US-India Friendship

Request your House Representative to co-sponsor the PEACE Bill introduced by Rep Berman

2009-04-11T21:17:00.002-04:00

As you know, Congressman Howard Berman (D-California), the chair of the House Foreign Affairs Committee has moved a bill named Pakistan Enduring Assistance Cooperation Enhancement (PEACE) act of 2009 - H.R. 1886.

It focuses on funding the core issues relating to genuinely helping Pakistan get out of the hole in which it finds itself – a jihadi onslaught, economic collapse and a broken education system – while holding strict accountability and monitoring requirements to ensure that the funds are used for their stated purposes.

So, this is your chance, as an American, to make your voice heard and make an impact in Washington on an issue that is close to our hearts. Please consider doing all, or at least some, of the following:

**relay this email out to all your friends, specially those who have been politically active over the past few election cycles, and therefore are in a position to influence their respective Congresspersons

**take the time to write a letter to your Congressperson. Please scroll down for a sample letter.

THE GOAL IS TO HAVE A MINIMUM OF 50 CONGRESSPERSONS FROM ACROSS THE NATION TO PUT THEIR NAMES AS CO-SPONSORS OF THE BERMAN BILL.

Only if your Congressperson were to get enough letters from his/her constituents impressing upon him/her why this bill is a good one and needs his/her support, do we have a chance of reaching the goal.

Please do not discard this e-mail. A little effort on your part can make all the difference between us seeing this bill pass in its current form, or having it amended and altered into a toothless document.

Cheers,

Ram Narayanan

Write your Congressional Representative

To co-sponsor "Pakistan Enduring Assistance Cooperation Enhancement Act" (PEACE) -- H. R. 1886 introduced by Congressman Howard Berman

To identify and contact your Representative, please click: https://writerep.house.gov:443/writerep/welcome.shtml

Dear Representative .......

My name is ....... and I am a resident of your congressional district. I am writing to you because there is a new bill that Congressman Howard Berman (D-California) has just introduced in the House and I would appreciate if you would co-sponsor this proposed legislation, for it has potentially far reaching geopolitical ramifications for the United States, Pakistan and our long term ability to win the campaign against terrorism.

The bill in question is the Pakistan Enduring Assistance Cooperation Enhancement Act of 2009 [or, the PEACE Act of 2009] -- H. R. 1886.

Today, it is common knowledge that the epicenter of global terrorism is Pakistan, and more specifically, its Northern and Western territories that abut Afghanistan and Iran. Based on preliminary numbers, it is also a fact that Pakistan is soon going to become the second largest recipient of United States aid, after Israel. Hence, it is imperative that our funding is done carefully, managed to appropriate metrics, monitored meticulously and appropriate feedback loops created to ensure that aid is tied to Pakistan delivering on its commitment.

The PEACE bill of 2009 (H. R. 1886) does precisely all of this. Here are some of the highlights of the proposed legislation:

The bill clearly directs Pakistan, “not to provide any support, direction, guidance to or acquiescence in the activities of any person or group that engages in any degree in acts of violence or intimidation against civilians, civilian groups or government entities.”

The proposed bill asks the United States to redouble its efforts to work with the Government of Pakistan through all appropriate means in establishing counter insurgency and counter terrorism strategies to prevent any territory of Pakistan from being used as a base or conduit for terrorist attacks in Pakistan, Afghanistan or elsewhere.

With reference to the involvement of the military and intelligence agency in supporting terrorist activities, the bill demands Pakistan cease support to extremists and terrorist groups, particularly to any group that has conducted attacks against United States or Coalition forces in Afghanistan or against the territory of India or the people of India.

In a section entitled Sense of Congress, the bill states that the conditions in Pakistan will only be improved through regional coordination and cooperation, and long term security in Pakistan depends on strengthening regional relationships among India, Pakistan, and Afghanistan.

It recommends increasing oversight of educational curricula in schools, including Madrasas, and states that these religious schools not be used to incite terrorism. It further demands the closing of Madrasas found to have links to terrorists.

Congressman Berman’s Bill also deals with the sale of nuclear technology reportedly by Mr. A.Q. Khan of Pakistan. It states that Pakistan provide access to United States investigators to individuals suspected of engaging in worldwide proliferation of nuclear material. It asks Pakistan to restrict such individuals from travel or any other activity that could result in further proliferation. Pakistan has refused to investigate the activities of Khan and has recently released him from house arrest.

The proposal by Berman demands complete transparency and accountability of the aid given to Pakistan. It requires a report from the Comptroller General to Congressional Committees evaluating the effectiveness of security assistance provided to Pakistan and asks for a detailed description of the expenditures made by Pakistan.

This is the first time that the United States, which has given over $10 billion in aid to Pakistan, has attached conditions of accountability and transparency to future aid and has directed Pakistan to dismantle all terrorist training camps on its territory. With this bill, we finally have an opportunity to methodically work on reducing the risk of a future attack on American soil and American interests worldwide by working with the Pakistanis on dismantling the very nerve center of global jihadi terrorism.

Hence, as my representative, I would implore you to consider becoming a co-sponsor of this bill, which would go a long way in ensuring its passage through the House.

Respectfully,

____________________________________________

Is innovative workplace training fueling an Indian economic miracle?

2008-07-31T19:05:00.000-04:00

Entrepreneur and business professor Vivek Wadhwa who is executive in residence for the Pratt School of Engineering at Duke University, and a Wertheim Fellow at Harvard Law School, sent me the following dispatch which I have titled,

"Is innovative workplace training fueling an Indian economic miracle? What the US can learn from India."

It’s worth careful reading. Please do not miss the last section of this message which compares China with India.

Cheers,

Ram Narayanan
US-India Friendship
http://usindiafriendship.net/
http://usindiafriendship.blogspot.com/

Is innovative workplace training fueling an Indian economic miracle? What the US can learn from India -- A Note from Vivek Wadhwa.

Ram, many have been predicting the demise of Indian industry. They say that rising salaries, poor infrastructure, a weak education, etc. will cause Indian industry to implode….that the Indian IT industry was just a flash in the pan.

Yet my research at Duke and Harvard has shown the opposite -- that despite all the obstacles, India is rapidly becoming a global R&D hub. I used to be a tech CEO, and was one of the first to outsource R&D to India. What I saw the Indian IT industry achieve in 15 years is happening in half the time in an assortment of industries -- Its scientists are doing sophisticated drug discovery for Big Pharma, its engineers are designing key components of jetliners for Boeing and Airbus, helping to design automobile bodies, dashboards, and power trains for Detroit vehicle manufacturers, and are developing next-generation networking solutions for companies like Cisco. Indian companies are also developing innovative solutions for the Indian marketplace, such as the $2500 car produced by Tata.

My own research has shown that India is in poor shape with its higher education – the country graduates less than 1000 PhD’s in engineering – which is not even enough to staff the growing universities, let alone build an R&D machine. So how is India doing all this?

Duke/Harvard and the Kauffman Foundation published a detailed report, which I authored, called "How the Disciple became the Guru: Is it time for the U.S. to learn workforce development from former disciple India." It shows how India’s companies learned the best practices of Western companies and perfected these. Indian industry has developed a surrogate education system which can take workers with weak education and turn these into world class R&D specialists. Here is a link to download this http://papers.ssrn.com:80/sol3/papers.cfm?abstract_id=1170049 (select the download location at the top of the page).

Below are 2 articles which I authored for BusinessWeek and the Wall Street Journal on this. Harvard International Review also published an abstract and will spotlight this in the next edition of their journal.

Bottom line: Just as the Japanese achieved major advances in manufacturing management in the 70’s, which led to their rise as an economic power, India is achieving similar feats in workforce development: India has learned and perfected the best practices of leading companies that have been outsourcing their computer systems and call centers. We believe that this will fuel the Indian economic miracle. And we believe that the best way for America to respond to globalization isn’t to construct trade or immigration barriers: it needs to re-learn some lessons in workforce development from its former disciple, India.

Regards,

Vivek Wadhwa
Duke University, Pratt School of Engineering
Harvard University, Labor and Worklife Program, Harvard Law School

http://www.businessweek.com/technology/content/jul2008/tc20080722_958899.htm?chan=search

BUSINESSWEEK

Viewpoint July 23, 2008

What the U.S. Can Learn from Indian R&D

Engineering companies in India play a leading role in educating their research employees, a practice the U.S. can adopt to help keep its global competitive edge

by Vivek Wadhwa

We’ve heard the dire warnings before. The U.S. is falling behind in math and science. A recent admonition came from the Business Roundtable, which cautioned that the U.S. could lose its competitive edge to India and China unless it doubles higher education graduation rates in engineering and science. Intel Chairman Craig Barrett, a member of the influential association of executives, said America’s economic future lies with its next generation of workers and its ability to develop new technologies and products. This means we must strengthen math and science education, he said. Yes, we need to keep improving education.

But too great an emphasis on education at the university and high school level lets off the hook another crucial contributor to the education of U.S. workers: the workplace.

India knows well the role companies must play in educating employees. A new report I co-authored for the Ewing Marion Kauffman Foundation titled How the Disciple Became the Guru reveals that Indian industry isn’t relying on India’s education system to gain an edge. Indian industry has developed a surrogate education system that can take workers with weak educational backgrounds and turn them into world-class R&D specialists.

Perhaps it is time for America to learn from its former disciple.

Click here for the rest http://businessweek.com/technology/content/jul2008/tc20080722_958899.htm .

http://online.wsj.com:80/article/SB121675006375274155.html

THE WALL STREET JOURNAL ONLINE , JULY 23, 2008

India’s Workforce Revolution

By VIVEK WADHWA

July 23, 2008

American businesses are increasingly moving their research and development operations to India. Companies like General Electric and Cisco now have their second-largest research centers in Bangalore. Debates rage in the U.S. about whether this will lead to greater prosperity or threaten the country’s global economic leadership. But it’s more productive to ask how India is training a workforce capable of handling such complex work.

The global engineering and entrepreneurship project team at Duke University traveled to India several times between September 2006 and May 2008 to meet the executives of dozens of multinational and domestic Indian companies to review their R&D projects and operations. What we found was astonishing: Despite its low science and engineering graduation rates, India is rapidly becoming a global hub for R&D, with a momentum and scale similar to what it accomplished in information technology services.

But how? Adjusting for different definitions of which degrees count as "engineering" degrees, India graduated roughly 140,000 engineers in 2004, about the same as the U.S. Additionally, it graduated 17,000 at the masters level and 900 Ph.D.s -- a small fraction of the U.S. numbers and not even enough to meet the growing staff requirements of Indian universities. Nor is the quality of its graduates consistent. India’s Institutes for Technology, for instance, are equivalent to the MITs of the world, but many other, smaller institutions aren’t even licensed.

So if engineering education is so critical to global competitiveness, how is India succeeding? It’s picking up on the best practices know-how it effectively imports from foreign companies outsourcing to India, and perfecting those techniques. This is hardly novel -- it’s exactly the path Japan followed in the 1970s and ’80s.

A new report by the Kauffman Foundation, which I co-authored, breaks the Indian innovations down into seven key areas:

- Employee recruitment: The companies we studied are innovative not only in how they recruit, but also in whom they recruit and where they look for talent. Most hire for general ability and aptitude, rather than specialized domain and technical skills. They rely on training and development to bridge skill gaps.

Technology companies like HCL and Wipro recruit from second- and third-tier colleges all across the country, and also in arts and science schools. India’s largest call-center operator, Genpact, has recruiting storefronts in 22 cities, without even requiring a resume. It is also targeting retired bank clerks and housewives.

- New-employee training: Companies in India assume new recruits will have to be trained practically from scratch. So they invest substantial time, money and effort in the training function. Most large companies have built dedicated learning centers and some employ hundreds of training staff. The Infosys Global Education Centre at Mysore can train 13,500 people at a time. New recruits attend a 16-week boot camp which strengthens their technical, communications and management skills. For its science recruits, TCS provides seven months of training in computer programming, customer orientation and project management.

- Continuing employee development: Indian companies have to invest in making their employees more productive and rapidly moving them up the skill and management ladder. This increases billing rates and the productivity of employees, and lessens attrition because of the rapid career advancement that employees can achieve.

Employees are typically required to participate in a wide range of education programs, including not only technical and domain training but also soft skills and management skills encompassing training in quality processes; communication; and cultural, foreign-language and personal-effectiveness skills. Career advancement and salary increases are usually tied to the completion of such training.

- Managerial training and development: Shortages in managerial talent have made it necessary to foster talent from within. Managers are typically groomed through fast-track programs that provide management training and mentorship to high-performing employees. The average age of first-line managers in the Indian companies we studied is below 30. Preference is usually given to internal staff to fill management openings.

- Performance management and appraisal: All of the companies we studied have implemented sophisticated performance-management and appraisal systems to create greater transparency and fairness in evaluation and rewards. Managers are evaluated on a variety of nonfinancial measures, including employee satisfaction, attrition rates and mentoring.

- Workforce retention: Most companies have achieved dramatic reductions in employee turnover by carefully analyzing recruitment, performance and attrition data to identify patterns. This has led to constant refinements in recruitment, training and development, performance management and other human-resource practices. Corporate communications and employee engagement in the company and its programs are always a priority.

- Education upgrades: Indian companies appear to have an unusual level of interaction with the private colleges and universities that supply them with talent. This involves working with these institutions in developing customized degree programs; training the educators; creating new curricula and training programs; and negotiating deals to hire graduates in bulk -- without job interviews.

* * *
The result of this workforce productivity is clear to see. In the aerospace industry, Indian companies are designing the interiors of luxury jets, in-flight entertainment systems, and collision-control and navigation systems for American and European corporations. In pharmaceuticals, Indian scientists are discovering drugs and performing clinical research for nearly all of the largest multinational drug companies. In the automotive industry, Indian engineers are helping to design bodies, dashboards, and power trains for Detroit vehicle manufacturers -- and soon may develop entirely outsourced passenger cars.

The Indian experience highlights what can be achieved by investing in upgrading workforce skills. That lesson has implications for policy makers in the U.S. who worry about how the economy will adapt to globalization. If workforce training can take the output of an education system as weak as India’s and turn its graduates into world-class engineers and scientists, imagine what could be done with an American worker base that has received amongst the best education in the world.

Mr. Wadhwa is executive in residence for the Pratt School of Engineering at Duke University, and a Wertheim Fellow at Harvard Law School. This op-ed is adapted from a report, "How the Disciple Became the Guru," released today by the Ewing Marion Kauffman Foundation.

_____________________________________________

I asked Vivek: Where does India stand vis-a-vis China with reference to his research?

Vivek’s answer:

In China the only significant R&D is being performed by MNC’s and that is targeted at the Chinese market. In India, MNC’s are doing a lot of advanced research for global markets, but they are greatly overshadowed by Indian companies doing research for the global and Indian market. China today excels at imitation -- not innovation.

China increased engineering bachelors graduation rates by a factor of 4, its masters and PhD’s by a factor of 6 to 7 over a decade. It now publishes 4 times as many academic papers. And it is investing massively in research. One can only marvel at the magnificent infrastructure and gleaming cities of China. In India, the government is focused mainly on playing vote bank politics with its higher education system – setting 52% university admission quotas for groups in which the vast majority does not even complete high school. India still only graduates less than a thousand PhD’s in engineering – not even enough to staff its educational institutes. The country looks like it is falling apart.

Yet India is leapfrogging China in R&D. In China, the vast majority of R&D is being performed by MNC’s to adapt their products for the Chinese market. This is usually managed by expats and returnees. There are a few exceptions, but by and large, China is excelling at imitation, not innovation. Now, go inside the labs of hundreds of companies in several industries in India, and you’ll be amazed. There are literally hundreds-of-thousands of engineers developing advanced technologies for global markets. (Now they are developing innovative products for their own markets also).

If K-12 education, investment in research and S&E graduation could make all the difference by themselves as is the mantra in the U.S., then India should be imploding and China should be the world’s new innovation hub. This story from the Washington Post shows some of the issues in China -- A Long Wait at the Gate to Greatness (http://www.washingtonpost.com/wp-dyn/content/article/2008/07/25/AR2008072502255.html?wpisrc=newsletter). But China faces even greater challenges in laying the seeds for innovation and entrepreneurship. It takes much more than people who want to make money…you have to build the culture and systems for entrepreneurship…and you need to enforce IP laws.

Bottom line: China’s growth is government-led. India’s growth is entrepreneur-led. Education is an enabler. Not having this ensures failure. But more education doesn’t ensure success. The U.S. needs to bring education to those that are left behind (which is a horrifyingly high number for an advanced country). And the U.S. needs to focus on improving the skills of its existing workforce. If it waits for its next generation to make it more competitive, it will be too late. Indian industry isn’t relying on its education system or government – it has learned the best practices in workforce development from the west and put these together to form a whole which is giving the country a badly needed edge.
___________________________________________________

2008-07-28T12:05:00.000-04:00

http://www.rgemonitor.com:80/asia-monitor/253103/indias_nuclear_deal_and_benchmarking_against_china

RGE MONITOR, ASIA ECONOMONITOR

India’s Nuclear Deal and Benchmarking against China

Nirvikar Singh Jul 25, 2008

The successful confidence vote for Prime Minister Manmohan Singh’s government in India, which had been shaken by his standing behind the nuclear deal with the United States, prompted me to reflect on the undercurrents and implications of this exceptional agreement. The 2005 announcement of the agreement on sharing nuclear knowhow was certainly a coup for India, and it is a pity that it took so long for the Indian government to cut loose its obstructionist communist allies.

Why did the U.S. make a nuclear exception for India? According to the Washington Post in 2005, “much of the plan was conceived by Robert Blackwill, former ambassador to India and a deputy national security adviser under Condoleezza Rice, along with his close confidant, Ashley J. Tellis, a specialist on U.S.-India relations” at the Carnegie Endowment for International Peace. Tellis had earlier laid out a vision for India-U.S. relations in a paper titled “India as a New Global Power,” promoting strategic cooperation between the two countries rooted in U.S. defense sales to India, and support for India’s growing military nuclear capability. This is an easy connection to see, between the explicit agreement on “civilian nuclear technology” and the strategic, military goals of both nations. It is also clear that competition for natural resources, the oldest (and traditionally the only) driver of geopolitics, remains a salient factor in these interactions. India’s push for a natural gas pipeline from Iran, which failed to get a positive response from the U.S., also falls in this category. India’s current attractiveness to the U.S. comes from its potential role as a partner against terrorism and as a fellow democracy – pragmatism and principle, as the Prime Minister put it, in his 2005 address to the Joint Session of the U.S. Congress. On the Indian side, abandonment of the “holier-than-thou” attitude that characterized India’s earlier approach to diplomacy is welcome. Instead, India seems to be falling more in line with the Chinese realpolitik stance, to achieve some degree of nuclear parity with China.

While acknowledging the importance of security, and of access to natural resources, it is imperative to take a broader view of what constitutes “success” for a country like India. International prestige and military clout should not be goals that divert attention from raising the economic wellbeing of the population. It is better to be a Japan, than a Soviet Union. While the nuclear deal’s avowed purpose is to serve India’s future energy needs, one should take that objective with a grain of salt. There are other things that India’s policymakers can do that would provide greater immediate and lasting benefits, including more rational energy pricing and organizational reform of public sector energy suppliers.

