The Washington Diplomat / June 2012
By Larry Luxner
Sometime between 2025 and 2030, India will surpass China as the world’s most populous nation. With only 2.4 percent of the Earth’s total land area, that means it will also be one of the most crowded places on the planet.
Politicians in New Delhi are counting on rapid, sustained economic growth to lift this massive sea of humanity from destitute poverty to relative prosperity in the coming years — a huge challenge but a doable one, considering that India’s $4 trillion economy continues to boom as most other countries see their economies hit a plateau or, in the case of the European Union, even shrink a bit.
According to official figures, India’s GDP rose by 6.9 percent in the financial year that ended March 31. Government advisors expect growth to rebound to 7.6 percent in 2012-13 and hit 8.6 percent in 2013-14.
India has gained such prominence worldwide that its currency, the rupee, now has its own internationally accepted symbol — which combines a capital “R” with the Devanagari “ra” — alongside the dollar, the euro, the British pound and the Japanese yen. The world’s largest democracy, widely known for its yoga, sitar music and Bollywood movies, is now the fifth-largest aid donor to Afghanistan and enjoys international support in its bid for a permanent seat on the United Nations Security Council.
“India already has 1.2 billion inhabitants and our economy ranks fourth in purchasing power parity,” said the country’s energetic ambassador in Washington, Nirupama Rao. “If we keep growing at 8 to 8.5 percent, we’ll be poised to become the third-largest economy in the world.”
Rao is intimately familiar with the United States and China — which rank first and second on that list — thanks to her stint as minister of press affairs in Washington back in the mid-1990s, and as India’s first female envoy in Beijing from 2006 to 2009.
Her impressive resume, quite lengthy because she joined the Foreign Service at the age of 22, also includes a posting as deputy chief of mission in Moscow, as well as ambassadorships in Peru, Bolivia and Sri Lanka. Most importantly, Rao spent two years as India’s foreign secretary prior to assuming her duties in Washington last fall.
“Every diplomatic posting brings you valuable insights,” said Rao, 61 and the mother of two grown sons. “I believe that the 21st-century diplomat has to be open minded, sensitive and intellectually alert to the way our world is changing.”
The Washington Diplomat interviewed Rao over Darjeeling tea and biscuits at her official residence last month — just as the ambassador began preparing for the visit of her boss, Foreign Minister Somanahalli Mallaiah Krishna, to Washington in mid-June for the next round of the U.S.-India Strategic Dialogue, launched in 2010 to discuss and strengthen the bilateral relationship.
At that strategic forum, Krishna and his counterpart, Secretary of State Hillary Clinton — who held talks May 8 in New Delhi — are expected to reaffirm their partnership on stability in Afghanistan following the planned 2014 pullout of U.S. troops and discuss joint efforts in counterterrorism.
“This dialogue has matured in the last few years and encompasses almost every field of human endeavor: health care, education, agriculture, monsoon forecasting, energy efficiency and climate change,” the ambassador told us. “Increasingly in the last few years, we’ve seen the manner in which India and the United States have drawn closer.”
That’s a far cry from the early 1970s, when the United States was a staunch ally of anti-communist Pakistan in its bitter war with India, then an ally of the Soviet Union.
“At that time, India was a very young nation, having marked 25 years of its independence — years during which our republic began its journey on the path of economic development and building a just and equitable social order after a dark period of colonial rule and exploitation,” Rao told University of Florida students at an April 27 commencement address in Gainesville, one of numerous university talks she’s held since coming to Washington. “In what was then a small town in India, where I studied for my master’s degree in English literature, I was witness to the tragedy of the war in Vietnam, the creation of Bangladesh, President Nixon’s historic visit to China and the menacing brinkmanship of the Cold War.”
Fast-forward to today. Pakistan is no longer a close friend of the United States — in fact the two countries barely trust each other — and India has become one of Washington’s closest allies in the region.
“The past is completely behind us,” Rao proudly told us. “Every country learns from history, and there is growing recognition here in the United States about India and its enormous potential. In addition, the contribution of the Indian-American community — which numbers close to 3 million — has served to reinforce our image as a very responsible global power.”
