth spurt. There is intense economic and military competition, especially over knowledge. This competition leads to new technologies. The climate comes under major pressure due to economic arms races. There is some low-intensity conventional conflict between puppet states, in addition to protracted proxy wars, cyber warfare, espionage, possible sanctions, and terrorism.

How will this affect India? Rising inequality and security concerns lead to severe marginalisation. Security is the dominant theme of organisation. The middle class is not as assertive. There are major opportunities for diplomatic payoffs by playing off the superpowers against each other. We would, however, be at an increased risk of sanctions from either bloc, trade disruption due to new alignments, or economic disruption due to new technology.

How can India maximise its national interest? Russia, owing to rising prosperity, will also be antagonistic to China. This gives India a chance to weaken the Chinese hegemony. Power projection is vital and overseas military bases may be needed. Closer ties with the East African and Arabian seaboard should be sought with an expanded navy, and the army expanded to protect the China and Pakistan borders, in addition to building nuclear deterrence. FDI must be allowed only for friendly states, and technology transfers aggressively sought. State spending should be used to deal with inequality and prevent marginalised internal actors from aligning with China. 27

Geopolitics:

New Cold War

Geoeconomics:

New Economic Boom➔ High global growth, low to moderate

levels of inflation➔ Moderate automation➔ High levels of trade within blocs.➔ Increased pressure on conventional

fuels➔ Relatively high levels of knowledge,

capital and labour mobility within blocs

“The Great Walls”What might the world look like? The UN becomes irrelevant, and the world separates into alliances dominated by either power, which use investment to win over states. There will be low levels of trade even within blocs, causing destabilisation. There is considerable competition with trade/investment deals used as carrots or sticks, as well as low-intensity conventional conflict over resources, and asymmetric warfare to a moderate degree. Climate change worsens.

How will this affect India? There will be populism and redistribution, with a degree of state involvement in markets. Inequality and unemployment lead to calls for social justice. India also faces significant pressure from both blocs to join or provide market access. This is an opportunity for FDI, favourable trade agreements or investment/infrastructure deals with either superpower, with strings attached.

How can India maximise its national interest? Owing to India’s reduced economic clout, a cautious foreign policy should be followed to not antagonise either superpower. It should use its market power to get the best possible deals from both blocs, using these to stimulate its own economy with fiscal spending to address inequality and unemployment. India must play off the blocs to ensure its own security, while also stimulating indigenous defence and trying to obtain better technology from the superpowers. If it is impossible to get deals without aligning, India should consider forming a Non-Aligned Movement 2.0 under its economic leadership.

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Geopolitics:

New Cold War

Geoeconomics:

Secular Stagnation➔ Low global growth, deflation or low

inflation; Low automation➔ Existence of trade barriers between

blocs. Moderate trade within blocs➔ No major shift in patterns of resource

demand➔ Low labour mobility, capital flows

from developed to developing economies within blocs.

5.The Multipolar World

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“The Delhi Dream”What might the world look like? Order is maintained by a reformed United Nations and other global institutions, with a strong G20. Strong regional economic blocs emerge, and climate action is taken. Some degree of competition over knowledge resources and market access are present within a global (mostly) neoliberal economy. Conventional conflict is nonexistent.

How will this affect India? India is highly development-oriented. The middle class is large, growing, and assertive. Concerns about inequality begin to wane. All countries are interested in friendly ties with India for strategic and economic reasons, presenting more opportunities for regional cooperation and leadership.