In fact, economic growth should be the main goal where India benchmarks itself against China. It is also where India falls short. Comparing how the two countries tackle some of the means to achieve this end of high growth is illuminating. Begin with higher education. As far back as 2004, China announced some opening of the education sector to foreign participation. Six months later, a wide variety of joint ventures in higher education were under way. There are now over 700 foreign-affiliated colleges in China. Along with this injection of foreign organizational expertise have come successful attempts to hire internationally renowned faculty and host high quality foreign visitors. There has also been a shake-up of the incentive system in China’s universities, with a new emphasis on rewarding productivity and talent rather than seniority, and paying internationally competitive salaries.

In contrast, India produced a committee report in late 2005 on the entry of foreign universities, which was full of qualifications and restrictions that can only discourage investment: no “poaching” faculty from Indian institutions; no repatriation of profits; no franchising or offshore campuses. The committee stipulated probationary periods and large security deposits, and suggested that only foreign universities from countries that offer Indian universities reciprocal opportunities abroad should be allowed entry. These conditions are designed to protect inefficiency in Indian higher education and restrict supply, rather than promote positive change and growth in a sector that is even more important than energy. The report’s recommendations are bad economics, and a resurgence of the license-permit raj mentality. And all this, in a country where quality higher education is in such short supply that there are coaching classes to prepare students for entrance exams to qualify for other coaching classes, which then prepare students for the IIT entrance exams.

Next, consider research and development (R&D). A report in the Wall Street Journal in March 2006 described a surge in foreign-invested R&D centers in China, its top place in the list of countries slated for R&D expansion by multinationals (with the US and India following), R&D spending well ahead of India’s (1.3% of GDP compared to 0.77% for India – translating to six times as much spending), and clear targets to boost spending and to train and attract talent. In contrast, India’s “top official” was quoted as saying, “the scale of investment is not much” because of budgetary constraints. India is “trying to build R&D,” but the government does not have the financial resources or expertise, nor does it seem willing to allow those to come freely from abroad. According to the US National Science Foundation, China (with Israel) tops emerging economies in technological competitiveness, with India a long way behind.

Finally, consider venture capital. Also in March 2006, the Wall Street Journal ran a headline “Venture Capital Swarms China.” The story reported that a flood of venture capital is competing to fund tech companies, with funds raised by VC investors reaching $4 billion in 2005. This compares with well under a billion dollars of foreign investment for true venture deals (excluding late-stage private equity deals) in India in the same year. Of course VC investment in India has increased. The problem in growing it even more is India’s policy environment, with the persistence of needless government controls and interference.

The bottom line is that India has much to learn from China in areas of international economic policy as well as foreign policy. Even if the government cannot become more efficient in its basic functions, it can at least create an enabling environment for foreign capital and expertise to enter more freely in areas where they can make a long run difference to India’s growth: higher education and R&D. This will ultimately be more important than matching China in nuclear prestige, and more fitting with India’s new global confidence.

NIRVIKAR SINGH is Professor of Economics and Co-Director of the Center for Global, International and Regional Studies at the University of California, Santa Cruz.

2008-07-12T16:43:00.000-04:00

Harsh Pant on India's Search for a Foreign Policy‏

2008-07-01T18:05:00.000-04:00

The following article by Harsh Pant is a critique of India’s foreign policy or rather, the lack of it -- perhaps the best critique to appear in recent months.

His main point: An incoherent foreign policy [as it is now] will ensure that India will forever remain poised on the threshold of great power status, but will be unable to cross it.

While India’s policymakers, including the think tanks, should carefully read this article, I hope Harsh Pant will do a follow-up piece to answer the following questions:

If you (Harsh Pant) are the policy-maker, what will be India’s foreign policy? How will you convince India's Parliament that what you are suggesting is the best foreign policy for India?

What will be your "grand strategy to integrate the nation’s multiple policy strands into a cohesive whole?"

What should India do with the accretion of economic and military capabilities and with its purported great power status?

"The portents are hopeful if only the Indian policy-makers have the imagination and courage to seize some of the opportunities." What are the opportunities that India must seize?

Ram Narayanan
US-India Friendship
http://usindiafriendship.net/

http://pragati.nationalinterest.in/2008/07/%e2%80%9cadamant-for-drift-solid-for-fluidity%e2%80%9d/

PRAGATI: THE INDIAN NATIONAL INTEREST REVIEW, JULY 2008

FOREIGN POLICY: “Adamant for drift, solid for fluidity”

India needs leadership and a renaissance in its foreign policy

HARSH V PANT

AS THE United Progressive Alliance (UPA) government completes its four years in office, there is a whiff of fragility and under-confidence in the air, as if at any moment the entire facade of India as a rising power might simply blink out like a bad idea.

The absolute control of the Communists on all realms of policy-making, the single point agenda of the Congress party to stay in power as long as possible and the insistence of the Bharatiya Janata Party upon destroying its credibility as a national party—all have ensured that Indian foreign policy continues to drift without any real sense of direction.

The seemingly never ending debate on the USIndia nuclear deal has made it clear that today India stands divided on fundamental foreign policy choices facing the nation.

What Walter Lipmann wrote on US foreign policy in 1943 applies equally to the Indian landscape of today. He had warned that the divisive partisanship that prevents the finding of a settled and generally accepted foreign policy is a grave threat to the nation. "For when a people is divided within itself about the conduct of its foreign relations, it is unable to agree on the determination of its true interest. It is unable to prepare adequately for war or to safeguard successfully its peace."

In the absence of a coherent national grand strategy, India is in the danger of losing its ability to safeguard its long-term peace and prosperity.

As India’s weight has grown in the international system in recent years, there’s a perception that India is on the cusp of achieving ’great power’ status. It is repeated ad nauseum in the media, and India is already being asked to behave like one. There is just one problem: Indian policy-makers themselves are not clear as to what this status of a great power entails. At a time when the Indian foreign policy establishment should be vigourously debating the nature and scope of India’s engagement with the world, it is disappointingly silent. This intellectual vacuum has allowed Indian foreign policy to drift without any sense of direction and the result is that as the world is looking to India to shape the emerging international order, India has little to offer except some platitudinous rhetoric that does great disservice to India’s rising global stature.

There is clearly an appreciation in the Indian policy-making circles of India’s rising capabilities. It is reflected in a gradual expansion of Indian foreign policy activity in recent years, in India’s attempt to reshape its defence forces, in India’s desire to seek greater global influence. But all this is happening in an intellectual vacuum with the result that micro issues dominate the foreign policy discourse in the absence of an overarching framework.

The recent debates on the US-India nuclear deal, on India’s role in the Middle East, on India’s engagements with Russia and China, on India’s policy towards its immediate neighbours are all important but ultimately of little value as they fail to clarify the singular issue facing India today: What should be the trajectory of Indian foreign policy at a time when India is emerging from the structural confines of the international system as a rising power on way to a possible great power status?

Answering this question requires one big debate, a debate perhaps to end all minor ones that India has been having for the last few years. However much Indians like to be argumentative, a major power’s foreign policy cannot be effective in the absence of a guiding framework of underlying principles that is a function of both the nation’s geopolitical requirements and its values.

Otto Van Bismarck famously remarked that political judgement was the ability to hear, before anyone else, the distant hoof-beats of the horse of history. In India’s case, everyone but policymakers it seems is hearing the hoof-beats of history’s horse. Indian policy-makers seem to have come to believe that just because the country registers economic growth rates of 8 percent, they don’t really need a serious foreign policy and that they can afford to get by with ad hoc responses or grand finger-wagging.

Foreign policy requires a serious look at the causal chain of events as opposed to mere reaction. A strategic framework is necessary to bring some measure of order out of an increasingly chaotic world. India needs a coherent, holistic approach to its foreign policy that is rooted in the deepest tectonic plates of its geography and history. It is the underlying and immutable characteristics of a nation that shapes its interests as it struggles for power and survival in an anarchic international environment.

But India’s foreign policy elite remains mired in the exigencies of day-to-day pressures emanating from the immediate challenges at hand rather than evolving a grand strategy that integrates the nation’s multiple policy strands into a cohesive whole.

The assertions, therefore, that India does not have a China policy or an Iran policy or a Pakistan policy are plain irrelevant. India does not have a foreign policy, period. It is this lack of strategic orientation in Indian foreign policy that often results in a paradoxical situation where on the one hand India is accused by various domestic constituencies of angering this or that country by its actions, while on the other, India’s relationship with almost all major powers is termed as a ’strategic partnership’ by the Indian government.

More recently, Indian government has been accused of betraying its ’time-tested friends’ such as Iran and Russia as if the only purpose of foreign policy is to make friends. A nation’s foreign policy cannot be geared towards trying to keep every other country in world in good humour. India has been extremely fortunate that it has encountered an incredibly benign international environment for the last several years, making it possible for it to expand its bilateral ties with all the major powers simultaneously.

This has given rise to some rather fantastic suggestions such as India being well-placed to be a ’bridging power’, enjoying harmonious relations with all major powers—the United States, Russia, China, and the European Union. Such a suggestion not only implies that the major global powers are willing to be ’bridged’ but also that India has the capabilities and influence to be such a ’bridge’.

Moreover, the period of stable major power relations is rapidly coming to an end and soon difficult choices will have to be made and Indian policy-makers should have enough self-confidence to make those decisions even when they go against their long-held predilections. But a foreign policy that lacks intellectual and strategic coherence will ensure that India will forever remain poised on the threshold of great power status but won’t be quite able to cross it.

Let not history describe today’s Indian policymakers in the words Winston Churchill applied to those who ignored the changing strategic realities before the Second World War: "They go on in strange paradox, decided only to be undecided, resolved to be irresolute, adamant for drift, solid for fluidity, all-powerful to be impotent."

India is being told that it is on the verge of becoming a great power. But no one is clear what India intends to do with the accretion of economic and military capabilities and with its purported great power status. India today, more than any other time in its history, needs a view of its role in the world quite removed from the shibboleths of the past. An intellectual renaissance in the realm of foreign policy that allows India to shed its defensive attitude in framing its interests and grand strategy is the need of the hour.

Despite enormous challenges that it continues to face, India is widely recognised today as a rising power with enormous potential. The portents are hopeful if only the Indian policy-makers have the imagination and courage to seize some of the opportunities. Instead we have to bear witness to the sorry spectacle of the nation’s prime minister reduced to asking his coalition partners to "listen to voices of reason" on the crucial issue of the nuclear pact with the United Sates.

At crucial moments in its history, a nation needs a leader who can inspire, infuse its people with confidence and remind them that greatness is theirs if only they would push a bit harder. India is in the danger of losing that moment and right or wrong, Dr Manmohan Singh will be blamed for it by history.

Harsh V Pant teaches at King’s College, London.

MIT's Yasheng Huang draws lessons from a fresh look at the Chinese and Indian development stories

2008-06-29T13:33:00.000-04:00

Professor Yasheng Huang of MIT is a specialist on Chinese economic development. His "Capitalism with Chinese Characteristics: Entrepreneurship and the State" (New York: Cambridge University Press, 2008) explains the roots of China’s rise.

In an article published exactly five years ago, “Can India Overtake China?” (Foreign Policy, July/August 2003), Huang and Tarun Khanna of Harvard argued that India’s homegrown growth will eventually give it an edge over the foreign-direct-investment variety that China has preferred.

In the following article just released (Foreign Policy, July/August 2008), Huang draws lessons from a fresh look at the Chinese and Indian development models:

EXCERPTS:

**The emerging Indian miracle should debunk—hopefully permanently—the entirely specious notion that democracy is bad for growth. And the emerging Indian miracle holds substantial implications for China’s political future. As Chinese political elites mark the 30th anniversary of economic reforms this year, they should reflect on the Indian experience deeply and absorb the real reason behind their own miracle.

**If India, with its noisy, chaotic, and lumbering political arrangements, can grow, then no other poor country must face a Faustian choice between growth and democracy. A deeper look at the two countries shows that they have succeeded and failed at different times for remarkably similar reasons. Their economies performed when their politics turned liberal; their performances faltered when their politics slid backward. Now, as many poor countries grapple with similar political and economic choices, we must understand this dynamic. It is high time to get the China-India story right.

**The idea that China grew because of its one-party rule stems from a mistaken focus on a single snapshot in time at the expense of an understanding of shifting trends. China did not take off because it was authoritarian. Rather, it took off because the liberal political reforms of the 1980s made the country less authoritarian. when China reversed its political reforms and saw governance worsen in the 1990s, citizens’ well-being declined. Household income growth slowed, especially in the rural areas; inequality rose to an alarming level; and the gains of economic growth accruing to ordinary people fell sharply. China even underperformed in its traditional areas of strength: education and health. Adult illiteracy rose. Immunizations fell. The country’s GDP might have been booming, but it was also hazardous to your health.

**The real Chinese miracle began back in the 1980s—when Chinese politics was most liberal. Personal income growth outpaced GDP growth; the labor share of GDP was rising; and income distribution initially improved. China accomplished far more in poverty reduction in the 1980s without any of the factors (such as foreign direct investment) now viewed as essential elements of the China model. In four short years (1980–84), China lifted more of its rural population out of poverty than in the 15 years from 1990 to 2005 combined. If India became less democratic under Indira Gandhi, China became less authoritarian under the troika rule of Deng Xiaoping, Hu Yaobang, and Zhao Ziyang in the 1980s. Therein lies the key insight into China’s economic takeoff.

**In the 1990s, the nature of China’s growth was fundamentally altered. In the 1980s, growth was broad-based and positive for the poor; since then, the percentage of people benefiting from growth has narrowed, and social performance has deteriorated. The impact of this great reversal is strongest in the silent and less visible rural areas of China.

**After the Soviet collapse, Chinese political elites converged on the view that China avoided the same fate because China had not reformed its politics. The truth is precisely the opposite. The single most important reason why China survived the 1989 Tiananmen crisis is because its rural population was content. In the 1980s, rural China experienced the most radical economic and political reforms. It was reform that saved the Chinese Communist Party.

**As China tightened its political grip on rural affairs in the wake of the Soviet collapse, India moved in the opposite direction. In 1992, India amended its constitution to strengthen a reform with long and deep implications—village self-government. This panchayati raj phenomenon promises to transform an urban-centered, elitist system to one that is Tocquevillian in character and is empowering women along the way. The auxiliary institutions of Indian democracy, so atrophied under Indira Gandhi, have been renewed. World Bank indicators show a notable improvement in key areas of Indian governance during the period of high growth since the mid-1990s.

**In fact, India leads China in a number of important areas of reform. Throughout the 1990s, India reduced state controls on the banking sector, allowed the entry of private domestic and foreign banks, and abolished government interference in setting the equity pricing of initial public offerings on the stock exchange. China is nowhere near India in terms of pace and depth of financial reforms.

**What about building infrastructure? Even liberals in India sometimes wish for a dose of authoritarianism here. A powerful government in China is able to sidestep all the political and legal complications and build world-class railroads, highways, water systems, and other networks overnight. Surely, authoritarianism has an edge when it comes to public works projects. But no. Building infrastructure has followed—not preceded—Chinese growth. In 1988, China had roughly 91 miles of expressway. That did not begin to change until the late 1990s, when the country poured massive resources into infrastructure. Only in the past eight to 10 years could the country claim to have infrastructure rivaling that of developed countries.

**Many foreign investors think that infrastructure explains the different pace of growth between China and India. No such evidence exists. In the 1980s, India started with some infrastructural advantages over China. It had a longer system of railways, for example. Although we can debate today which country is performing better, there is no doubt that China outperformed India in the 1980s. It was reforms and social investments that propelled Chinese growth, not fancy airports and skyscrapers.

**For years, Western economists and business analysts have chided India for not following China’s lead in this area. But that criticism puts the cart before the horse. Like infrastructure, FDI follows GDP growth rather than precedes it. In the 1980s, China received very little FDI, and yet the country grew faster and more virtuously than its later growth. FDI is a result of growth, and the first order of the policy business is how to grow the economy—not how to attract FDI. As long as India can grow in the 8 to 9 percent range, even without superior infrastructure, it can easily triple or even quadruple its FDI inflows from its current level of $7 billion a year. [Actually, FDI flows into India more than quadrupled to $24.5 billion in fiscal year 2007/08 as compared to just $5.5 billion three years ago]. Growth can self-finance the infrastructure truly needed for business and economic development.

**China has built critical networks, such as power stations and transportation links, but since the mid-1990s, unconstrained by public voice, media scrutiny, and private land rights, Chinese leaders have wasted massive resources on urban skyscrapers that have no economic benefits. Many of them are government buildings and are extraordinarily expensive, costing more than $100 million in some cases. And the financial costs of these projects do not even begin to approach their opportunity costs—those investments in education and health China has failed to make. That a country constructed nearly 3,000 skyscrapers in Shanghai and added 30 million illiterate Chinese during the same decade is truly remarkable.

**The economic dividends of political reform don’t appear overnight, which skews the timeline and confuses the cause. But by using nearly every metric, political liberalization has spurred rather than stunted growth in both China and India.

**After a long hiatus, China’s leadership has rhetorically returned to a vision of the 1980s—that political reforms should be a priority. Rural China has begun to recover from the neglect of the 1990s, and rural income has grown the fastest since 1989. All this is good news. But consolidating these achievements will require a more substantial undoing of the illiberal policies of the 1990s. How India managed to emerge from its own long shadow of illiberalism offers some valuable lessons. In the past, China taught India the importance of social investments and economic opening. It is time for today’s China to take a page from India—and from the China of the 1980s—that political reforms are not antithetical to growth. They are the keys to a healthier and more sustainable foundation for the future.

Ram Narayanan
US-India Friendship
http://usindiafriendship.net/

http://www.foreignpolicy.com/story/cms.php?story_id=4345

FOREIGN POLICY MAGAZINE, July/August 2008

The Next Asian Miracle

By Yasheng Huang

Democracies are peaceful, representative—and terrible at boosting an economy. Or at least that’s the conventional wisdom in Asia, where for years growth in India’s sprawling democracy has been humbled by China’s efficient, state-led boom. But India’s newfound economic success flips that notion on its head. Could it be that democracy is good for growth after all? If so, China better watch its back.

Consider the experiences of the following two Asian countries. In 1990, Country A had a per capita GDP of $317; Country B’s stood at $461. By 2006, Country A, though 31 percent poorer than Country B only 16 years earlier, had caught up: It enjoyed a per capita GDP of $634, compared with Country B’s $635. So, if you had to guess, which of these two Asian countries would you assume is a democracy?

You might be tempted to conclude that the better-performing country is authoritarian China and the laggard is democratic India. In reality, the faster-growing country is India, and the laggard is the occasionally autocratic Pakistan. This fact certainly belies the commonly held notion that—especially among Asian countries—authoritarian states have an advantage in growing an economy compared with their democratic counterparts, who are forced to reckon with such pesky trappings as labor standards and political compromises.

But surely, the familiar China-India comparison would support an authoritarian edge, right? The conclusion seems so obvious: China is authoritarian, and it has grown faster; India is democratic, and it has grown more slowly. For years, Indians have defended their democracy with a sheepish apology—“Yes, our growth rate is terrible, but low growth rates are an acceptable price to pay to govern a democracy as large and as diverse as India.”