Differences remain, however. In recent months, one of the Obama administration’s biggest irritations has been India’s refusal to stop importing petroleum from Iran, which is currently the subject of biting global sanctions over its nuclear program, including a European Union oil embargo set to begin July 1. India and China, two of Iran’s biggest importers, have largely resisted U.S. pressure to curb their use of Iranian oil or face punitive sanctions, citing their national interest in needing to power their thriving economies.
At a recent breakfast sponsored by the Christian Science Monitor, Rao argued that cutting off oil imports from Tehran overnight is simply impossible, though cutbacks are being made.
“The share of Iranian imports in our total volume of petroleum imports is going down as we speak, and there has been a significant reduction,” she said. “And I see that reduction being even more reinforced in the weeks and months to come.”
Rao estimated that Iranian petroleum accounted for 10.3 percent of India’s total imports in 2011-12, down from 16.4 percent in 2008-09. Yet it still ranks as one of Iran’s top customers for crude oil. Moreover, to circumvent U.S. sanctions on its banking sector, Iran has devised a payment mechanism whereby it will accept rupees for almost half of India’s oil purchases — which in turn means that Iran will have to spend those rupees on Indian exports or investment, thereby increasing bilateral trade.
We asked Rao if the Western boycott on Tehran’s oil has caused a mini-rupture in relations with Washington. Not at all, she insisted.
“Contrary to what you may hear, these reports do not square with the facts. We do cooperate,” she said. “If you look at the vast majority of issues discussed within the U.N., India and the U.S. work together. We have established a very cooperative relationship in terms of the applications of U.N. sanctions that have been put in place against Iran. And we have agreed completely that we do not want to see the weaponization of Iran’s nuclear capability and that it should cooperate with the Security Council.”
When it comes to business, there’s no question that the United States and India are tighter than ever. Bilateral trade has jumped from $9 billion in 1995 to around $100 billion today. Most of that growth is being driven by domestic demand, and by India’s rapidly growing middle class, which is projected to include 583 million people by 2025.
Two of India’s fastest-growing sectors are telecommunications and the automotive industry. Between 15 million and 20 million Indians sign up for new mobile phone service each month, with 800 million — or two-thirds of the population — now glued to their cell phones.
At present, close to 58 percent of India’s GDP now comes from services, while only 16 percent from manufacturing.
“Our objective is to increase the share of manufacturing in our GDP to about 25 percent in the next 10 years,” said Rao. “If you go to cities like Bangalore and Hyderabad, you’ll find all the major Fortune 500 companies there, investing in software, IT, research and innovation.”
India is also one of America’s best customers when it comes to defense, having spent $8 billion on U.S. weaponry in the last five years alone.
In fact, India, which has embarked on an $80 billion military modernization overhaul in the next three years, recently became the world’s top arms buyer, with companies from BAE Systems Inc. to France’s Dassault Aviation looking to cash in on the country’s lucrative defense market.
But India’s growing military might has sparked concerns of a regional arms race. The successful April launch of the Agni 5, a ballistic missile able to reach Beijing and Shanghai, propelled India into an elite club of nations that boast long-range nuclear weapons capability. Days later, India’s archrival Pakistan launched its own intermediate-range ballistic missile, triggering fears of heightened tensions not only between New Delhi and Islamabad, but between India and China, which have also clashed militarily over the years.
And even though India’s defense spending, as a percentage of its GDP, is still less than its neighbors, and its aging military apparatus is in need of upgrades, the steady rise in defense spending has raised eyebrows. A 2010 Deloitte study, for example, projected that India’s arms procurement could climb to $120 billion by 2017.
To those who question such enormous expenses in a nation where 500 million people still don’t have access to electricity, Rao has a ready answer: “We have to safeguard our security interests. We’re a huge country and have borders to protect. We have not indulged in violence or irresponsible behavior, and India’s defense needs are very legitimate. Our right to defend ourselves cannot be questioned.”
Sadly, one thing that’s brought the United States, which is predominantly Christian, and India, which is mostly Hindu, together is the common threat of terrorism by Islamic fundamentalist groups.