How can India maximise its national interest? This scenario is an excellent opportunity for India to rise to the top of the global order. Free trade agreements should be negotiated, a sovereign wealth fund created, the export sector boosted, and the knowledge economy developed. India should invest in massive regional and global projects - and maybe even create its own - a "New Spice Route". An “Aman ki Asha 2.0” should be pursued with Pakistan (the relative decline of American and Chinese funding to the military-jihadi complex creates an opportunity for peace). Major social reforms can be carried out. India’s economic power can be solidified with a regional bloc supported by an expanded Navy to govern the Indian Ocean and support large-scale Indian projects and demographic expansion across the region. Since non-proliferation has been less than a success, India should create a new global peace accord by insisting on a global no-first-use policy. 30

Geopolitics:

Multipolar World

Geoeconomics:

New Economic Boom➔ High global growth, low to moderate

inflation; moderate automation➔ Moderate to high levels of trade.

Preference given to trade within cooperative areas

➔ Increased pressure on conventional fuels

➔ Relatively high levels of knowledge, capital and labour mobility

“The Big Snail Race”What might the world look like? Global order is slightly eroded, and institutions are neglected in favour of new groupings on nationalist/economic lines. Competition will be over favourable trade/investment deals. Conventional conflict is unaffordable, and asymmetric warfare is present to a moderate degree.

How will this affect India? India is development-oriented with a high degree of state involvement. Inequality and unemployment lead to calls for social justice. All countries are very interested in friendly ties with India, for economic reasons. India’s large market provides opportunities for FDI and allows for favourable trade agreements.

How can India maximise its national interest? India must be receptive to trade and FDI, using its market power to get the best possible deals and investing in strategically vital countries. Other countries should be incentivised to buy from India. The country’s economic strength can be used to project power in unprecedented ways and obtain massive concessions from countries interested in growth. India can also focus on building charter cities and creating SEZs to create employment. Social reforms might be necessary. Military strength can be ramped up through FDI deals and a regional bloc formed on economic lines.

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Geopolitics:

Multipolar World

Geoeconomics:

Secular Stagnation➔ Low global growth, deflation or low

inflation; low automation➔ Low levels of trade. Preferential

trade within cooperative areas➔ No major shift in patterns of resource

demand➔ Low labour mobility, capital flows

from developed to developing economies.

“Powerful in Poverty”What might the world look like? Global order is seriously eroded. Global institutions are neglected in favour of new groupings with increasing nationalism. Most nations struggle with high unemployment, leading to radicalisation and more non-state actors. The climate worsens, as every state attempts to kickstart growth. Localised conventional conflict occurs in order to capture resources. Trade wars are commonplace, as is asymmetric warfare.

How will this affect India? The electoral system favours populism and redistribution, with a high degree of state involvement. High inequality and unemployment lead to demands for social justice. Meanwhile, all countries are interested in friendly ties with India for economic reasons. This means that India needs to walk a fine line between protecting its industries and obtaining investment and trade.

How can India maximise its national interest? The international order can be expected to be far more anarchic than any time in recent history. A massive investment in defence would be necessary to project power as well as to create jobs. Both expeditionary capacity and nuclear deterrence capability are needed. A much larger army should be deployed on the borders, and neighbours should be dissuaded from engaging deeply with China. India should also develop its own internal free-trade bloc for emerging economies to collectively negotiate with others, using its military power to get favourable terms, maintaining control and extracting resources with an expanded navy operating in the Indian Ocean. Domestically, some degree of redistribution should be considered to maintain social stability.

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Geopolitics:

Multipolar World

Geoeconomics:

Global Recession➔ Negative global growth, deflation➔ Low automation➔ Low levels of trade, competitive

trade barriers. ➔ No major shift in patterns of resource

demand➔ Very low labour mobility. Capital

flows only into high-performing developing countries.

India’s demography over the next 25 Years

An extrapolation of present trends

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What will India look like in 25 years?

By 2043 i.e. 25 years from now, demographic projections suggest:

1. Total population will be 1.63 billion, the largest in the world.2. The median age will be 35. 3. Ratio of non-working to working population: 46.3% . 4. 43% of India will be urban (an extremely conservative estimate).5. The female working age population will be 53 million, or 48% of the

labour force.

Sources: World Bank Data Catalog

United Nations World Urbanization Prospects

United Nations World Population Prospects

END