There is no need to apologize now. India has ended the infamous 2 to 3 percent annual “Hindu rate” of growth and begun its own economic takeoff. Recent Indian success is not only impressive in terms of its speed—growing at the “East Asian rate” of 8 to 9 percent a year—but also in terms of its depth and breadth. The Indian miracle is no longer confined to the much vaunted information-technology sector; its manufacturing is taking off. Even the historically lackluster agricultural sector is beginning to grow.

So where does this leave the “authoritarian edge” that China’s economy has supposedly enjoyed for years? The emerging Indian miracle should debunk—hopefully permanently—the entirely specious notion that democracy is bad for growth. And the emerging Indian miracle holds substantial implications for China’s political future. As Chinese political elites mark the 30th anniversary of economic reforms this year, they should reflect on the Indian experience deeply and absorb the real reason behind their own miracle.

The idea that there is a trade-off between economics and politics is ingrained in the minds of many policymakers and business executives in Asia, as well as the West. But that idea has never been systematically proven. If India, with its noisy, chaotic, and lumbering political arrangements, can grow, then no other poor country must face a Faustian choice between growth and democracy. A deeper look at the two countries shows that they have succeeded and failed at different times for remarkably similar reasons. Their economies performed when their politics turned liberal; their performances faltered when their politics slid backward. Now, as many poor countries grapple with similar political and economic choices, we must understand this dynamic. It is high time to get the China-India story right.

INDIA’S UNTOLD HISTORY

That story doesn’t begin in 2008. It’s a horse race that goes back decades, and one that tells us much about the relationship between democracy and growth, governance and prosperity. From an economic perspective, it is not the static state of a political system that matters, but how it has evolved. The growth India enjoys today sped up in the 1990s as the country privatized TV stations, introduced political decentralization, and improved governance. And contrary to the conventional wisdom, India stagnated historically not because it was a democracy, but because, in the 1970s and 1980s, it was less democratic than it appeared. To understand just what is happening in India’s economy today—and how it relates to the country’s political system—we must travel as far back as the 1950s.

Many scholars blame India’s first prime minister, Jawaharlal Nehru, for adopting a development strategy that caused India to stagnate from 1950 to 1990. But this view is unfair to Nehru, and it shifts the blame from the real culprit—Indira Gandhi, Nehru’s daughter and prime minister during much of the period from 1966 to 1984. Nehru’s commanding-heights approach was the reigning ideology in many developing countries, some of which, like South Korea, were quite successful. The issue is not how harmful Nehru’s economic policies were, but why India intensified and persisted in this model when it was clearly not working. To answer this question we have to understand the lasting damage that Indira Gandhi inflicted on Indian democracy.

Patronage became her electoral strategy as she undermined a vital institution in a functioning democracy—the party system. Gandhi weakened the Congress Party, once a proud catalyst of the independence movement, by sidestepping many of its well-established procedures, reducing its grass-roots reach in the states, and appointing party officials rather than allowing rank-and-file members to elect them. The shriveling of the Congress Party meant that Gandhi had to use other means to get reelected: crushing political opposition, pandering to special interests, or offering political handouts.

Or cancellations of elections altogether. Indira Gandhi imposed emergency rule in June 1975 and cancelled the general election scheduled for the following year. It was no isolated event. As early as 1970, she postponed or cancelled Congress Party elections. In addition, she moved very far to replace federalism with her own centralized rule. One telling statistic, as shown by political scientists Amal Ray and John Kincaid, is that between 1966 and 1976 the Gandhi government invoked Article 356 of the constitution—which empowers the federal government to take over the functions of state governments in emergency situations—36 times. The government of Nehru and his successor (1950–65) resorted to this measure only nine times. From 1980 to 1984, she invoked this power an additional 13 times. The misuse of the extraordinary power vested in the executive damaged an important institution of Indian democracy.

The cumulative effect of Gandhi’s actions is that the Indian political system, though still retaining some essential features of a democracy, became unaccountable, corrupt, and unhinged from the normal bench marks voters use to assess their leaders. In a functioning democracy, voters punish those politicians who fail to deliver at the ballot box. Not in India. Both the 1967 and 1971 reelections of the Congress Party followed a decline of per capita GDP the year before. It was not democracy that failed India; it was India that failed democracy.

The economic consequences of this period of illiberalism were long lasting. Because Gandhi’s political fortunes depended on patronage, she felt no compulsion to invest in real drivers of economic growth—education and health. The ratio of teachers to primary-school students throughout the long Gandhi years stubbornly hovered around 2 percent. After her rule, in 1985, only 18 percent of Indian children were immunized against diphtheria, pertussis, and tetanus (DPT), and only 1 percent were immunized against measles. Even today, India is still paying for her neglect. The low level of human capital remains the single largest obstacle to that country’s developmental prospects.

The good news is that India is shedding this harmful legacy. As Indian politics became more open and accountable, the post-Gandhi governments began to put welfare of the people at the top of the policy agenda. For example, the adult literacy rate increased from 49 percent in 1990 to 61 percent in 2006. In due time, these social investments will translate into real dividends.

CHINA’S GREAT REVERSAL

The story of China’s rise seems, on the surface, quite different. A communist and closed regime undertakes an efficient, massive, and rapid embrace of the global economy—and sends its country into overdrive. It appears to be a far cry from the common understanding that democracy promotes growth because it imposes constraints on rulers and reassures private entrepreneurs of the safety of their assets and fruits of their labor. The idea that China grew because of its one-party rule stems from a mistaken focus on a single snapshot in time at the expense of an understanding of shifting trends. China did not take off because it was authoritarian. Rather, it took off because the liberal political reforms of the 1980s made the country less authoritarian. Like India, when China reversed its political reforms and saw governance worsen in the 1990s, citizens’ well-being declined. Household income growth slowed, especially in the rural areas; inequality rose to an alarming level; and the gains of economic growth accruing to ordinary people fell sharply. China even underperformed in its traditional areas of strength: education and health. Adult illiteracy rose. Immunizations fell. The country’s GDP might have been booming, but it was also hazardous to your health.

The real Chinese miracle began back in the 1980s—when Chinese politics was most liberal. Personal income growth outpaced GDP growth; the labor share of GDP was rising; and income distribution initially improved. China accomplished far more in poverty reduction in the 1980s without any of the factors (such as foreign direct investment) now viewed as essential elements of the China model. In four short years (1980–84), China lifted more of its rural population out of poverty than in the 15 years from 1990 to 2005 combined. If India became less democratic under Indira Gandhi, China became less authoritarian under the troika rule of Deng Xiaoping, Hu Yaobang, and Zhao Ziyang in the 1980s. Therein lies the key insight into China’s economic takeoff.

One of the first acts by the reformist leaders was to signal an improving environment for private property. In marked contrast to today’s massive land grabs, the Chinese government in 1979 returned confiscated bank deposits, bonds, gold, and private homes to those former “capitalists” the regime had persecuted. The number of people affected by this policy was not large, around 700,000. But symbolism mattered for a country still reeling from the Cultural Revolution. There were also other symbolic acts designed to elicit the confidence of private entrepreneurs in the new political environment of a post-Mao era. In 1979, two vice premiers visited and personally congratulated an entrepreneur who was granted the first license to operate a private restaurant in Beijing. As early as 1981, a Communist Party document signaled a willingness to recruit its members from the private sector, a well-publicized gesture. The widely held view that the party only began to recruit capitalists late in the Jiang Zemin era is simply incorrect.

The reformist leaders also began to embark on meaningful political changes. As scholar Minxin Pei has noted, every single important political reform—such as the mandatory retirement of government officials, the strengthening of the National People’s Congress, legal reforms, experiments in rural self-government, and loosening control of civil society groups—was instituted in the 1980s. The Chinese media became freer in the early reform era. The timing here is critical. This “directional liberalism” of China’s politics either preceded or accompanied China’s economic growth. It was not a result of economic success.

This liberalism mattered the most for growth in rural China, where the majority of Chinese citizens live. Private access to capital eased in the 1980s. Private entrepreneurship and even some privatization became widespread, especially in poorer parts of the country that needed them most. Of 12 million rural businesses classified as township and village enterprises, 10 million were completely private. The change in direction of China’s politics was sufficiently credible to encourage millions of entrepreneurs to go into business for themselves.

But in the 1990s, the Chinese state completely reversed the gradualist political reforms that the leadership began in the 1980s. This assessment comes from a well-placed insider, Wu Min, a professor at the Party School under the Shanxi Provincial Party Committee. In a 2007 article, Wu revealed that the political reform program adopted at the 13th Party Congress in 1987 implemented some substantial changes. The congress abolished the party committees in many government agencies and explicitly delineated the functions of the party and the state. After 1989, there was no progress on the political reform front, especially in reducing and streamlining the power of the Communist Party.

The political reforms of the 1980s were designed to enhance the accountability of the government by creating some checks and balances over the power of the party and by fostering intraparty democracy. Wu cites one specific measure in the 1990s to derail the reforms of the 1980s. According to Wu, in the 1990s China instituted explicit provisions prohibiting the National People’s Congress (NPC) from conducting evaluations of officials in the executive branch and the courts. Wu comments, “This is obviously a step backward.”

Just how far did this step set back China? How about nearly 30 years? Consider China’s track record when it comes to industrial fatalities. In 1979, in the aftermath of the capsizing of an oil rig that resulted in 72 deaths, the NPC held hearings at which officials in the Ministry of Petroleum Industry were called to testify. The minister was determined to have been negligent and was sacked. But since the mid-1990s, there have been hundreds of explosions and industrial accidents in China’s coal mines. Thousands of people have lost their lives. No hearings have been held, and not a single official at the rank of minister or provincial governor has ever been held explicitly responsible.

Like Indira Gandhi in the 1970s and 1980s, the Chinese state greatly centralized its economic management in the 1990s. It was another reversal from the promising reforms of a decade earlier, the gist of which was delegating decision-making to those best informed about local situations. In 1994, the central government increased substantially the shares of tax revenues going to the central coffers and abolished one of the most innovative Chinese reforms—fiscal federalism. A less well-known development in the 1990s was that the Chinese state centralized the budgetary and other functions of villages. So, even though people were voting in village elections, the officials elected exercised very little power.

The economic consequences of these reversals were substantial. The 1990s saw depressed growth in household incomes relative to GDP, which means that the average Chinese person was losing ground. The employee share of GDP —the income going to the general population—peaked in 1990, at 53.5 percent. By 2002, it had declined to 45 percent of GDP. At 45 percent, the Chinese economy in 2002 was benefiting its people less than it was in 1978, when its employee share of GDP stood at 48 percent. Similarly threatening for the poorest Chinese is a development that has garnered almost no attention: The country is backsliding on literacy. On April 2, 2007, the state-run China Daily published an article with an unusually frank title, “The ghost of illiteracy returns to haunt the country.” It reported that the number of illiterate Chinese adults increased by 30 million between 2000 and 2005. In 2005, there were 115.7 million illiterate Chinese adults, compared with 85 million in 2000. The roots of the problem began in the 1990s. Consider how literacy is defined—the ability to identify 1,500 Chinese characters by the age of 7 to 9. An adult reaching into the illiterate group by 2005 received all his or her primary education in the mid-1990s. In addition, immunization rates against DPT and measles—rising throughout the 1980s—began to decline in the 1990s. In time, China will pay dearly for these colossal failures.

In the 1990s, the nature of China’s growth was fundamentally altered. In the 1980s, growth was broad-based and positive for the poor; since then, the percentage of people benefiting from growth has narrowed, and social performance has deteriorated. The impact of this great reversal is strongest in the silent and less visible rural areas of China.

THE WAY TO REFORM

Of course, understanding the origins of India’s and China’s separate paths to development is just half the story. What’s more telling is how these two countries enacted and reacted to reforms—and what that says about the relationship between political liberalization and economic growth.

After the Soviet collapse, Chinese political elites converged on the view that China avoided the same fate because China had not reformed its politics. The truth is precisely the opposite. The single most important reason why China survived the 1989 Tiananmen crisis is because its rural population was content. In the 1980s, rural China experienced the most radical economic and political reforms. It was reform that saved the Chinese Communist Party.

Political reforms contributed to Indian growth as well. Take the media. During the long Gandhi era, though the print media were free, the government controlled the TV stations—a more important source of information for a country with high illiteracy. The privatization of the stations in the 1990s not only enriched the quality of entertainment for the average Indian but also added transparency to Indian politics. Many corruption and bribery scandals were first exposed on TV, the effects of the exposures being magnified by the vivid images of politicians receiving cash in shady hotel rooms. That is the right way to fight corruption.

As China tightened its political grip on rural affairs in the wake of the Soviet collapse, India moved in the opposite direction. In 1992, India amended its constitution to strengthen a reform with long and deep implications—village self-government. This panchayati raj phenomenon promises to transform an urban-centered, elitist system to one that is Tocquevillian in character and is empowering women along the way. The auxiliary institutions of Indian democracy, so atrophied under Indira Gandhi, have been renewed. World Bank indicators show a notable improvement in key areas of Indian governance during the period of high growth since the mid-1990s.

In fact, India leads China in a number of important areas of reform. Throughout the 1990s, India reduced state controls on the banking sector, allowed the entry of private domestic and foreign banks, and abolished government interference in setting the equity pricing of initial public offerings on the stock exchange. China is nowhere near India in terms of pace and depth of financial reforms.

Would democracy galvanize opposition to reforms? Many progressive reformers in China hold this view, but this is a hypothesis long on fear and short on facts. Consider the following fact about Indian politics: All the reforms have been carried out by a coalition of multiple parties rather than by a single-majority ruling party. This is true of the Congress Party in the early 1990s, the Bharatiya Janata Party between 1998 and 2004, and the Congress Party today.

What about building infrastructure? Even liberals in India sometimes wish for a dose of authoritarianism here. A powerful government in China is able to sidestep all the political and legal complications and build world-class railroads, highways, water systems, and other networks overnight. Surely, authoritarianism has an edge when it comes to public works projects. But no. Building infrastructure has followed—not preceded—Chinese growth. In 1988, China had roughly 91 miles of expressway. That did not begin to change until the late 1990s, when the country poured massive resources into infrastructure. Only in the past eight to 10 years could the country claim to have infrastructure rivaling that of developed countries.

Many foreign investors think that infrastructure explains the different pace of growth between China and India. No such evidence exists. In the 1980s, India started with some infrastructural advantages over China. It had a longer system of railways, for example. Although we can debate today which country is performing better, there is no doubt that China outperformed India in the 1980s. It was reforms and social investments that propelled Chinese growth, not fancy airports and skyscrapers.

One justification for building those massive infrastructure networks is to attract FDI. For years, Western economists and business analysts have chided India for not following China’s lead in this area. But that criticism puts the cart before the horse. Like infrastructure, FDI follows GDP growth rather than precedes it. In the 1980s, China received very little FDI, and yet the country grew faster and more virtuously than its later growth. FDI is a result of growth, and the first order of the policy business is how to grow the economy—not how to attract FDI. As long as India can grow in the 8 to 9 percent range, even without superior infrastructure, it can easily triple or even quadruple its FDI inflows from its current level of $7 billion a year. Growth can self-finance the infrastructure truly needed for business and economic development.

China has built critical networks, such as power stations and transportation links, but since the mid-1990s, unconstrained by public voice, media scrutiny, and private land rights, Chinese leaders have wasted massive resources on urban skyscrapers that have no economic benefits. Many of them are government buildings and are extraordinarily expensive, costing more than $100 million in some cases. And the financial costs of these projects do not even begin to approach their opportunity costs—those investments in education and health China has failed to make. That a country constructed nearly 3,000 skyscrapers in Shanghai and added 30 million illiterate Chinese during the same decade is truly remarkable.

The economic dividends of political reform don’t appear overnight, which skews the timeline and confuses the cause. But by using nearly every metric, political liberalization has spurred rather than stunted growth in both China and India.

After a long hiatus, China’s leadership has rhetorically returned to a vision of the 1980s—that political reforms should be a priority. Rural China has begun to recover from the neglect of the 1990s, and rural income has grown the fastest since 1989. All this is good news. But consolidating these achievements will require a more substantial undoing of the illiberal policies of the 1990s. How India managed to emerge from its own long shadow of illiberalism offers some valuable lessons. In the past, China taught India the importance of social investments and economic opening. It is time for today’s China to take a page from India—and from the China of the 1980s—that political reforms are not antithetical to growth. They are the keys to a healthier and more sustainable foundation for the future.

Professor Yasheng Huang, of the Sloan School of Management at MIT, is author of Capitalism with Chinese Characteristics (New York: Cambridge University Press, 2008). He is writing a book on how politics shapes business, education, and entrepreneurship in China and India.

A discussion on strategic affairs with Stephen P Cohen

2008-06-02T14:38:00.000-04:00

Dr Stephen Cohen, who specializes on India and South Asia, says in the following interview that:

**The Indian strategic community is hopelessly unstrategic. As long as Pakistan was the only threat it was easy, policy was on auto-pilot. When you multiple threats (China, Pakistan), when you have opportunities, when you have America as a potential partner, potential rival, when you have a domestic security problem much larger than Pakistan or China, then it requires more careful thinking. I don’t see that emerging.

**India has a second rate fleet that can do a first rate job. The air force is going to disappear, it’s losing airplanes, it can’t seem to buy more or build any, all be losers.

**I do foresee coalition governments in India well into the future. When there is a coalition government that is unsure of its own political power base, it is difficult to have strategic dialogue with any country, let alone the United States.

**Future senior US government officials might simply say: "That’s the Indians, it is simply not worth the effort to do any kind of deal with them".

**I know one Indian diplomat who has said that India is better off not being a permanent member in UN Security Council. If it were a permanent member, then it would have to take a position on every issue. Historically, India is best off by not taking positions, given its fragile domestic politics and the loss of a foreign policy consensus.

**Without good education and modern agriculture, India will just struggle along. I have spent 45 years studying India, but these two areas are enormously disappointing.

**Indians are very comfortable with complexities. The more screwed up it is, the better Indians function. That is the reason why they do so well in America. For Indians, America is a pretty simple country.

Ram Narayanan
US-India Friendship
http://usindiafriendship.net/
http://usindiafriendship.blogspot.com/

http://pragati.nationalinterest.in/2008/06/look-before-you-hop/

PRAGATI: THE INDIAN NATIONAL INTEREST REVIEW

JUNE 2, 2008

Look before you hop

A discussion on strategic affairs with Stephen P Cohen

NITIN PAI & ARUNA URS

In 1979, Stephen P Cohen wrote a book titled India: Emergent Power? In 2001, he wrote a new book, this time without the question mark. Shekhar Gupta, editor-in-chief of the Indian Express once wrote that “many Indians see him as being overly friendly to the Pakistanis. Many Pakistanis similarly say he has flipped to India’s side. Cohen, however, has written landmark books on both armies and loves them.”

Pragati spoke to Dr Cohen, who is currently a senior fellow at the Brookings Institution, on several issues centred around India-US relations.

Perspectives on India as a rising power

You wrote your book about India being an emerging power in 2001, seven years ago. Do you have a different view today?