The November 2008 terrorist attacks on Mumbai — coming just over seven years after 9/11 — killed 166 people and injured another 308 at various sites around India’s financial capital, including two luxury hotels and a Jewish center. The victims included Virginia residents Alan Scherr and his 13-year-old daughter Naomi, who were gunned down as they enjoyed dinner at the Oberoi hotel.
“We want Pakistan to bring to justice those persons who were responsible for the Mumbai attacks,” said Rao, who recently received Alan Scherr’s widow, Kia, at the embassy. “It’s been established that the plot to attack Mumbai emanated from Pakistani soil. The trauma of Mumbai has not gone away.”
Ajmal Kasab, the sole surviving terrorist who was captured by Indian forces, later confessed during interrogation that the attacks were conducted with the support of Pakistan’s intelligence agency, the ISI. Both India and the United States have also been pressing Pakistan to take action against Hafiz Saeed, the militant accused of orchestrating the 2008 attacks (the U.S. recently offered a $10 million bounty for his capture).
In fact, India has suffered from cross-border terrorism since the 1980s, said Rao — generally at the hands of Lashkar-e-Taiba, a Pakistan-based militant organization.
“Terrorist groups operate from the soil of Pakistan, targeting our cities, complicating the lives of ordinary civilians and destroying our economic progress. So we have firsthand awareness and knowledge of the havoc that terrorism can wreak on an innocent population,” Rao told The Diplomat. “In our dialogue with Pakistan, we have sought to emphasize that they must take effective action to remove the terrorist havens on their soil and eliminate those groups.”
As if that’s not clear enough, Rao rephrased her ultimatum: “We would like Pakistan to grow economically and be a stable, peaceful country. It is our neighbor and we cannot choose our neighbors. But Pakistan must understand that unless it deals with the violence and terrorism, its own progress will be affected.”
Asked about her dealings with Islamabad’s new ambassador here in Washington, Sherry Rehman, she replied, though without much enthusiasm: “We have a civil relationship and we communicate with each other. Each ambassador is preoccupied with bilateral duties.”
India and Pakistan have fought three wars since both countries won independence in 1947, although some tentative progress has been made since relations took a nosedive following the Mumbai attacks. In April, Pakistani President Asif Ali Zardari met with Indian Prime Minister Manmohan Singh in the first visit ever by a Pakistani head of state to India.
During the low-key stop, the two leaders discussed expanding trade ties and loosening visa restrictions, with Singh saying he would visit Pakistan at some point in the future. Kashmir has also been relatively quiet, although the disputed territory, claimed by both sides, remains the most serious issue that divides the two nuclear-armed adversaries.
“Jammu and Kashmir, as I’ve always told my American friends, is an integral part of India,” Rao insisted. “The situation there has been improving, although the threat of terrorism and infiltration from the Pakistani-occupied part of Kashmir continues. The people of Kashmir are citizens of India, and they want peace, development and a better life for their children.”
On that score, it seems this is exactly what all of India’s citizens want — though it remains to be seen if their country is capable of delivering.
According to a Gallup poll conducted in the five BRICS countries and released in early April, only 44 percent of Indian respondents said they were satisfied with their standard of living. That compares to 47 percent in South Africa, 65 percent in Brazil and 79 percent in China; only Russia, at 26 percent, ranked lower than India.
And among the poorest fifth of respondents, only 27 percent said their standard of living is improving, compared to 61 percent of the richest 20 percent.
Rao says she doesn’t necessarily agree with the survey.
“There is definitely a revolution of rising expectations within India today. Like people everywhere, Indians, too, desire better lives for themselves and for their children,” she said. “I do not subscribe to the view, however, that the quality of life has declined in India over the years. Quite to the contrary, living standards have improved tangibly, and every decade of reform has brought a change for the better in economic conditions.”
But India has a long, long, long way to go. Even though it has come incredibly far, there are concerns that India’s supersonic growth may be ebbing, with its services-based industry reaching its limits and, above all, an inefficient government bureaucracy and reluctance for further market reforms stifling future growth. (In April, Standard & Poor’s lowered its outlook for India, from stable to negative, in light of the government’s inability to tackle the country’s relatively high debt and fiscal deficit.)