Yes, I’d say that the military side of that emergence is less likely than I thought it was then. I think that the Indian strategic community is hopelessly unstrategic. As long as Pakistan was the only threat it was easy, policy was on auto-pilot. When you have multiple threats (China, Pakistan), when you have opportunities, when you have America as a potential partner, potential rival, when you have a domestic security problem much larger than Pakistan or China, then it requires more careful thinking. I don’t see that emerging.

The Indian political community is too domestically focused and I can see it becoming more so. When coalition governments come to power they can’t care about strategic and military policy.

So India is going to continue to expand much faster economically than I thought it would, but it will be a limited military partner for the United States.

It will be even more crippled by the selfinflicted wound of its dysfunctional educational system. That’s something that nobody imposed on India, that’s India’s choice.

India’s cultural power is going to grow. India has always been a cultural superpower. The bhangra is now in American high schools. And there’s Indian films. That aspect of India’s influence is going to continue to grow. And its very impressive.

How do you see the geopolitical structure of the world shaping up in the next 15 years and the next 30 years?

I’m not sure if I’d be willing to guess at that kind of future. You may have periods when some countries are very influential and some when they are not. The US would be powerful across the board, but in terms of cultural power, other countries could gain influence. Now China not going to become a cultural superpower the way India is, especially in the non-Western world, but China will certainly be an economic superpower. Japan could have a revival. It’s a world in which you are going to have one larger power, several medium powers, India will be among the medium powers. Maybe India’s net influence will be equivalent to that of Japan. Japan is a country of great economic capabilities but limited cultural and military influence.

Is the current situation similar to the 60s where the US wants India to act as a counterweight to China but India is inclined not to be aligned with the US against its neighbour.

I think we have always exaggerated the degree to which India is willing or capable of playing that kind of game. I’ve changed my views on this—I just don’t think the Indians can do this. There aren’t enough Indians who can think strategically. For years India’s foreign policy was on automatic pilot. It was to do the opposite of whatever Pakistan did. Pakistan was the main enemy. For a while China briefly became the main threat but that disappeared very quickly. India has accommodated China in various ways, and is now in awe of China’s economic growth.

The Bush administration saw India in strategic terms but except for four or five of your friends, I don’t think the Indians see themselves in strategic terms: that’s it. The Indian military would like to balance China, but they can’t do it unless the politicians and bureaucrats think in terms of balancing China.

There may well be a good outcome because if you have nuclear weapons and a nuclear deterrence relationship you can’t talk in terms of classical strategic balances. You can talk about economic competition, cultural rivalries, but in terms of using military force being a nuclear power complicates matters, as India and Pakistan found out from Kargil.

Is the US-India-Australia-Japan quadrilateral likely to happen?

I think the coming together for a period of twofour months for humanitarian purposes—that’s where the world is moving. There is a lot more capability in working with other countries in India.

In that regard, India is going to be one of the major players. Anything that involves the ocean and naval power, India is going to be a real power, no two ways about it. India has a second rate fleet that can do a first rate job. It has a first rate army but the army is tied down in conflicts all around the place, and can’t spare anybody. The air force is going to disappear, it’s losing airplanes, it can’t seem to buy more or build any, and above all it has some doctrinal schizophrenia—especially regarding air support for the army.

Naval co-operation, which involves disaster relief is a big area. India is going to get its money’s worth out of its navy.

Naval co-operation

Some Indian commentators have complained that in the naval relationship, the United States wants to limit India to the Bay of Bengal, and in a sense, keep it out of the Arabian Sea and ocean to India’s West.

I don’t see why India could not be the member of [the US-led naval task force in the Arabian Sea/Persian Gulf]. It has legitimate Persian Gulf interests and a capable navy. The US navy will be happy to co-operate with Indian navy, but there might be third-party objections in the Persian Gulf. The Pakistanis are deeply involved there. They have twice commanded the joint task force. I look forward to the day when India and Pakistan could collaborate militarily, probably first at sea. We live in a world where natural and man-made disasters will only increase and it is important that major powers work together.

Richard Haas’s metaphor of ‘Sheriff and Posse’ is a good example of co-operation that might be needed. A sheriff will round up a posse of likely characters and then they go and get the bad guys. In this scenario, the bad guy could be natural disaster or an insurrection or a state out of control. India might or might not join the coalition but it is important to work with Indians now to develop and standardise operating procedures.

Isn’t inter-operability a problem that can create hurdles to such co-operation?

The Indians are among the best in the world in integrating systems from different countries. In 1987, I went on board of an Indian frigate visiting Washington, DC. The frigate had Dutch, French, British, Israeli and Russian systems and it all seemed to work very well. Our navy people regard the Indian navy as being up to NATO standards. A naval ship deals with another ship as a single point of command unlike the air force where a plane has to co-ordinate with multiple aircraft. So inter-operability is not a major issue for the navy. I hope we will sell more ships to India like the USS Trenton/INS Jalashwa.

Without restrictive end-user terms & conditions…[Note: India’s Comptroller and Auditor General has noted “restrictions on the offensive deployment of the ship and permission to the foreign government to conduct an inspection and inventory of all articles transferred under the End-Use monitoring clause”]

That applies to the sale of ships to any country. It is just boilerplate.

But wouldn’t that be a spoiler, if other competing suppliers don’t have the same clauses?

India can buy from the French or anyone else. I don’t think American government will have a problem with it. India has trouble buying equipment as it is. The armed forces cannot figure out on how to make acquisitions, especially airplanes. This is a real problem for India. But in terms of restrictions on use, I don’t see any hindrance at all.

The United States in India’s neighbourhood

How do you see US policies towards India changing over the coming decade? And what might be the key differences in the foreign policy approaches of the main candidates.

I cannot go 10 years down the line. If Democrats win the next election, as it looks like they might, and if the nuclear deal is not completed by then, the deal will be a dead duck. Democrats might want to re-negotiate it. I am not sure if Indian government could re-negotiate even if they wanted to.

I do foresee coalition governments in India well into the future. When there is a coalition government that is unsure of its own political power base, it is difficult to have strategic dialogue with any country, let alone the United States. If the BJP comes back to power, its coalition partners might do what Communists did to the Congress. The Communists got involved in foreign policy as a way of putting leverage on Congress for domestic issues.

I don’t think future American governments will have much inclination to learn about which minister belongs to which regional party and what his leanings are. India is simply too complicated a system to deal with, and there is not much of India related expertise in America. I fear that the future senior government officials might simply say: "That’s the Indians, it is simply not worth the effort to do any kind of deal with them".

No American government official is likely to again invest the kind of energy and dedication that Nicholas Burns put into the nuclear deal; he spent half of his life negotiating the deal and it is almost dead now. Still, I hope the deal goes through.

And what if the Republicans win?

A Republican administration might be more sympathetic to India. They would not have to live with their legacy of being ‘anti-India’. The Bush administration has changed that. Indian officials I meet are very pro-Bush.

However, I don’t think India will be a high priority if Iran becomes the real issue. Unless somebody stops Iran from developing nuclear weapons, we might soon see an Iranian nuclear test. This leads to new problem that might make India less relevant. Pakistanis might help the Saudis balance the Iranians. Or Saudi Arabia might become nervous and there might be a ‘Saudi bomb’ probably made in Pakistan or China.

What will India do? Do they stick with Iranians as their best friend in Middle East or try some type of mediating role? It is quite difficult to predict. They might try to stay out of the whole issue, as the Israelis are involved. India would not want to anger Israel, a major arms supplier, by becoming too close to Iran.

Do you think it is possible for India to play a bridging role between the United States and Iran, much like the role played by Pakistan in bringing China and the United States together in 1971?

I don’t think so. It is largely our problem, a psychological one to be more specific, that goes back to 70s and the hostage crisis. Too many Americans are still wrapped up in that. We have an obsession and we cannot get rid of it. So it is hard for India to play that kind of role. By the way, there are other countries that want to play that role also.

Indian is caught between all kinds of contesting powers. I am not sure if India wants to play any role at all. I know one Indian diplomat who has said that India is better off not being a permanent member in UN Security Council. If it were a permanent member, then it would have to take a position on every issue. Historically, India is best off by not taking positions, given its fragile domestic politics and the loss of a foreign policy consensus.

There is room for creative Indian diplomacy on Iran, but [it has] to take Pakistan along. I think India ought to go with Pakistan to the US and say ‘look we understand your concerns about Iran but pipeline is more important to us’.

Tell us something about your upcoming book

I am writing a book with Sunil Dasgupta. The book is about the prospects for an India-US strategic (military) relationship. We are not that enthusiastic about the prospect. My own policy advice to Americans would be: ‘look before you hop’. It is not a leap but a hop—as people do in a potato sack race. The nuclear weapons make a long term and intense relationship inconceivable vis-à-vis China. We also cannot imagine a balancing of Chinese land power by the Indians. The army is not ready for that. They can barely do what they are doing now. The notion of Indians crossing the Himalayas and defeating the Chinese in Tibet or even in Nepal is simply inconceivable.

Agriculture and Education

While military co-operation might not work out, I am very optimistic about economic cooperation, which is booming in both directions. However the big problem areas are education and agriculture. The Indians appear to be unwilling to accept the transfer of foreign educational systems, except for a small sector. I am also bothered by Indian agriculture. Without good education and modern agriculture, India will just struggle along. I got my job at the University of Illinois because it was one of the dozen or so American universities that fostered the green revolution in India. Illinois contributed to the soya bean revolution, Kansas State university was part of the white (milk) revolution. The growth of Indian agriculture 40 years ago was unprecedented, but now it is growing at 1%!

I have spent 45 years studying India, but these two areas are enormously disappointing. If you have a billion people with a bad education system, there might some bright people coming out of that system but that is not good enough. That is not how liberal democracies work.

Indians are very comfortable with complexities. The more screwed up it is, the better Indians function. That is the reason why they do so well in America. For Indians, America is a pretty simple country. Indians need better education to thrive but the universities, including the best ones, are awfully messed up. When I first arrived in India, the universities at Allahabad, Bombay and Calcutta were great places to study. They still had some world class faculties, who have long since gone. The good Indian ones ended up in America.

The government refuses to lift its stranglehold on education

Yes, but you can learn from American system where both public and private universities compete vigourously. This is one area where the British model was ineffective, and ours, which accommodates a multi-ethnic, federal, complex society would fit better.

Yet, I remain amazed at India: my wife says that 100 metres of India is more interesting than 10 kilometres of most other countries. A few months ago I was on Parliament Street: under three different trees there were three different businesses flourishing. One guy was repairing bicycle tyres, a second was a cobbler and a woman was hawking lottery tickets. Each had a different life story. That was an amazing display of India’s complexity and diversity.

Nitin Pai is editor of Pragati. Aruna Urs works for a risk consultancy.

US and India: Uses of NONLETHAL Weapons for National Security

2008-05-26T11:17:00.000-04:00

Dr. D V Giri is a Harvard Ph. D and one of America's leading researchers in high-power electro-magnetics. He has written an insightful and path-breaking book, published by Harvard University Press, which focuses on "the science and technology of nonlethal weapon systems."

What are nonlethal weapon systems?

The effectiveness of weapons has advanced over the centuries -- their purpose being to outsmart and overpower one's enemy, accomplished primarily through the use of lethal force. From bows and arrows, to nuclear and biological weapons, the mission is to kill the opponent. Modern weaponry far exceeds the early forms of weaponry in terms of carnage and destruction yielded, including the ability to wipe out entire countries with chemical, nuclear and biological weapons. However, throughout the ages, each new level of weapon sophistication and lethality has presented new concerns: how to eradicate powerful armies without wiping out the surrounding civilian population. In other words, can we win a conflict without excessive collateral damage and without exposing our own forces to excessive risk?

The major modern themes in weapons innovation have been on accuracy , precision and controllability. Precision can ultimately reach a point where rather than just targeting specific buildings, specific pieces of equipment, or people, they can be targeted from a safe distance away. Controllability can also be achieved by weapons that disable instead of destroy. These weapons may be able to disable people or equipment without any permanent major damage.

Information is becoming the battlefield in the modern age. Communication and coordination are vital to the modern army. If the adversary's communication links can be effectively destroyed, this can present an important strategic advantage. The future battlefield can, thus, be thought of as an information battlefield which may be just as fierce, but may turn out to be much less lethal than traditional battlefields.

Dr Giri affirms that lethal weaponry as the only source of protection and defense is a concept that may soon be outdated. In the 21st century, new strategies and weapons are becoming available that are nonlethal in nature and designed to minimize casualties on all sides.

Nonlethal weapons generally are "life conserving and environmentally friendly".

Nonlethal weapons are of two kinds: a) Conventional -- tear gas, plastic bullets, tasers, sprays; b) Unconventional -- high-power microwaves, low energy lasers, acoustic weapons.

The new frontier and the area that offers the most potential for nonlethal weapons is within the unconventional category.

There are two types of life-conserving unconventional nonlethal technologies (NLT), that greatly minimize the killing of soldiers and civilian noncombatants:

1) Anti-material nonlethal technologies -- designed to destroy or impair hardware, munitions, electronics, or in other ways to stop the enemy's systems from functioning.

2) Anti-personnel nonlethal technologies -- impairs the functioning of people without causing lasting serious physiological damage.

Nonlethal technologies can be implemented at a minimal cost and will expand the options available to all levels on the defense continuum from domestic crime to strategic war.

The value of nonlethal defense lies first as a means for assessing the enemy's weaknesses. The other important function concerns its role for targeting the enemy's critical assets without harming the people associated with those networks.

Nonlethal weapons (NLW) hold the potential for playing an active role in six key areas: psychological operations, mobility denial, vision denial, communications denial, close combat, and paralysis of administrative/logistical infrastructures.

NLW systems could also be used to disable sensor systems, communications, computers, enemy weapons, and air, sea and ground vehicles. NLWs possess both defensive and offensive capabilities. Their introductions to current defense systems are expected to profoundly impact the direction and outcome of conflict.

As Clausewitz said (quoted by Giri): "The supreme object of war is to render the enemy incapable of resistance".

CYBER WARS AND TECHNO-WARRIORS:

Some NLWs are a result of the technological advances in information systems. By the year 2020, one computer would be as powerful as all the computers in Silicon Valley today. Research and development in "information warfare" hopes to transform the way wars are fought.

NLT currently being researched, will be used to confound, confuse, harass, and otherwise debilitate the perpetrator, in short to stop him in his path without killing him or blowing up the road. Examples of such devices include laser rifles that will temporarily blind the enemy or compromise his optical-sensing gear, low frequency infra-sound generators that can trigger nausea and bowel spasms, electronics-disrupting pulses of electromagnetic radiation that are emitted by RF (Radio Frequency) weapons, slick and sticky chemicals that can make roads and railways impassable (either through sticky glue or extreme slipperiness), and biological agents made to "chew up" assets.

A non-nuclear electromagnetic-pulse (NNEMP) "bomb", when used against a financial institution such as a bank, can scramble the electronics of the computer and communications systems , thus incapacitating the entire operations of that institution.

Computer viruses can be fed into the enemy's switching networks and cause massive failure to the country's telephone system. Technology-warriors can jam the communications equipment of enemy armies. Using electronic technology the armed forces can send out incorrect information to enemy forces, rendering their systems virtually useless. These techno-warriors can also jam the signals for the enemy's government television stations and actually insert "morphed" television announcements. And finally, "logic-bombs" can shut down the mainframe computers that run the enemy country's air-traffic control system and route its railroads. In this way, enemy planes end up at the wrong airports and railcars carrying military supplies are misdirected.

Giri makes it clear that NLTs are not intended to replace lethal weaponry. Rather they are intended to supplement our current approach and to increase our options.

CIVILIAN AND MILITARY SCENARIOS WHERE NLW CAN BE BENEFICIALLY APPLIED

Civilian law enforcement scenarios: automobile chase in approaching criminals, illegal border crossing between nations, snipers shooting at civilians, certain hostage situations, suicide attack against public places, riverboats carrying contraband, and trucks carrying contraband.

Military scenarios: unarmed crowds blocking a convoy, armed civilians blocking a convoy, peace enforcement and support efforts, suicide attacks against military facilities, large numbers of unarmed civilians hiding armed individuals, area denial and perimeter security, enforcement of no-fly zones by attacking air defense facilities, violation of demilitarized zones (eg: tunnelling through the DMZ in Korea), deny successful mission to hostile aircraft and incoming missiles.

An example of NLW: Active Denial Technology. This uses millimeter-wave electromagnetic energy to stop, deter and turn back an advancing adversary from relatively long range. It will save countless lives by providing a way to stop individuals without causing injury , before a deadly confrontation develops.

NON-ELECTROMAGNETIC NLWS

These are optical, acoustic, and chemical NLW technologies.

Optical NLWs can be broken down into four basic categories: 1) Low-Energy Laser (LEL) Weapons, 2) Isotropic Radiators, 3) LIDAR (Light Detection and Ranging), and 4) Visual Stimulation and Illusion (VSI).

LEL weapons -- man-portable nonlethal weapons resemble conventional rifles and can be powered by portable battery parks or other conventional electrical sources. They can flash-blind people and disable optical and infrared systems used in target acquisition, tracking, night vision and range finding. They provide law enforcement with an additional option that is nonlethal.

Isotropic Radiators are special munitions that illuminate with laser-bright intensity. These illuminations act the same way as LEL weapons They can be packaged for airdrops, fired aloft from mortars or artillery, or used by hand. They are effective against aircraft, in the dark, or when people look toward the light.

LIDAR, or light detection and ranging, can be used for plume identification as well as for sensor blinding. LIDAR systems could identify the plume of covert drug manufacturers or other illicit processes, pinpointing manufacturing sites. LIDAR may be used as either an offensive weapon or as a sophisticated type of sensor.

VSI (Visual Stimulus and Illusion) -- employs high intensity strobe lights that flash at a frequency that causes vertigo, disorientation and vomitting. This technology can be effective if the facility is installed in airports, security check points, banks and prisons. Law enforcement vehicles equipped with banks of high intensity strobe lights and power generators might be dispatched within minutes to riot or hostage-barricade situations. When VSI weapons are combined with infrasound technology they create a very effective nonlethal disabling package.

Acoustic NLW Technologies are of two categories -- Acoustic Weapons and Voice Recognition Technologies (VRT). These weapons are intended to disable individuals and communication systems.

Chemical NLW technologies include those technologies of polymers, acids, sedatives, and other agents designed to disable equipment and humans, but not to kill people. Current chemical NLW include Liquid Metal Embrittlement, Supercaustics, Calmative Agents, Anti-traction, Polymers, Combustion Alteration, Entanglements and Foams.

Thus, there are a variety of NLWs that can be used to defend and protect ourselves from threatening forces with or without the use of LWs.

Giri's less than 300 page book -- its full title is "High-Power Electromagnetic Radiators: NonlethalWeapons and Other Applications" -- has 7 chapters and 5 Appendices. Three of the chapters and all the appendices are highly technical: to understand them one needs to be strong in higher mathematics. However, there are 4 chapters which the layman can follow. I have summarized the contents of the four chapters in the foregoing paragraphs.

Giri has plans to write one more book on this subject tentatively titled
"Bloodless Wars" which he expects would appeal to a wider audience. He tells me that "Very complicated matters can sometimes be described in simple terms".

Meanwhile, some very important questions call for answers:

1) Are NLT weapons being currently used by the US in Afghanistan and Iraq? If so, how effective are they?

2) Is India employing NLT weapons to fight terrorists and insurgents in Kashmir and elsewhere in the country?

3) Is the US law enforcement system using NLT weapons to outwit hostage-takers?

4) Is India's law enforcement system employing NLT weapons to tackle civil riots? The latest incident involving the Gujjars in Rajasthan resulted in police firing and the death of a number of people. Could the deaths have been avoided and the riots better managed by using suitable NLT weapons?

5) Will democracies like the US and India be able to stay ahead of authoritarian and militarily fast growing countries like China so that their continued superiority in NLT weapons (apart from LT weapons) will act as a severe deterrent to any possible future Chinese attempts to tamper with their computer and communication systems or grab Indian territory or be overassertive in the Pacific Ocean or the Indian Ocean areas?

6) How do democracies like the US and India stay ahead in building effective defense mechanisms against ALL NLT weapons being developed by countries like China? An example would be against computer viruses that can be fed into our switching networks and cause massive failures in our telephone systems?. Also cyber attacks in recent months on government computers in India by Chinese hackers. "The challenge will be in harnessing our advanced technologies into powerful weapons that cannot be used against us." India needs to let the Chinese know that if India is affected, China would be more than harmed in equal terms, electronically.

7) Since China has shown a strong propensity to steal, through espionage or otherwise, advanced US technology in restricted areas, the US needs to make fool proof arrangements to protect its vital technologies. Increasingly, this caution will apply to India too.

8) How do nations such as the US and India ensure that terrorists and other non-state hostile elements within their boundaries or outside do NOT acquire or develop NLT weapons?

Finally, Isn't it time the US and India actively collaborate to develop cutting edge NLT weapons, to stay well ahead of China, and also join forces in training their armed forces, anti-terrorist forces and law enforcement systems in using the most effective NLT weapons?

Time for the US, India and the world to start drastically cutting consumption of petroleum and petroleum products‏

2008-05-22T12:52:00.000-04:00

If, as the following article predicts, a “super spike” — a price surge will soon drive crude oil to $200 a barrel, it would mean, as Thomas Friedman says in another article in The New York Times (http://www.nytimes.com/2008/05/21/opinion/21friedman.html?_r=1&scp=2&sq=Thomas+Friedman&st=nyt&oref=slogin):

a "huge transfer of wealth to the petro-authoritarians" from countries like the US and India. ’According to Congressional testimony Wednesday by the energy expert Gal Luft, with oil at $200 a barrel, OPEC could "potentially buy Bank of America in one month worth of production, Apple computers in a week and General Motors in just three days." ’

The time has come for the US, India and world to develop an alternative energy policy that would involve a drastic cut in the consumption of petroleum and petroleum products over the next decade or so.

The article below gives some pointers as to how this can be done.

Ram Narayanan
US-India Friendship
http://usindiafriendship.net/

http://www.nytimes.com/2008/05/21/business/21oil.html?_r=1&adxnnl=1&oref=slogin&adxnnlx=1211404736-fVXuPtJiB4gGw/r3H8BtPg

THE NEW YORK TIMES

An Oracle of Oil Predicts $200-a-Barrel Crude

By LOUISE STORY
Published: May 21, 2008

Arjun N. Murti remembers the pain of the oil shocks of the 1970s. But he is bracing for something far worse now: He foresees a “super spike” — a price surge that will soon drive crude oil to $200 a barrel.
Mr. Murti, who has a bit of a green streak, is not bothered much by the prospect of even higher oil prices, figuring it might finally prompt America to become more energy efficient.

An analyst at Goldman Sachs, Mr. Murti has become the talk of the oil market by issuing one sensational forecast after another. A few years ago, rivals scoffed when he predicted oil would breach $100 a barrel. Few are laughing now. Oil shattered yet another record on Tuesday, touching $129.60 on the New York Mercantile Exchange. Gas at $4 a gallon is arriving just in time for those long summer drives.

Mr. Murti, 39, argues that the world’s seemingly unquenchable thirst for oil means prices will keep rising from here and stay above $100 into 2011. Others disagree, arguing that prices could abruptly tumble if speculators in the market rush for the exits. But the grim calculus of Mr. Murti’s prediction, issued in March and reconfirmed two weeks ago, is enough to give anyone pause: in an America of $200 oil, gasoline could cost more than $6 a gallon.

That would be fine with Mr. Murti, who owns not one but two hybrid cars. “I’m actually fairly anti-oil,” says Mr. Murti, who grew up in New Jersey. “One of the biggest challenges our country faces is our addiction to oil.”

Mr. Murti is hardly alone in predicting higher oil prices. Boone Pickens, the oilman turned corporate raider, said Tuesday that crude would hit $150 this year. But many analysts are no longer so sure where oil is going, at least in the short term. Some say prices will fall as low as $70 a barrel by year-end, according to Thomson Financial.

Experts disagree over the supply of oil, the demand for it and whether recent speculation in the commodities markets has artificially raised prices. As an energy analyst at Citigroup, Tim Evans, reportedly put it, trading commodities these days is like “sticking your hand in a blender.”

Whatever the case, oil analysts like Mr. Murti have suddenly taken on the aura that enveloped technology analysts in the 1990s.

“It’s become a very fashionable area to write about,” said Kevin Norrish, a commodity analyst at Barclays Capital, which began predicting high oil prices around the same time as Goldman. “And to try to get attention from people, people are coming out with all sorts of numbers.”

This was not always the case. In the 1990s, oil research was a sleepy area at banks. Many analysts assumed oil prices would hover near $15 to $20 a barrel forever. If prices rose much above those levels, they figured, consumers would start conserving, suppliers would raise production, or both, causing prices to decline.

But around the turn of the century, oil company after oil company started missing predicted production. Mr. Murti, who covers oil companies like ConocoPhillips and Valero Energy, decided to study the oil spikes of the 1970s.

Since starting his career at Petrie Parkman & Company, a Denver-based investment firm acquired by Merrill Lynch in 2006, he had been conservative in his calls on oil. But by 2004, he concluded the world was headed for a long supply shock that would push prices through the roof. That summer, as oil traded for about $40 a barrel, Mr. Murti coined what has become his signature phrase: super spike.

The following March, he drew attention by predicting prices would soar to $105, sending shock waves through the market. Angry investors questioned whether Goldman’s own oil traders benefited from the prediction. At Goldman’s annual meeting, Henry M. Paulson Jr., then the bank’s chief executive and now Treasury secretary, found himself defending Mr. Murti.

“Our traders were as surprised as everyone else was,” Mr. Paulson reportedly said. “Our research department is totally independent. Our trading departments have no say about this.”

Over time, Mr. Murti was proved right again. Oil crossed $100 in February. Mr. Murti’s forecasts now feed into many of Goldman’s economic and corporate forecasts, affecting research of companies like Ford and Procter & Gamble. His research is distributed widely among investors.

“Even if you disagree with their views, the problem is that Goldman does carry so much credibility,” said Nauman Barakat, senior vice president for global energy futures at Macquarie Futures USA. “There are a lot of traders who are going to buy based on their reports.”

His sudden fame unsettles Mr. Murti. He rarely grants interviews, citing concerns about privacy, and he declined to be photographed for this article. He is not the bank’s only gas prognosticator: Jeffrey R. Currie predicts oil prices out of London.

Mr. Murti, for his part, discounts suggestions that his reports affect market prices. “Whenever an analyst upgrades a stock or downgrades a stock, sometimes you get a reaction that day, but beyond a day, fundamentals win out,” he said.

Mr. Murti falls into the camp of oil analysts who believe that supply is likely to remain tight because of geopolitical factors. These analysts predict higher prices because production is declining in non-OPEC countries like Britain, Norway and Mexico.

The analysts who predict lower prices say there are supplies of oil that the bullish analysts are missing. “This year will be a year in which supply will be put into the market by stealth by OPEC and by countries we call black-hole countries,” said Edward L. Morse, chief energy economist at Lehman Brothers. China is one example, he said.

But while oil and gas prices have been rising for a while now, Americans have only just begun to reduce gasoline consumption, so their efforts to conserve have not dragged down oil prices.

“The fact that the U.S. gasoline demand can be down and that the U.S. gasoline consumer is no longer driving world oil prices is a monumental event,” Mr. Murti says. He spends most of his time talking to money managers and analysts, many of whom keep asking him if oil prices will stay high if speculators abandon the market, and says he applauds investors for driving up oil prices, since that will spur investment in alternative sources of energy.

High prices, he says, “send a message to consumers that you should try your best to buy fuel-efficient cars or otherwise conserve on energy.” Washington should create tax incentives to encourage people to buy hybrid cars and develop more nuclear energy, he said.

Of course, if lawmakers heed his advice, oil analysts like him might one day be a thing of the past. That’s fine with Mr. Murti.

“The greatest thing in the world would be if in 15 years we no longer needed oil analysts,” he says.

_____________________________________________

India's Rural Poverty and Maoist Insurgency

2008-05-09T15:19:00.000-04:00

Here is a wake up call for all of us who are interested in India’s progress.

Naxalite insurgency is spreading. (Please see BUSINESSWEEK article below).

While the law enforcement machinery must be adequately strengthened, the real solution lies in addressing the issue of poverty of the tribals and of the other rural poor who inhabit some 200 districts of India that have been declared backward and where poverty levels are worse than elsewhere in the country.

India’s business corporations have grown rich since the opening up of the economy -- there are many whose revenues exceed a billion dollars per annum and are continuing to expand their operations.

If they will each care to adopt a few districts and focus singlemindedly on eliminating poverty, the naxalite movement can be marginalized in five years. The example of Byrraju Foundation set up be the Satyam group of companies to promote healthcare, education, and improve livelihood in remote villages, is one example of how Indian industry can go about transforming villages. The Foundation currently operates in 189 villages in 6 districts of Andhra Pradesh (http://www.byrrajufoundation.org/) .

The urgent need is for India’s top companies (including all the mining companies) to join hands and adopt all the 200 backward districts, among themselves, and follow the Satyam or any other proven model of rural development.

Will CII (Confederation of Indian Industry), FICCI (Federation of Indian Chambers of Commerce and Industry) and ASSOCHAM (Associated Chambers of Commerce and Industry) convene a joint action-oriented meeting to discuss and take action on this specific issue?

I am aware that CII recently convened its annual meeting, where the issue of poverty was discussed. However, going by one leading commentator’s review, it looks like it was only a talking session, with a few good ideas thrown in. No specific India-wide action plan emerged from that meeting (http://www.indianexpress.com/story/305005.html).

It’s tme the three powerful Indian business organizations take the initiative to convene a joint meeting specifically to take action on allotting the 200 backward districts to India’s corporates and hold them to a time-bound poverty-elimination action plan .

Ram Narayanan
US-India Friendship
http://usindiafriendship.net/

http://www.businessweek.com/magazine/content/08_20/b4084044908374.htm?link_position=link1

BUSINESSWEEK

MAY 7, 2008

In India, Death to Global Business
How a violent—and spreading—Maoist insurgency threatens the country’s runaway growth

by Manjeet Kripalani

On the night of Apr. 24, a group of 300 men and women, armed with bows and arrows and sickles and led by gun-wielding commanders, emerged swiftly and silently from the dense forest in India’s Chhattisgarh state. The guerrillas descended on an iron ore processing plant owned by Essar Steel, one of India’s biggest companies. There the attackers torched the heavy machinery on the site, plus 53 buses and trucks. Press reports say they also left a note: Stop shipping local resources out of the state—or else.

The assault on the Essar facility was the work of Naxalites—Maoist insurgents who seek the violent overthrow of the state and who despise India’s landowning and business classes. The Naxalites have been slowly but steadily spreading through the countryside for decades. Few outside India have heard of these rebels, named after the Bengal village of Naxalbari, where their movement started in 1967. Not many Indians have thought much about the Naxalites, either. The Naxalites mostly operate in the remote forests of eastern and central India, still a comfortable remove from the bustle of Mumbai and the thriving outsourcing centers of Gurgaon, New Delhi, and Bangalore.

Yet the Naxalites may be the sleeper threat to India’s economic power, potentially more damaging to Indian companies, foreign investors, and the state than pollution, crumbling infrastructure, or political gridlock. Just when India needs to ramp up its industrial machine to lock in growth—and just when foreign companies are joining the party—the Naxalites are clashing with the mining and steel companies essential to India’s long-term success. The threat doesn’t stop there. The Naxalites may move next on India’s cities, where outsourcing, finance, and retailing are thriving. Insurgents who embed themselves in the slums of Mumbai don’t have to overrun a call center to cast a pall over the India story. "People in the cities think India is strong and Naxalism will fizzle out," says Bhibhu Routray, the top Naxal expert at New Delhi’s Institute for Conflict Management. "Yet considering what has happened in Nepal"—where Maoists have just taken over the government—"it could happen here as well. States, capitals, districts could all be taken over."

Officials at the highest levels of government are starting to acknowledge the scale of the Naxal problem. In May a special report from the Planning Commission, a government think tank, detailed the extent of the danger and the "collective failure" in social and economic policy that caused it. The report comes five months after Prime Minister Manmohan Singh shocked the country with a candid admission: "The Naxal groups…are targeting all aspects of economic activity…[including] vital infrastructure so as to cripple transport and logistical capabilities and slow down any development. [We] cannot rest in peace until we have eliminated this virus."

Why such rhetoric now about a movement that has coexisted with the rest of India for more than 40 years? One reason is the widening reach of the Naxalites. Today they operate in 30% of India, up from 9% in 2002. Almost 1,400 Indians were killed in Naxal violence in 2007, according to the Asian Center for Human Rights.

Collision Course

The other reason for sounding the alarm stems from the increasingly close proximity between the corporate world and the forest domain of the Naxalites. India’s emergence as a hot growth market depended at first on the tech outsourcing boom in Bangalore and elsewhere. Now the world is discovering the skill and productivity of India’s manufacturers as well. Meanwhile India’s affluent urban consumers have started buying autos, appliances, and homes, and they’re demanding improvements in the country’s roads, bridges, and railroads. To stoke Indian manufacturing and satisfy consumers, the country needs cement, steel, and electric power in record amounts. In steel alone, India almost has to double capacity from 60 million tons a year now to 110 million tons. "We need a suitable social and economic environment to meet this national challenge," says Essar Steel chief Jatinder Mehra.

Instead there’s a collision with the Naxalites. India has lots of unmined iron ore and coal—the essential ingredients of steel and electric power. Anxious to revive their moribund economies, the poor but resource-rich states of eastern India have given mining and land rights to Indian and multinational companies. Yet these deposits lie mostly in territory where the Naxals operate. Chhattisgarh, a state in eastern India across from Mumbai and a hotbed of Naxalite activity, has 23% of India’s iron ore deposits and abundant coal. It has signed memoranda of understanding and other agreements worth billions with Tata Steel and ArcelorMittal (MT), De Beers Consolidated Mines, BHP Billiton (BHP), and Rio Tinto (RTP). Other states have cut similar deals. And U.S. companies like Caterpillar (CAT) want to sell equipment to the mining companies now digging in eastern India.

The appearance of mining crews, construction workers, and truckers in the forest has seriously alarmed the tribals who have lived in these regions from time immemorial. The tribals are a minority—about 85 million strong—who descend from India’s original inhabitants and are largely nature worshippers. They are desperately poor, but unlike the poverty of the urban masses in Mumbai or Kolkata, their suffering has remained largely hidden to outsiders and most Indians, caught up as they are in the country’s incredible growth. The Naxalites, however, know the tribals well and have recruited from their ranks for decades.

Judging from their past experience with development, the tribals have a right to be afraid of the mining and building that threaten to change their lands. "Tribals in India, like all indigenous people, are already the most displaced people in the country, having made way for major dams and other projects," says Meenakshi Ganguly, South Asia chief researcher for Human Rights Watch, which is compiling a report on the Naxal movement. The tribals are supposed to be justly compensated for any land used by the companies, but the states’ record in this area is patchy at best.

The Biggest Threat

This creates an opening for the Naxalites. "If there is a land acquisition issue over a project, the Naxals come in and say, ’We will fight on your behalf,’" says Anami Roy, the director general of police for Maharashtra, the western state that has Mumbai as its capital. Upon his appointment to the post in March, Roy declared Naxalism to be the biggest threat to the state’s peace.

For those who see things differently from the Naxalites, the results can be terrifying. In January in Chhattisgarh, a village chieftain, suspected of being a police informer, was kidnapped, mutilated, and killed with a sickle—an example to any of the villagers who dared to oppose the Naxals. Company executives talk sotto voce about how dangerous it is for a villager to support business projects. "No villager has the courage to stand up to the Naxalites," says one manager who is often in the region. The possibility of violence has contributed to the slow progress of many mining projects. Nik Senapati, country head of Rio Tinto, which has outstanding permits for prospecting in eastern India, knows the threat. "It’s possible to work here," he says. "But we avoid parts where there are Naxals. We won’t risk our people."

The Naxalites often don’t hesitate to kill or intimidate their foes, no matter how powerful they are. Former Andhra Pradesh Chief Minister Chandrababu Naidu, who is credited with turning the state capital of Hyderabad into a tech center, narrowly avoided death at their hands.

Targeting Cities

But the Naxalites can offer their followers clear benefits. Lakshmi Jalma Khodape, 32, alias Renuka, a petite tribal from Iheri, Maharashtra, was just 15 when she joined up. "I had no education," she recalls. "My father was a guard in the forest department. The Naxals taught me how to read and write." Eventually disgusted by the Naxals’ violence, Lakshmi surrendered to the state police and now lives under their protection.

Undeniably, the Naxals are viewed as Robin Hoods for many of their efforts. "The tribals have benefited economically thanks to the Naxals," says human rights lawyer K. Balagopal, who has defended captured Naxalites in court cases. In Maharashtra, tribals pick tender tendu leaves, which are rolled to make a cigarette called a "bidi." Contractors used to pay them the equivalent of a penny for picking 1,000 leaves from the surrounding forest. The contractors would then take the leaves to the factory owners and sell them for a huge markup. But the Naxals intervened, threatening the contractors and demanding better wages. Since 2002 the contractors have increased the price to about $4 per 1,000 leaves.

According to the Institute for Conflict Management, the Naxalites are now planning to penetrate India’s major cities. Ajai Sahni, executive director of the Institute, says they are looking to encircle urban centers, find sympathy among students and the unemployed, and create armed, "secret, self-defense squads" that will execute orders. Their targets are the two main industrialized belts that run along the east and west coasts.

That’s an ambitious plan, but the Institute estimates there are already 12,000 armed Naxalites, plus 13,000 "sympathizers and workers." This is no ragtag army. It is an organized force, trained in guerrilla warfare. At the top, it is led by a central command staffed by members of the educated classes. The government also fears the Naxalites have many clandestine supporters among the urban left. The police have recently been rounding up suspected allies in the cities.