On that note, corruption has hobbled national progress and drawn the fury of hundreds of millions of Indians fed up with entrenched graft — an issue brought to the fore last year by Anna Hazare, a longtime activist whose hunger strike tapped widespread outrage and forced the government to create an independent anticorruption agency.
Hazare’s ongoing campaign echoes the frustrations of large swaths of India’s population that feel left behind by the country’s boom. For instance, it’s estimated that half of all children under the age of 5 still suffer from malnutrition. Inequality is rampant; in Mumbai, gleaming new skyscrapers stand alongside a labyrinth of slums that are home to millions of people and reek of human waste and garbage.
Even though the Indian Planning Commission says government spending has helped to slash the poverty rate from 37.2 percent in 2004-05 to 29.8 percent in 2009-10, by its own estimates, some 360 million people still live in poverty. Moreover, critics say the government vastly underestimates the poverty levels, setting the threshold artificially low, with some putting the figures as high as 800 million people (the State Department says 700 million Indians live on $2 a day or less).
Rao conceded that tremendous challenges remain — as do tremendous achievements.
“Alleviation of poverty is the most important priority for our government,” the amassador told us. “We must improve literacy levels. Today the right to education is a fundamental right, and the government is committed to giving access to education for our poor people. There’s going to be a revolution in literacy. We have 700 to 800 million people voting in our elections. They’re aware what democracy brings to them, and what political parties stand for. They’re increasingly aware of the need to send their children to school. The old India is behind us. You’re looking at a country in the 21st century.”
She added: “Our rate of population growth is falling. India is paying increasing attention to ensuring that expenditures in health and education go up as a percentage of our GDP. We must promote awareness of the need for people to have smaller families.”
Yet India, a democracy, has no intention of adopting communist China’s forced method of population control.
For years, Chinese authorities have limited married couples to one child, except in rural areas. That’s enabled China to slow its annual birthrate to 0.49 percent, which in turn has raised living standards. India’s birthrate, by comparison, clocked in at 1.34 percent last year, with one northern state, Uttar Pradesh, now home to 200 million inhabitants — more than the entire population of Brazil.
Rao, who became a China expert while working in the East Asia Division of the Ministry of External Affairs, was a member of the delegation of Prime Minister Rajiv Gandhi when he made his historic visit to Beijing in December 1988.
Today, she said, “Our relationship with China, our largest neighbor, is no doubt complex. But we have created a management regime for this relationship that has ensured regular dialogue and ongoing negotiation to resolve outstanding issues like the boundary question. While all this is happening, trade has multiplied.”
It also appears that the two giants may be moving slowly toward a solution for their border dispute in the Himalayas, which sparked a brief war in 1962. China claims about 90,000 square kilometers of what India says is its territory, mostly along their shared border in Arunachal Pradesh, east of Bhutan.
“With China, we have not reached a settlement of our differences, but there is a mechanism in place to discuss this,” said Rao. She added that even though the Dalai Lama lives in New Delhi, India has no desire to infuriate Beijing by clamoring for Tibetan independence.
“Our position on that is very clear,” said the ambassador. “We recognize Tibet as an autonomous region of China, and Tibetan refugees in India are not expected to indulge in any anti-Chinese activities. The Dalai Lama is a revered spiritual leader, and the Chinese are aware of our position.”
Relations with another important neighbor, Bangladesh, are “excellent” these days, says Rao, despite grumblings about a double-walled, barbed-wire fence India has been quietly constructing along the 4,053-kilometer length of its border with its Wisconsin-size neighbor. The forbidding fence has sparked protests in both countries, but more so in Bangladesh — many of whose 160 million inhabitants could find themselves with nowhere to go as large parts of their low-lying country disappear underneath the sea in a catastrophic climate-change scenario.
According to the Indian human rights watch organization Odhikar, nearly 1,000 people of both nationalities have been gunned down by overzealous Indian border guards since 2000, including 31 last year alone.