Ready Recruits

The Naxalites are already operating on the edge of industrialized Maharashtra state, about 600 miles from Mumbai. The litany of complaints from village women in Maharashtra’s Gadchiroli district is endless and is one reason the Naxalites find ready recruits here. The teachers don’t come to teach in the government school, and when they do, say local parents, they drink and gamble on the premises. In one village, the sixth-graders don’t know how to read and write despite the fact that the state pays teachers 20% extra for volunteering to work in Naxal-infested areas. In the civil hospital in Gadchiroli, poor villagers have to purchase all the equipment for treatment themselves, from scalpels to swabs. (The hospital says it’s well stocked.) "This is what happens in nontribal villages," says Dr. Rani Bang, a Johns Hopkins School of Medicine physician who runs a popular tribal hospital in the nearby forest. "You can imagine how bad it is for tribals."

Despite the need to ease the tribals’ poverty and blunt the appeal of the Naxalites, New Delhi still treats the insurgency largely as a law-and-order problem. States like Chhattisgarh, whose ill-trained police force is overwhelmed, have unleashed vigilantes on the Naxalites and the tribals and given the force arms and special protection under the law. The vigilantes, called Salwa Judum ("Peace Mission"), have made homeless an estimated 52,000 tribals, who have fled to poorly run, disease-infested government camps. Allegations of rape and unprovoked killings have dogged the Salwa Judum. Efforts to reach Salwa Judum were unsuccessful, but the state government has vigorously defended the group.

The problem is so severe that, in March, a public interest lawsuit was filed in India’s Supreme Court by noted historian Ramachandra Guha, who demanded an investigation into Salwa Judum’s activities. The court granted the request in April. Guha himself is not sanguine about the state’s ability to address the Naxal issue. "The problem is serious, it is growing, our police force is soft," he says. "Thousands of lives will be lost over the next 15 years."

Kripalani is BusinessWeek’s India bureau chief.

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**U.S. is One of the 'Central Pillars' of Indian Foreign Policy‏

2008-05-01T03:43:00.000-04:00

http://www.cfr.org/publication/16130/us_is_one_of_the_central_pillars_of_indian_foreign_policy.html?breadcrumb=/publication/publication_list?type%3Dinterview

COUNCIL ON FOREIGN RELATIONS

U.S. is One of the ‘Central Pillars’ of Indian Foreign Policy

Interviewee: Bruce O. Riedel, Senior Fellow, Foreign Policy, Saban Center for Middle East Policy, Brookings Institution

Interviewer: Bernard Gwertzman, Consulting Editor

April 29, 2008

Bruce Riedel, a South Asia expert who has served in the Central Intelligence Agency and in the Clinton White House, sees the improvement in U.S.-India relations as a major accomplishment of the Bush administration, which carried forward progress made during President Bill Clinton’s tenure. Riedel says the U.S.-India nuclear agreement, which has been held up by opposition in India’s parliament, is likely to be approved next year, and that both major Indian political parties now see the United States as one of “the central pillars of India’s foreign policy.”

In looking at President Bush’s foreign policies, people have criticized him for not building on the past. On the question of dealing with India, President Bush’s administration seems to have built on [President Bill] Clinton’s work in getting a relationship going with the Indians. Would you agree with that?

Very much so. When it came in, the Bush team recognized that India was going to be one of the key powers of the twenty-first century, an emerging potential power, certainly a regional power, but perhaps a global power as well. I worked for President Clinton and for President Bush in his transition. His team very much understood that they wanted to build on what the Clinton people had done and to take it further. The Bush people have taken it further with the India-U.S. civilian nuclear deal, which offers the opportunity to remove one of the main stumbling blocks to U.S.-Indian rapprochement—the nuclear nonproliferation issue.

That agreement caused a certain amount of controversy in the United States when it was signed in 2007, but eventually it got general approval in Congress. Why is India delaying approving it?

The delay in India is entirely due to politics in the governing coalition. The Congress Party, a strong supporter, negotiated the deal and it wants to conclude it. But their junior partner in the coalition, the Communists, opposes the deal for a very simple reason. They recognize that the deal is the pathway by which U.S.-Indian relations are going to get much stronger. The Communists are basically opposed to a strong U.S.-Indian strategic partnership and they want to try to scuttle the deal. When I was in India a few weeks ago, the government made it very clear that they are determined to push this deal forward and to get the various bits and pieces of it put together to go to the International Atomic Energy Agency to finish the negotiations with them and then take it to the Nuclear Suppliers Group [multinational nuclear safeguards group]. Sooner or later they will force a showdown with the Communists but probably closer to the next scheduled Indian election in May 2009. This agreement is probably one that is going to slip over into the next administration.

Is there any chance that a new president in the United States would want to scuttle this?

I certainly hope that wouldn’t happen. This deal is the basis for strong U.S.-Indian relationship and I support it. There is certainly a possibility that a new administration may try to strengthen the nonproliferation parts of it, and might, particularly if the Democrats are elected, try to revive the Comprehensive Test Ban Treaty . But the first step there of course would be for the United States to ratify the CTBT. I don’t think we could go to the Indians and ask them to do something that we haven’t done so far.

When was the CTBT last pushed in Washington?

It died when the Senate turned it down in 1999.

In the United States, India is discussed in a slightly negative way—companies farming out work to India and that sort of thing. Is the U.S.-India trade relationship very strong right now?

The U.S.-India trade relationship is growing. U.S. trade with India has been increasing and U.S. investment in India has been growing. The Indian economy is now growing at about 9 percent [GDP growth], which by Indian standards and by any standard is really remarkable. The change in India in the last decade is one of the most revolutionary developments in the world. We see India really, at long last, beginning to have the kind of economic growth rate that people have always hoped for. There is still a great deal of poverty but there is an enormous amount of change and wealth. India will soon have the world’s largest oil refinery in Jamnagar by Reliance Industries. It’s a symbol of the country’s growing emergence as a major economic power.

It will be able to process virtually every kind of oil from around the world from heavy to light, making it really one of the most attractive refineries for oil in the world. It will not be dependent upon a certain kind of oil to come to it. It’s one example of the economic change that is going there.

That is fascinating. And the two-way trade between the United States and India, what does that show?

It’s growing. It’s certainly nothing like U.S.-Chinese trade, but after decades of being almost flatlined, it’s growing and improving. The traditional barriers to stronger U.S.-Indian economic relations, the bureaucratic jungle that India was for many years, are slowly changing in the right direction. Infrastructure in the country which has been very poor for a long time is improving. You see new big container ports in India, new airports coming into being, the beginning of a national highway system: the kinds of things to undergird real economic growth for a long time to come. All of those things are going in the right direction.

When I started in foreign affairs, India was always the leader of the nonaligned countries and was in a way in line with the Soviet bloc against the United States’ interest in most places. Now of course we’re getting closer and closer. Who is responsible for this change in India’s thinking?

The end of the Cold War freed India in some ways from thinking in those terms. There is still resistance to stronger U.S.-Indian relations. The Communists are very much opposed to it. But there is a very large consensus between the Congress Party and the main opposition—the BJP—that U.S.-Indian relations will be one of the central pillars of India’s foreign policy. When the Indians look around, they look at a troubled neighborhood. To go around the circle with them: Pakistan is in the midst of a difficult transition from military dictatorship to democracy and it’s clear that that transition is going to be a troubled one and that violence is increasing. In Afghanistan, to the north, the Karzai government is having a difficult time with the Taliban, demonstrated by the attempted assassination of President Karzai yesterday. Nepal just elected a Maoist government; Maoist rebels are a big problem in much of India today so this could be another source of trouble.

Then there are problems in Tibet which have come up this year. India probably has the most at stake with how those troubles work themselves out, being the home of the Tibetan exile community and the Dalai Lama. Then you have Bangladesh and Burma [Myamar] on the other side, which have been experiencing great deals of domestic trouble and both are now under military government. Burma, of course, has a horrendous human-rights record. So India looks around its neighborhood and it’s got many troubled neighbors and it’s trying to look for friends that will be standing by it. The United States has demonstrated in the last decade or so, first under President Clinton, then under President Bush, that it’s a solid partner for working with India.

What about the current flap about Iranian President Mahmoud Ahmadinejad, who is due in India on April 29 to talk about a natural gas pipeline that would go through Pakistan? This has been talked about for over a decade. Is this about to come into fruition? Is the United States really that opposed to this deal?

Ahmadinejad and Pakistan President Pervez Musharraf announced that they worked the Iran-Pakistan part of this deal out. I’m a little skeptical. This is a very complex deal and it’s been in the works a long time. My own suspicion is that it’s still probably years away from being operational. American relations with India should not become a hostage to Indian-Iranian relations. India does have a working relationship with Iran. India is the world’s second largest Shiite Muslim country. There are almost as many Shittes in India as there are in Iran. But India also has a very strong relationship with Israel. India is today Israel’s number one customer for military exports and India and Israel have a very close relationship in terms of space activity. India has been a launching point for Israel’s most sophisticated spy satellite, which will launch later this year, and several that are coming up. So if you compare the India-Israel relationship with the India-Iran relationship on a strategic level, India and Israel are much closer and have much more intimate relations in terms of military technology transfers and space research than India has with Iran.

India has made clear that it supports the United States and other UN Security Council members on the resolutions on Iran’s nuclear enrichment program. Right?

That’s right. In the critical vote in the IAEA on the Iran issue, India has been with us. Indian officials said to me when I was there a few weeks ago that the last thing they want to see is a second Muslim nuclear power on their western border. They have enough to worry about with a nuclear-armed Pakistan. They don’t want to see a nuclear-armed Iran.

When you talked about the troubled neighbors you didn’t talk about India’s relations with China.

One part of that is the Tibet issue but yes, there is a larger question in the relationship between Indian and China. The Indians do not want to become part of some kind of American strategy to encircle or contain China. They want to engage China. They obviously have some concerns about long-term Chinese policy. They are quick to point out the difference between India and China is that India is a democracy with a proven track record of democratic elections and democratic transitions whereas China remains a communist dictatorship. They are eager to have strong relations with China but they also know that the two of them are the emerging major powers in Asia and there will be areas of competition as well as cooperation. Indian strategic thinkers recognize that in the long term, getting their relationship with China right is probably the single-most important part of Indian foreign policy in the twenty-first century.

Has the United States taken advantage of this improved relationship with India to do much with military cooperation and in intelligence cooperation? Are we working together against terrorists for instance?

There has been progress in the right direction in the military and intelligence fields but more can be done. We’ve begun to strengthen the military to military relationship but we still have some ways to go. In the intelligence relationship, we’ve made some progress but there again more could be done. But India has been a frequent target of Islamic terrorist groups, many of them operating out of Pakistan. It is high on al-Qaeda’s list of targets , as is the United States. India should cooperate much more strongly on counterterrorism than they have in the past. I would say that this is one of the areas—military and intelligence cooperation—that the next administration should really try to take this relationship to an even higher level.

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Also see the following link for an insightful interview with Bill Emmott, former editor of ‘The Economist’ and author of a new book on ‘Rivals: How The Power Struggle Between China, India and Japan Will Shape Our Next Decade’ http://www.indianexpress.com/story/303757.html

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India-US Space Cooperation: NASA and India's Moon Mission

2008-04-22T04:03:00.004-04:00

INDIA ABROAD, APRIL 25, 2008
Pages A22 & 23

MICHAEL GRIFFIN: THE NASA ADMINISTRATOR DISCUSSES INDIA'S MOON MISSION WITH MANAGING EDITOR AZIZ HANIFFA

**Cooperation between Indian and the US in space can be useful for both sides because the Indian technical community is superb.

**I would like to see India in future years join with us to return people to the moon, among them Indian astronauts.

**I hope that India-US space cooperation will not be impacted by the progress of the nuclear agreement, whether or not that goes well.

From his well-appointed office on the ninth floor of the National Aeronautics and Space Administration, its Administrator Dr. Michael Griffin looks out on a vista of increased space cooperation in which, he hopes, India will play an increasing role.

Dr. Griffin, who has visited India twice since taking over the top slot at NASA, is currently looking forward to the launch of the Indian Space Research Organization's moon probe Chandrayaan-1 -- not only because it will mark the first occasion an Indian space launch vehicle carries advanced United States technological payload, but because of his belief that it will signal the start of sustained US-India cooperation in outer space.

His connection with all things India dates back to his student days at the University of Maryland, when he met, and became friends with, several Indian American students who have remained among his closest friends.

One such -- Dr. Ajay Kothari, President & CEO, Astrox Corporation, in Maryland, an aerospace research and development company that works closely with NASA -- told India Abroad: "When we were taking our graduate classes, there would be four, five students only in some of them: three of whom were Indians, along with Mike and maybe one more."

Dr. Kothari describes his friend as "quick-witted with a great sense of humor, which still comes through quite often, and of course, stupendously smart. We used to share one of those graduate assistant offices with Mike, and we also had the same advisor, Professor John Anderson, then Head of the Department of Aerospace Engineering, now a very well known name in the aerospace world with eight books to his credit.

"At the time, little did we realize that our good friend Mike would one day go on to become head of the country's space program and take NASA to the new heights that he has."

Dr. Griffin started out in academia, teaching courses in spacecraft design and related subjects at the University of Maryland, Johns Hopkins University, and George Washington University. Besides various stints in the private sector, he has served as Chief Engineer and as Associate Administrator for Exploration at NASA, and as Deputy for Technology at the Strategic Defense Initiative Organization.

Q. How significant is the U.S. participation in Chandrayaan-1, India's moon project? Isn't this the first time a U.S. payload will be aboard an Indian space vehicle?

A. I believe that is true -- this is the first time, and I am delighted. It was a competitive process, and so I'm glad a U.S. payload successfully competed to be aboard the instruments suite on Chandrayaan-1. It's terrific that the Indian Space Research Organization is carrying out this mission. It's very symbolic of the kind of cooperation that I would like to see between India and the United States going forward, in space.

Q. Have you any indication from ISRO as to when it will finally take place? You were, I understand, hoping it was going to be sometime this month.

A. Loosely speaking, in June is what I am hearing. I want Chandrayaan-1 to launch when it's ready, (and) not because we reach a date on the calendar.

Q. I understand the U.S. payload, which you have said is symbolic of future cooperation, comprises some very important instrumentation that NASA is getting together.

A. It is not symbolic. It's a scientific investigation. The payload is synthetic aperture radar -- radar that will help detect the presence of water ice on the moon and the poles, if indeed it exists.

Q. During your interaction with ISRO, Chairman Dr. Madhavan Nair at the Kennedy Space Center, when he visited the U.S. in January-February, you signed a new framework agreement establishing the terms of future cooperation between ISRO and NASA in the exploration and use of outerspace for peaceful purposes. How far to you hope to take this agreement, and is the U.S.-India space cooperation now institutionalized?

A. The purpose of a framework agreement is to institutionalize the possibilities for cooperative activities on successive missions without having to go back to our parent authorities each time. To get the first framework agreement through requires that I work with the White House and State Department and other entities in the U.S. government, and I'm sure that Dr. Nair has similar constraints.

But once we have commissioned for the framework agreement, then we can continue if India does Chandrayaan-2 and if we are able to complete successfully for a payload aboard Chandrayaan that's covered in the framework agreement. And, similarly, if we want to fly an Indian instrument on an American mission, that is also covered. So, the purpose of the framework agreement is to institutionalize a certain level of cooperation.

Q. Taking off from that, do you see India in the coming years becoming a major partner for the U.S. in space cooperation?

A. Let me say at this point that I hope that's the case. Why do I hope that? Several reasons: the United States is by no means a perfect nation, but we are the world's oldest democracy and we try very hard to live up to our ideals. India is the world's largest democracy, and I think that there must be opportunities for us to cooperate because of our fundamentally shared values. In many respects, they are not completely shared, but there is a large overlap of shared values. I know this because of the many Indian friends that I have.

Another reason why I think cooperation between India and the United States in space can be useful for both sides is, the Indian technical community is superb. You have in India wonderful technical schools -- scientific, mathematics, engineering; a population that values education in terms of a way to get ahead in life, to improve oneself. In years past, in my generation, many of the best Indian students came to the United States and then stayed here. Now, many of those students are coming to the United States for advanced education and then going back home, which I think is good for the Indian people. But, that means that many people -- a significant number of India's technical community -- has had some education in America. So, they know us. There are two million Indians in America; so, many of us in the technical community have an opportunity to know them.

So we have had opportunities to get to know one another -- to learn common things together -- and it forms a basis for engineering and technical cooperation. Another reason we can work effectively together is that we do share a common language. The times when I have been to India, and the many more times when I have worked with Indians over here in the States -- India has what, four or five official languages. But the one language that almost all Indians have in common is English. [Actually, India has two official languages -- Hindi, the official language, and English, the associate official language. And India has 22 national languages.] So, surprisingly, there is a much lower language barrier between India and the United States than between the United States and everyone else we partner with, because everyone else is working in a second language. For Indians, it might be their fourth language, but they all know English. So, for those reasons there are very solid grounds for future cooperation.

Q. You visited India in 2006 and 2007, and hosted your counterpart Dr. Nair this year. But there was a time not too long ago -- just after the nuclear tests in May 1998 -- when ISRO had been slapped with sanctions, its officials were denied visas even to come here for conferences, etc. Is that now a thing of the past? Have all sanctions been lifted against ISRO, and is space cooperation between NASA and ISRO now a given, where it can be exploited to its fullest potential?

A. I am not familiar either with the sanctions or the events that led up to them, and so I just shouldn't comment. I do know that our President [George W. Bush] visited India shortly before I did, in the spring of 2006 and expressed a strong desire for greater cooperation between the two countries, which was well received on both sides. And I followed up with a visit to the space community. So, I hope that we are past any issues of sanctions, but I personally do not know where we stand on that and most crucially for your audience, NASA is not in charge of that. That is the purview of the State Department and others, but not NASA.

Q. After Chandrayaan-1, where do you foresee U.S.-India space cooperation going? Do you see some major commercialization? While Dr. Nair was here, he said commercialization benefits were a fraction of the potential -- in fact, in a speech at the CSIS [Center for Strategic and International Studies], he said it was only in the region of $10-$20 million, when it could potentially be in the billions. Are there any plans to rapidly increase this revenue base and get some American firms and industry involved in promoting such mutual commercialization?

A. I am a strong proponent, and I know that Dr. Nair is as well, of increased commercial activity in space. And to achieve that, it means the government has to lead the way. We have to welcome commercial activity. Whether there is an opportunity for commercial activity between the United States and India, I don't know -- but I hope so. The world does better when markets are open. But, again, you are outside my area of expertise and so I really don't know.

Q. But you do see tremendous potential if extraneous issues are resolved?

A. I do. If other issues can be resolved, I see the potential for commercial space activities between the U.S. and India.

Q. Do you think India should put a man on the moon? Also, is it a good thing for India to have a Mars mission?

A. I would like to see India in future years join with us to return people to the moon, among them Indian astronauts -- that's what I would like to see. As we are returning to the moon, we will be, I hope, going there in company with the international partners that helped build the space station. I would like to add India to that group, I would like to add India to that partnership.

Q. And in terms of a Mars mission?

A. That will come later. That's another generation. But in time, yes.

Q. It is something that hopefully can evolve after perhaps a joint moon mission?

A. Exactly. The moon is a target for the 20 teens, and Mars is a target for the 2030s -- so, about a generation apart.

Q. Is NASA considering including India in its planet exploration plans?

A. Not yet. I mean, we have just begun this framework of cooperation, so I hope that that will evolve.

Q. You said you were impressed with the technical schools in India, during your visit. Did you also find an increasing technological prowess in terms of capabilities, that you saw in this emerging India?

A I have only had two visits to India, three or four days each, and so that doesn't afford a lot of opportunity to measure trends. What I did say was that I had a chance to see the Engine Development Centre, the Launch Centre, the Satellite Development Centre, and I was very impressed with the quality of the engineering facilities and the engineering work that I saw. I mean that. Now I can't tell -- because I don't have a long history of observation -- whether the trend is up or level or down. I presume that it's up, but I don't have any background to know that. What I saw, I was very impressed with.

Q. The late Kalpana Chawla was the first Indian American astronaut to be part of a space shuttle mission, and she was followed by Sunita Williams -- both of whom are icons in India and among the Indian American community here. Do you foresee many Indian Americans following in their footsteps? And what next do you have in mind for Sunita?

A. I am not in charge of Sunita's new assignments, so I have no idea. She is highly regarded. As you know, she's an officer in the U.S. Navy as well as an astronaut. She is very well thought of. So I'm sure her future is good. As to whether other Indian American technical professionals will apply to and be accepted in the astronaut corps, I hope so. One of those who almost made it -- but not quite -- is a good friends of mine and was a former student of mine. I won't for privacy reasons give his name, but I was crossing my fingers that he would get accepted because he was a Ph.D. student of mine. He had applied to be an astronaut, after Sunita. I hope some of the Indian American technical community will decide that they want to be astronauts and will come join.

Q. So there's definitely a pool of qualified technical personnel for future astronauts among this Indian American community at NASA?

A. Again, depending on the skill mix that we want, yes.

Q. If the US-India civilian nuclear deal is not consummated, are you concerned that it could adversely impact on US-India space cooperation, in that US industry and business may be turned off to the extent that promoting US-India space commercialization may come to a grinding halt?

A. I don't know. I can't as NASA administrator speak to anything other than space. And what is even worse is I don't know anything about the nuclear situation or cooperation. So, I just can't comment. I hope that India and U.S. space cooperation will not be impacted by the progress of the nuclear agreement -- whether or not that goes well. There is a way we have to look at this: we can always find reasons to disagree if we want to. There are valid reasons to agree based on the values that each country holds dear, and there are valid reasons to disagree. We can always find reasons to agree in other areas. So, I suggest that as a starting point, we look for areas where we can agree and pursue those, and then let some of the disagreements follow in their own time. Sometimes, when you find areas where we can agree, you find that the areas where you thought you disagreed on aren't so bad. We will never have a perfect alignment of values between our two societies. We shouldn't even look for that. In my opinion, we should look for areas where we have common mutual interests and where our values are aligned, and make success stories out of these.

Q. When you were doing your Ph.D. at the University of Maryland's Department of Aeronautical Engineering, I believe you had quite a few close Indian colleagues like Dr. Ajay Kothari and others, who have remained your friends. What was that student experience like, where you interacted closely with these Indian colleagues and got a taste of Indian culture, food, and of course, the future top-notch calibre of Indian scientists? Ajay tells me about the fun times you guys had, and Dr. [K N] Parthasarathy spoke of how you very generously taught them to drive in your spanking new BMW?

A. I did, I taught several of them to drive. Those were fun days. My experience as a graduate student and background maybe was a little different. I had graduated from undergraduate school in 1971, from Johns Hopkins in physics and then I worked for three years. So I built up a certain amount of money -- obviously enough to afford a BMW -- and also got a Master's degree by going to college part-time in the evenings. Then, I decided I wanted to get a Ph.D. and I knew I had to do that full-time. So in 1974, I went back to graduate school, full-time with a Master's behind me and with the experience of three years at work, and I was very focused on accomplishing my goals.

The University of Maryland is a very cosmopolitan school, and when I was there we had students from Egypt, India, Pakistan, Germany, England, just in our department, as well as America. It was a very cosmopolitan place and I enjoyed that very much. There were several Indian students there and I got to know them and I was very impressed by the quality of the undergraduate education that they had -- that they brought to the school. I was also very impressed with just how nice people they were. And so I would invite them for dinner at my house or I would go out to eat with them at Indian restaurants or whatever, and learned to enjoy the food.

India is a very diverse nation and not all of you like each other very much, and so, I once said to my friends, I think I like you all better than you like each other, which became a somewhat famous remark in our group, because they often couldn't get along but I could get along with all of them. And so other things came up; those who intended to remain here wanted to learn to drive and I said, well, I will teach you to drive. So I taught several of them to drive, things like that. It just happened during one's student years, and they were very good years for me.

Q. Those friends of yours went on to start companies, head scientific departments and research facilities in top colleges and companies and so on?

A. You bet. One of them [Dr. Parthasarathy] works at the Applied Physics Laboratory [in Laurel, Maryland]. Another [Dr. Ram Diwaker] is a Director of Research at General Motors [in Warren, Michigan], and Ajay [Kothari] as you know has his own company [Astrox Corporation, an aerospace research and development company designing hypersonic aircraft] in Maryland. A couple of them have gone back to India. I mean, they all wound up getting Ph.Ds. They were a superb group of people.

Q. Do you have plans to visit India soon?

A. I'm actually hoping to go for the Chandrayaan launch if it doesn't interfere with other stuff I have to do. But my intention is to go for the launch, depending on when it is.
_____________________________________________

The World's Most Innovative Companies

2008-04-19T09:32:00.000-04:00

BUSINESSWEEK Magazine has published its list of the world’s 50 most innovative companies in its issue dated April 28, 2008.

The list has been compiled by the US financial publication in collaboration with Boston Consulting Group.

The 50 companies are distributed, countrywise, as follows:

USA 31
Britain 4
Germany 4
Japan 4
India 2
Canada 1
Finland 1
Netherlands 1
Singapore 1
South Korea 1
Total: 50

The two Indian industrial groups, included for the first time, are the Tatas and the Mukesh Ambani-led Reliance Group. The Tata group is ranked 6th and Reliance 19th.

The Tata group ranks well above IBM, BMW, Honda Motor, General Motors, Boeing, Audi and Daimler.

Mukesh Ambani’s Reliance ranks above companies like Boeing, Exxon and BP.

The most interesting thing is that not a single Chinese company is considered innovative enough to make it to the list.

The list of companies ranked in order are

1. APPLE
2. GOOGLE
3. TOYOTA MOTOR
4. GENERAL ELECTRIC
5. MICROSOFT
6.TATA GROUP
7. NINTENDO
8. PROCTER & GAMBLE
9. SONY
10. NOKIA
11. AMAZON.COM
12. IBM
13. RESEARCH IN MOTION
14. BMW
15. HEWLETT-PACKARD
16. HONDA MOTOR
17. WALT DISNEY
18. GENERAL MOTORS
19. RELIANCE INDUSTRIES
20. BOEING
21. GOLDMAN SACHS GROUP
22. 3M
23. WAL-MART STORES
24. TARGET
25. FACEBOOK
26. SAMSUNG ELECTRONICS
27. AT&T
28. VIRGIN GROUP
29. AUDI
30. MCDONALD’S
31. DAIMLER
32. STARBUCKS
33. EBAY
34. VERIZON COMMUNICATIONS
35. CISCO SYSTEMS
36. ING GROEP
37. SINGAPORE AIRLINES
38. SIEMENS
39. COSTCO WHOLESALE
40. HSBC
41. BANK OF AMERICA
42. EXXON MOBIL
43. NEWS CORP.
44. BP
45. NIKE
46. DELL
47. VODAFONE GROUP
48. INTEL
49. SOUTHWEST AIRLINES
50. AMERICAN EXPRESS

When Indian companies make at least a third of the world’s 50 most innovative companies, hopefully in another five years, India would have arrived. The US will doubtless continue to lead the list of innovative companies in number and percentage-wise.

For the BUSINESSWEEK article, click: http://www.businessweek.com/magazine/toc/08_17/B4081best_companies_at_innovation.htm

Robert Kaplan on the US, India, China, Europe, Africa, and the new balance of power

2008-04-15T16:15:00.000-04:00

Robert Kaplan is a senior fellow at the Center for a New American Security, where he is working on a book on the geopolitics of the Indian Ocean. In a keynote address delivered last week at the Foreign Policy Research Institute, Kaplan discusses issues that should provide ample food for thought to the foreign policy establishments of the US and India.

Reporter Trudy Kuehner has summarized his address.

EXCERPTS:

**Mr. Kaplan began by offering observations based on his recent trip to India, from which he had just returned. While there, he met with the chiefs of the army and navy, the foreign and finance ministers, and numerous other officials, along with leading intellectuals and journalists. India is focused on and obsessed with China, he said. It used to be compared with Pakistan, and India’s elite used to be obsessed with the threat from Pakistan. That has changed. They are now obsessed with the competition with China, and India is one major place where President Bush enjoys popularity, even among the intellectuals, the writers, journalists. That is because Bush, following on from the second Clinton administration, has been very pro-India.The U.S has sold the USS Trenton, a former amphibious ship, to the Indian navy; it has sold the Indians F-18 Super Hornets, it has replaced all their P-3 surveillance planes with P-8s, and there are constant bilateral military exercises between the U.S. Air Force and Navy and the Indian Air Force and Navy.

**This strong defense relationship is all about Asian balance-of-power politics. India and China, which share a long land border and therefore have to maintain stable relations, are inexorably coming into competition with each other. India’s sphere of influence extends to the borders of the old British India, from the Iranian plateau to the Gulf of Thailand, encompassing Burma, where it is involved in a quiet war of influence with China. It is extending east and west. During the days of the British viceroys in the nineteenth and early twentieth centuries, the Persian Gulf, Middle East, and Southeast Asia empire was not run from London, but from the viceroy’s headquarters in Calcutta. India is now assuming those dimensions.

**Meanwhile, China is pushing southward. The Chinese are building warm-water ports in Gwadar in Pakistan and in Mawlamyaing in Burma; they are going to start at Chittagong in Bangladesh. All these places are closer to cities in western and southwestern China than those cities are to Beijing and Shanghai. That is, developing warm-water ports in the Bay of Bengal and the Arabian Sea, both part of the larger Indian Ocean, is a way for much of China’s landmass to break out of being landlocked.

**India now has the world’s fourth largest navy; it is about to have the third largest. It will soon take delivery of its first nuclear-powered fast-attack submarine. Meanwhile, China’s navy is growing to be in asymmetric terms a peer competitor of the U.S., the Japanese Navy is now three times, soon to be four times, the size of Britain’s Royal Navy. All this is happening not just while the U.S. is deeply involved in two countries in the greater Middle East, but also as European defense budgets are starved at 2 percent or less of their GDPs.

**Asian militaries are becoming real civilian-military postindustrial complexes. The fact that the Chinese or Indian armies are so large was for decades meaningless, because they were poorly trained and badly equipped, more useful for defending long land borders and bringing in crops than for actual deployment, maneuverability, and fighting. That is changing rapidly. The Indians are using the Israelis to develop a new space satellite technology tied in with their own military. India and China’s software prowess is increasingly having military dimensions.

**If the U.S. is going to be in strategic competition with China and is going to quietly, subtly leverage countries like India and Japan, or South Korea and Australia, against China, the U.S. will continue to need a partnership with Europe.

**The Chinese are not competing with the U.S. across the board; they are concentrating on three things: (1) submarines, (2) missiles that can hit moving targets at sea, and (3) the ability to knock out satellites in space, all of which put together constitute an asymmetric threat against the U.S. navy. That asymmetric threat is not designed to get into a war with the U.S., but to deny the U.S. access whenever and wherever it wants, from the Asian mainland to the Chinese coast, to make it think twice before entering a zone where its carriers could be hit by a missile. This will dissuade U.S. movements and affect U.S. strategy. And ultimately, Kaplan noted, power is the ability to affect your competitors’ mode of operations.

** The Persian Gulf is about to become much more clogged with oil supertankers than it ever was. That is because among a number of big phenomena going on in the world today, Kaplan said, one is the growth of the Chinese and Indian middle classes. India’s middle class is growing from 200 million to a predicted 350 million. China has similar statistics. Middle classes are acquisitive. They buy things and consume a lot of energy. And so the growth of these middle classes means tremendous energy consumption, much of which is going to have to be solved by oil. Ninety percent of India’s energy requirements are going to be filled by oil in the Persian Gulf within a few years, as opposed to 65 percent today. China’s statistics are similar. We are about to see a major energy highway from the Persian Gulf across the Indian Ocean to the strait of Malacca to China and Japan and across the Persian Gulf to the west coast of India. Energy politics are going to tie China and India much more closely to the Arab and Persian world than they ever were before.

**This is why the U.S. position now in the Middle East is untenable. The U.S. has to find a way gradually, with carrots and sticks, to open up Iran and have some sort of normalized relationship with that country. The rest of the world is not going to wait the U.S. out, but is moving closer to Iran and Russia, because crude oil petroleum prices are going to continue to go up over the long run because of the growth of middle classes around the world.

**Africa represents the last untapped global food market in the world, because commodity prices are going to gradually go up, too, for basic foodstuffs, again because of the growth of the middle class in the developing world. The Chinese are all over the African continent now. We’re going to be faced with competition for resources in Africa with the Chinese, whether it’s oil in the Gulf of Guinea or coal in Mozambique and other parts of southern Africa.

**The Indian navy and air force would like to dominate the Indian Ocean from Mozambique all the way to Indonesia. But they cannot do that except as part of an alliance with the U.S. navy and air force. One major military development of the past year was an exercise off the coast of India in which India and the U.S. and also the navies and air forces of Japan and Australia took part, sort of the Malabar exercises of democracy. The Chinese took umbrage at this, seeing it for what it was: a group of countries balancing against them. But America cannot assume that it can crudely lever two democracies, India and Japan, against China, because China is the largest trading partner for both those countries.

**Going forward, the U.S. will have to build bridges with China even as it strengthens India and Japan and continues working hard to keep NATO relevant and inclusive. It will have to work on a lot of fronts, and the main theme is that if you go it alone, you can often get to a point faster than if you do it in a coalition, but if you want to get to the next point and the point after that and the point after that, you’ve ultimately got to do it with a coalition. So it’s better to go slow at the beginning and achieve some long-term ends afterwards. Kaplan emphasized that he was not speaking about the weakening of American power, but about other countries catching up and finding ways to neutralize the U.S. over time.

**Borders within Asia are crumbling. These countries are increasingly interconnected, and new economic prowess is leading to strengthened militaries. The U.S. military’s goal in the future, Kaplan concluded, is going to be a combination of having sea-basing and other capabilities that will allow the U.S. to be unencumbered by alliances, on one hand, even as we try to strengthen alliances wherever we can, on the other hand. It is a matter of being as flexible as possible. Kaplan predicts that whoever is elected the next U.S. president, whether Republican or Democrat, will evolve sooner or later into something very Nixonian in terms of foreign policy. After the first year, whoever is elected is going to be a power balancer.

**We’re entering a world of 19th-century balance of power on several different levels, Kaplan ended. All Metternich had to worry about was Europe; today we have to show the same adroitness at balancing across the whole world.

For the complete text of reporter Trudy Kuehner’s summary of Robert Kaplan’s keynote address, please click:
http://www.fpri.org/enotes/200804.kuehner.kaplannewbalanceofpower.html

The Nuclear Deal

2008-04-13T14:03:00.000-04:00

I have never been able to understand the reason as to why some well meaning people in India, interested in India's progress, should oppose the so-called nuclear deal.

So far as India is concerned, it's merely a passport to nuclear commerce which is now totally denied to it (and it badly needs uranium -- very urgently -- because most of its atomic power projects are functioning far below capacity on account of shortage of the material -- vide the following article by a former Chairman of India's Atomic Energy Commission http://www.indianexpress.com/story/289768.html).

America may have some leverage under the Hyde Act ONLY and ONLY if India signs a contract with a US company to buy nuclear materials or nuclear technology. Once the whole process is through, why should India deal with an American company at all?

The point is that France or Russia or any other country CANNOT sell nuclear material or technology to India unless and until the process is completed.

Once the process is over, India can decide to deal only with countries other than the US which are in NO WAY bound by the Hyde Act.

US corporates will then find that they cannot sign any contracts with India unless they get their lawmakers to suitably amend the Hyde Act. Otherwise they will get NO business.

So, it will be a case, as far as India is concerned, of heads I win, tails you lose.

Ram Narayanan

India to rise from 14th to 7th biggest manufacturer in 20 years

2008-04-09T11:36:00.000-04:00

My purpose in forwarding the following article is NOT to promote the interests of the Indian company which forms the subject of this case study of how, in the 21st century globalized world, Indian manufacturers are taking on the world’s largest companies including mighty American corporates, but merely to illustrate the fact that, not only in the sphere of software and high tech, but even in the area of manufacturing, India is graduating to become a mammoth powerhouse.

Cheers,

Ram Narayanan
US-India Friendship
http://usindiafriendship.net/
http://usindiafriendship.blogspot.com/

http://www.theglobeandmail.com:80/servlet/story/RTGAM.20080408.wrtycoon_new5_0408/EmailBNStory/Business/

GLOBE AND BUSINESS MAIL.COM

REPORT ON BUSINESS.COM

The tractor maker who has John Deere on the run

Anand Mahindra is one of the architects of a new empire rising in India. Meet him, and hear him speak, in the first of a four-part series this week by Marcus Gee

MARCUS GEE
mgee@globeandmail.com

April 8, 2008 at 7:08 AM EDT

MUMBAI — Anand Mahindra was at the World Economic Forum in Davos, Switzerland, last year when Robert Lane, chairman of U.S. farm equipment concern Deere & Co., approached him.

"I’ve been to your dealerships and seen all your manuals," he told Mr. Mahindra, whose Mumbai-based Mahindra & Mahindra Ltd. has been taking on the maker of John Deere tractors in the U.S. market.

Well, replied Mr. Mahindra with a laugh, "that’s good news and bad news."

The bad news is that the world’s biggest tractor maker has put Mahindra & Mahindra in its sights. The good news, both for Mr. Mahindra and India, is that a behemoth like John Deere is worried enough to bother.

Indian manufacturers have never troubled the sleep of executives in the rich world. India is well known for its outsourcing and information technology skills - even, more recently, for the global shopping sprees of its acquisitive billionaires - but its manufacturers are minnows beside the sharks of China, South Korea and Taiwan.

Gradually, that has begun to change.

India’s manufacturing industry grew at an annual rate of 9 per cent over the past four years, on pace with its booming economy. Boston Consulting Group predicts that India will be the 11th-biggest global manufacturer by 2015 and the seventh-biggest by 2025, up from 14th in 2005.

Mr. Mahindra, 52, is one of the reasons. The urbane, Harvard-educated business leader has taken his family firm from a staid domestic maker of jeeps and tractors to a global player with ambitions in everything from SUVs and auto parts to movie making and time share resorts. In naming him Businessman of the Year for 2007, Business India magazine called the M&M managing director "the poster child for the global Indian."

His M&M has dealerships in 25 countries and subsidiaries in Europe, Australia and South Africa. Its revenue has grown 20-fold in 17 years.

Already the largest tractor maker in the world’s largest tractor market - India - it has become third largest in the world by units sold and plans to be first by 2010. It makes India’s most popular SUV, the Scorpio, and has joined with France’s Renault to make the Logan, a no-frills sedan for Indians. It plans to launch the Scorpio and two models of pickup truck in the U.S. market next year.