“In flagrant violations of international norms and treaties, Indian Border Security Forces shoot and kill unarmed Bangladeshi civilians in the border areas and, on occasion, even inside Bangladeshi territories,” says the group.
Adds New York-based Human Rights Watch: “The abusive methods used by the BSF are disproportionate to the problems that the Indian government faces on its eastern border. Numerous ordinary Indian and Bangladeshi citizen residents in the border area end up as victims of abuses, which range from verbal abuse and intimidation to torture, beatings and killings. Even the most serious abuses by border guards go unpunished. This sends a clear message that the Indian government finds such abuses acceptable.”
Rao admitted that there have been “incidents” along the border, but added that “our prime minister had a very good visit to Bangladesh last fall, which resulted in an understanding on settling our differences. We are putting in place an effective border management regime that will prevent any complicated situations from occurring.”
As India expands its economic influence around the world, it’s also beginning to extend economic aid not only to Bangladesh but also to other smaller, poorer countries like Afghanistan, Djibouti and Burma.
“It’s time to start thinking of India not as a beneficiary of the world’s charity but as a major donor,” argue India experts Rani Mullen and Sumit Ganguly, writing in Foreign Policy magazine. “Indian foreign assistance has not only tripled since the turn of the century — with foreign aid by the five BRICS countries growing 10 times faster than aid by G-7 countries — but it has also grown in terms of the diversity of recipients.”
The article, titled “The Rise of India’s Soft Power,” points out that after a decade of nearly 9 percent annual growth, India is for the first time in a position to provide direct cash transfers and subsidized loans. “India’s assistance effort is clearly enmeshed into a larger set of foreign-policy goals: ensuring secure sources of energy for an expanding economy, opening markets for India’s increasingly export-oriented industrial and service sectors, and bolstering geostrategic ties with key neighbors.”
Meanwhile, Rao said her government is investing a mind-boggling $1 trillion in infrastructure at home over the next five years, which is double what India spent in the last five. That money will go mainly toward the development of railways, airports, highways, bridges and mass transport throughout India.
She’s also gung-ho about a recent flurry of visits by U.S. state governors to her country, most recently by Virginia Gov. Bob McDonnell and Maryland Gov. Martin O’Malley. Last December’s visit by O’Malley and 100 executives resulted in $60 million worth of business deals for Maryland companies ranging from software development to pharmaceutical manufacturing.
“A number of delegations from states in both countries are reaching out to each other,” she said. “A lot of them now want to develop sister-state relationships.”
To that end, Rao says she’s also doing all she can to push U.S. tourism to India — a task no doubt made easier by such popular movies as Danny Boyle’s 2008 drama “Slumdog Millionaire,” the more recent chick flick “Eat Pray Love” starring Julia Roberts, and the 2012 British comedy “The Best Exotic Marigold Hotel,” with Judi Dench and Tom Wilkinson.
A slick magazine published by the Ministry of External Affairs and distributed by the Indian Embassy in Washington has full-color articles promoting such adventures as bird-watching in Kaziranga National Park, enjoying big-game safaris in the Sunderbans — habitat of the royal Bengal tiger — and skiing at Rohtang La, a snowy Himalayan resort that at 14,000 feet above sea level boasts the highest motorable road in the world.
“It would be nice to see more young Americans discover India,” Rao said. “The love of a country really grows when you see it as a young person and you keep going back, again and again. India is fascinating in terms of its diversity. Each region, each state is different from the other. It requires a lifetime to understand India.”
Despite all the progress India has made, however, it won’t matter much over the long term unless fertility rates decline substantially, especially in impoverished states like Uttar Pradesh and Bihar. The Washington-based Population Reference Bureau (PRB) says those two states have a fertility rate of 4.3 per woman — more than twice that of Rao’s native Kerala, where per-capita income and educational levels are substantially higher.
Here’s a frightening thought: According to the experts at PRB, India’s population will approach 1.8 billion by 2050 and may even exceed 2 billion by 2100 — making it the world’s first, and only, country ever to reach that dubious distinction.
Asked whether she thinks that’s likely, Ambassador Rao, whose diplomatic career spans more three decades, quipped: “I wouldn’t bet my money on that.”