"On the manufacturing side, they’re top class," said Jamshed Dadabhoy, an analyst with Citigroup in Mumbai.

Mr. Mahindra is the first to admit that Indian firms still cannot compete with the cheap skilled labour and first-rank infrastructure of Chinese manufacturers. "If we had to put out a million Barbie dolls, we just couldn’t," he said.

But India has some distinct advantages: a sophisticated stock market where companies can go to raise money in a hurry; a young, eager work force; the English language; and, above all, well-managed, forward-looking companies such as M&M.

While China’s leading companies tend to be run or heavily influenced by the state, India’s are more often private, family-owned conglomerates - sprawling business houses with storied names like Birla, Tata and Ambani. After decades of stifling government regulation, these firms are emerging as fierce global competitors under a new generation of leaders.

Mr. Mahindra is a typical product of that generation. Like many educated Indians, he is charming, hospitable and effortlessly articulate. A sought-after luncheon speaker, he mixes quotations from T.S. Eliot with references to Hindu mythology. Instead of poring over earnings reports on the weekend, he sets sails on his 45-foot catamaran Dreamcatcher, taking the helm while his fashion-editor wife, Anuradha, "balances her champagne glass."

Around the dinner table when he was growing up, his family talked about jazz and politics, not the business. His mother, a teacher and author who escaped her modest background to try acting in Bollywood movies, was as much an influence as his father, himself a "reluctant businessman" who studied diplomacy at Harvard.

The younger Mahindra studied film at Harvard before taking an MBA at the business school, finally joining the family firm in 1981 and working his way up. "I’m not someone who’s going to recite the 10 commandments of business and tell you I slaved from the age of 17 and had a lemonade stand," he said.

He would rather talk about "the right brain," and how creative thinking can foster innovation. To keep his senior executives mentally flexible, he takes them to Harvard every year for sessions not just on business strategy but science, public policy and philosophy, with concerts to enliven the evenings. He calls the program Mahindra Universe.

But don’t mistake his sense of balance for detachment. Like many Indian business leaders, he is impatient to see India catch up with its global rivals. "A company like ours - whose DNA is Indian, whose character is Indian, who wants to become an Indian multinational - well, if this succeeds, it’s a sign that Indian business in general has what it takes to succeed," Mr. Mahindra said in an interview in his company’s Mumbai office tower. "If we don’t, there’s something wrong."

Mr. Mahindra traces the firm’s competitive zeal to its founders. His paternal grandfather, J.C. Mahindra, became India’s iron and steel czar during the Second World War, rationing the precious commodities in a time of shortage. J.C.’s brother, K.C. Mahindra, was the head of India’s supply mission in Washington. He channelled U.S. material to Britain’s forces in India. They went into business together after the war, trading iron and steel, then assembling jeeps - "two salaried blokes," as Mr. Mahindra puts it, "who got patriotic and decided to start a company with the princely sum of 100,000 rupees" (about $2,500 at today’s rates).

In 1947, just as the company was starting up, India won its independence from Britain. "So in a sense they were born at the same time, born with the same ideals as the country: To prove that this new country could survive and compete with the best in the world."

Like many others, the company languished under the "licence raj," the strict regime of protectionism and government micromanagement that prevailed until a financial crisis forced New Delhi to open up the economy in 1991.

So when Mr. Mahindra took over from his uncle Keshub and father Harish in 1997, "we decided we should live up to the founders’ expectations."

As India emerged from decades of stultifying government regulation, Mr. Mahindra shaped it up for national and global competition. He took on the company’s powerful unions. He shut unproductive plants. He hired away top executives from Xerox and General Motors and India’s Tata Group.

As India’s economy took off, he launched new products like the hardy Scorpio, which withstood competition from established brands such as Honda, Ford and Toyota to grab a quarter of the domestic market. Plans for an eco-friendly hybrid are on the books.

But Mr. Mahindra seems proudest of M&M’s success against Deere & Co., the Illinois company founded in 1837 whose green-and-yellow vehicles are a symbol of American industrial might.

"John Deere considers us enemy No. 1," says Mr. Mahindra. "We are the little baby cobra they have to kill."

M&M has found a niche in the United States with its sturdy, relatively low-horsepower tractors, popular among hobby farmers and suburban lawn masters who don’t need a monster tractor and like Mahindra’s reliability. Sales have grown 25 to 30 per cent over the past four years, putting Mahindra fourth in the market, inching toward third.

Deere was worried enough that it offered a $1,500 (U.S.) rebate to anyone who would trade in his or her Mahindra for a John Deere. Mahindra, for its part, tried to lure Deere customers with an ad showing a pretty blonde riding a Mahindra. "Deere John," read the caption, "I have found someone new."

Success or failure in the United States won’t make or break M&M, but Mr. Mahindra takes the Frank Sinatra view: "If you can make it there, you can make in anywhere."

"That’s why you go to certain sophisticated markets, because it pulls you up to a different weight class of competition," he said. "That’s why you do the U.S., that’s why you do the U.K. They’re the ones that keep yanking us into the future."

Companies like Mr. Mahindra’s M&M are doing the same for India.

___________________________________________________

The Series

By Marcus Gee, in Mumbai

Wednesday: Airport developer G.M. Rao is modernizing India’s crumbling infrastructure.

Thursday: Information-technology wizard Azim Premji leads

India’s rise as a flat-world competitor.

Friday: Industrial magnate Ratan Tata shakes up the global auto market by launching the world’s cheapest car.

Why India continues to lag far behind China in industrial progress?

2008-04-06T09:55:00.000-04:00

Why is it that, notwithstanding the fact that India has a far more dynamic private sector as compared to China, India is lagging well behind China in industrial development? The answer is provided in the following article of T N Ninan in his weekend ruminations published in BUSINESS STANDARD of April 6, 2008.

Here are two key passages from the short article:

**Corruption in the states has reached levels that (most) politicians at the Centre can only dream of. One businessman talked of the chief minister of a state demanding Rs 500 crore from a problem-ridden industry, as the price for fixing its problems. Another businessman from another state talked of the state’s rulers asking for 30 per cent of the cost of any project as the political contribution that would have to be made. A third businessman had his factory shut for several months under some environmental rule because he did not pay the sum demanded of him. These are numbers that we have not heard before in similar contexts, and they suggest rapacity on a previously unthinkable scale — to the point where doing business becomes impossible.

**The universal opinion these days is that the state that is most friendly to investors, in terms of rapid clearances, and where politicians do not make any financial demands on businessmen, is Gujarat. It is no surprise, then, that Gujarat is doing very well when it comes to fresh investment. Another state that is doing well in attracting big, headline-hitting projects is Orissa, which too has an administration and a chief minister that have clean reputations. Maharashtra, which has always been a magnet for investment despite its high cost structure, is a third example of a place where politicians are not focused on making enormous sums of money from businessmen; they might control sugar cooperatives or get into land and extortion rackets, but these do not come in the way of industrial investment. In comparison with these examples, take a look at some of the poorest states in the Hindi heartland and the reputation for corruption that their politicians have (one hesitates to be more specific), and the point becomes obvious. Even when investment takes place in some of these states, as in the mining sector, the benefits don’t go to the local people and it is the politicians who have made money on the mining licences or environmental clearances that have to be given. Yet, many of this latter category of states are rich in natural resources of various kinds, and are also attractive markets in many ways because of the size of their populations. If someone were to do a domestic equivalent of Transparency International’s Corruption Perception Index, and match that to investment numbers in states, that might confirm the hypothesis.

On March 5, 2008, I had showcased Harvard Business School Professor Tarun Khanna’s exhaustively researched book "Billions of Entrepreneurs: How China and India are Reshaping their Futures - and Yours."

A key point made be him on the nature of corruption in China and India reads as follows:

There is rampant corruption in both countries, but the corrupt in China are demanding a piece of something new that is being created ..... whereas India’s corrupt are content to help themselves without any real contribution.

It’s clear that India will start doing better than China the day rapacious corruption of the type currently prevalent at the highest political level in the various states of India (excluding Gujarat, Orissa and Maharashtra) is eliminated.

What would be the most effective approach toward this end? Starting powerful incorruptible NGOs backed by citizen power?

Please post your observations and comments .

http://www.business-standard.com/common/news_article.php?leftnm=10&bKeyFlag=BO&autono=319106

BUSINESS STANDARD, APRIL 6, 2008

T N Ninan / New Delhi April 05, 2008

Rich man, poor state

WEEKEND RUMINATIONS

Having listened over the past fortnight to stories from businessmen about the demands being made on them by politicians in different states, it is obvious that corruption in the states has reached levels that (most) politicians at the Centre can only dream of. One businessman talked of the chief minister of a state demanding Rs 500 crore from a problem-ridden industry, as the price for fixing its problems. Another businessman from another state talked of the state’s rulers asking for 30 per cent of the cost of any project as the political contribution that would have to be made. A third businessman had his factory shut for several months under some environmental rule because he did not pay the sum demanded of him. These are numbers that we have not heard before in similar contexts, and they suggest rapacity on a previously unthinkable scale — to the point where doing business becomes impossible. The explanation for the new scale of money-making seems to be that politicians have begun reading about the billions being made by businessmen, especially through stock market wealth, and they feel that they had not been getting their “fair” share in the past. The consciousness of the stock market is borne out by the story from a businessman who said that demands are also being made for a significant shareholding in any company that is being set up!

Looking at the pattern of such demands and the states where they are at a peak, the thought that crops up is whether there is any correlation between the wealth of politicians and the states that they run —negative, not positive correlation. In other words, the richer the politicians, the poorer the state. The logic for that is simple: the more rapacious the politicians in a state are, the more investment flees to more hospitable climes. And in cases where the investment cannot go anywhere else (as in the mining or agro-based industries), the investment takes place in such a fashion that the local people get little benefit while the politician makes a fat packet.

For instance, the universal opinion these days is that the state that is most friendly to investors, in terms of rapid clearances, and where politicians do not make any financial demands on businessmen, is Gujarat. It is no surprise, then, that Gujarat is doing very well when it comes to fresh investment. Another state that is doing well in attracting big, headline-hitting projects is Orissa, which too has an administration and a chief minister that have clean reputations. Maharashtra, which has always been a magnet for investment despite its high cost structure, is a third example of a place where politicians are not focused on making enormous sums of money from businessmen; they might control sugar cooperatives or get into land and extortion rackets, but these do not come in the way of industrial investment. In comparison with these examples, take a look at some of the poorest states in the Hindi heartland and the reputation for corruption that their politicians have (one hesitates to be more specific), and the point becomes obvious. Even when investment takes place in some of these states, as in the mining sector, the benefits don’t go to the local people and it is the politicians who have made money on the mining licences or environmental clearances that have to be given. Yet, many of this latter category of states are rich in natural resources of various kinds, and are also attractive markets in many ways because of the size of their populations. If someone were to do a domestic equivalent of Transparency International’s Corruption Perception Index, and match that to investment numbers in states, that might confirm the hypothesis.

_________________________________________

Do non-Indians have greater confidence in India than some Indians?

2008-03-25T09:08:00.002-04:00

Judging from the feedback I received on Singapore intellectual and diplomat, Kishore Mahbubani’s article, which had predicted that "only India can provide [global] leadership .... China cannot, for a simple geopolitical reason," it looks like some Indians do not think so.

Here is another distinguished person, a British historian, Paul Johnson, while discussing the foreign policy issues that will confront the next US President, saying:

**I have no doubt that in the long run India will emerge the stronger and richer of the two countries [India and China]. In the meantime, however, China carries more weight. Rivalries are bound to flare up. During the next presidency the U.S. may have to decide which of the two to back, as well as figure out what repercussions that choice will have on its handling of a newly assertive Russia.**

Please read the full article below.

Cheers,

Ram Narayanan
US-India Friendship
http://usindiafriendship.net/
http://usindiafriendship.blogspot.com/

US-India Friendship is a 100 percent not-for-profit labor of love, devoted to continuous improvement of US-India friendship and cooperation, especially people-to-people relations.

http://www.forbes.com/opinions/forbes/2008/0407/021.html

FORBES.COM

The Winner Will Need Brains and Guts

Paul Johnson 04.07.08, 12:00 AM ET

Watching the run-up to the U.S. presidential elections from proud and self-indulgent yet weak and cowardly Europe, I am disturbed that so little attention has been paid to electing a President who will have the courage to provide leadership--and, if need be, resolute action--in an increasingly dangerous world.

I stress the word "dangerous" because for nearly two decades the world has looked relatively safe. Since the collapse of Soviet communism, the disintegration of the Soviet empire and the emergence of the U.S. as victor in the Cold War, the nightmare of nuclear Armageddon has faded. We’ve been living in a period of comparative calm, under the watchful protection of the democratic and liberty-loving sole superpower.

This conjunction tempted one or two theorists to predict the end of history as an ideological struggle and the start of a future in which liberalism (democratic market economies) would slowly but inexorably become permanent and universal. I never believed this, not even in the first joyful flush of the Soviet collapse. I simply thought that history, far from ending, would become more complicated, bringing with it new dangers and anxieties. From a 2008 perspective, I’d say that was an understatement. We are once more living in a vertiginous world.

I’m not talking about the threat of Muslim fundamentalism. Thanks to some strong leadership from George W. Bush, that danger has been contained. Muslim extremists will not overthrow our societies. Fundamentalism will gradually lose its support and power as the majority of Muslims--who want a better life just as much as most other people do--reject its anarchism.

Disconcerting Maneuvering

No, what worries me most are the new moves and strategies being executed by the big players on the world chessboard. First and foremost is the revival of Russia. The huge expansion of China’s industrial economy (as well as those of other rapidly expanding former Third World powers) has effectively doubled the demand for energy, sending the price of oil skyrocketing. Of all the oil-producing countries, Russia has benefited the most, politically and psychologically.

The Russian people oscillate between a love of freedom, ending in anarchy, and a profound respect for strong leadership, ending in tyranny. They have recently gone through the anarchic phase and are now enthusiastically embracing Vladimir Putin’s brand of ruthless opportunism. Putin is not shackled by an ideology. He believes in nothing except power. He’s not a Communist but a former secret policeman. He is constructing an empirical police state, which tightly controls Russia internally in the name of restoring order, and is stretching its insidious reach worldwide through scientific assassination and new forms of sophisticated industrial espionage.

This is a formidable regime to deal with, not least because Putin is popular in Russia. He is restoring his nation’s self-respect, which was cruelly damaged by the loss of its European empire and by the independence of the vast and rich Ukraine, as well as other territories in the Caucasus and Asia. Putin is using Russia’s new wealth to rebuild its armed forces, sending off its newly efficient navy and its fleet air arm on exploratory missions on the high seas. The increasingly strident tone of Putin’s observations about the world also receives positive play at home.

Now, I’m not saying that Russia is--or is likely to become--a rival superpower to the U.S. Russia has many weaknesses--demographic, economic and cultural. But it is again a major factor in world politics. An index of Russia’s returning strength is the growing terror of its immediate neighbors and their anxiousness to take shelter under America’s nuclear-and-Star-Wars umbrella.

Needed: Intelligence, Finesse and Daring

The old 19th-century adage remains true: Russia is never as strong as it looks; Russia is never as weak as it looks. For nearly two decades we foolishly exaggerated its weaknesses, yet now that it appears strong again, we must not overestimate its strength.

Which of the leading U.S. presidential candidates is likely to provide the kind of firm, consistent and cerebral policies that will contain and render safe this newly invigorated Russia? From a European viewpoint this is the key question of the election. It is linked to other factors that have been looming but are now moving to the center on the world chessboard: the burgeoning economies of China and India. What policies should the U.S. adopt regarding them, separately and together?

China has taken the traditional road to economic superpower status by investing heavily in industry. China is also investing much of its new wealth in its armed services. India, on the other hand, is investing mainly in high tech, something at which its people seem to excel and which flourishes in a free society.

I have no doubt that in the long run India will emerge the stronger and richer of the two countries. In the meantime, however, China carries more weight. Rivalries are bound to flare up. During the next presidency the U.S. may have to decide which of the two to back, as well as figure out what repercussions that choice will have on its handling of a newly assertive Russia.

In short, the next American President will be obliged to make some courageous and complex decisions--probably early on in his or her Administration. Courage in complexity is the requirement voters should be looking for now.

Paul Johnson, eminent British historian and author; Lee Kuan Yew, minister mentor of Singapore; Ernesto Zedillo, director, Yale Center for the Study of Globalization, former president of Mexico; and David Malpass, chief economist for Bear Stearns Co., Inc., rotate in writing this column.

Is China Abdicating Global Leadership and Leaving that Role to India?

2008-03-22T10:04:00.003-04:00

Dear Friends:

>>Is China abdicating global leadership and leaving that role to India?<<

Yes, says Kishore Mahbubani, former Singapore diplomat, one of the world's key intellectuals and a seasoned observer of international affairs.

Two key paragraphs:

**With America and Europe losing faith in multilateral norms, the responsibility should pass on to the new rising powers, China and India, to maintain these norms. Indeed, both China and India want to preserve them, but only India can provide the leadership to do so. China cannot, for a simple geopolitical reason. The rise of India is not generating alarm in Washington DC. The rise of China is. Hence, China, in an effort to assuage American concerns, is deliberately trying to avoid assuming any kind of global leadership. When the Cancun trade meetings failed, Indian Trade and Industry Minister Kamal Nath could confidently explain India’s position and challenge the American and European perspectives. The Chinese Trade Minister said nothing.

**By default, the weight of global leadership may fall on India’s shoulders. Fortunately, India is well-qualified to provide such leadership. Its credentials as the world’s largest democracy; its open, tolerant and inclusive culture; its unique geopolitical and cultural position as a bridge between East and West provides it a unique opportunity to provide the leadership for forging new forms of global governance that spaceship Earth desperately needs as it sails into the future.
The full article is reproduced below.

Cheers,

Ram Narayanan

US-India Friendship
http://usindiafriendship.net/
http://usindiafriendship.blogspot.com/

US-India Friendship is a 100 percent not-for-profit labor of love, devoted to continuous improvement of US-India friendship and cooperation, especially people-to-people relations.

http://www.hindustantimes.com/StoryPage/StoryPage.aspx?id=b256bfa5-2b67-4cd0-8113-224240a01d87&MatchID1=4664&TeamID1=5&TeamID2=2&MatchType1=1&SeriesID1=1173&PrimaryID=4664&Headline=Can+India+save+the+world%3f

HINDUSTAN TIMES

Can India save the world?

Kishore Mahbubani

March 21, 2008
First Published: 23:28 IST(21/3/2008)
Last Updated: 23:34 IST(21/3/2008)

Humanity is embarking on a bizarre journey into the future. Subconsciously, we all believe (or would like to believe) that we live in a rational, well-ordered universe. The reality is closer to the opposite. If this sounds unbelievable, consider the following analogy. Imagine 660 passengers boarding a ship that is sailing into unchartered waters. After boarding, all 660 retreat into their cabins. No captain or crew is taking care of the ship as a whole.

Sadly, this is a literal, not metaphorical description of how spaceship Earth is sailing into the future. Globalisation has shrunk the world. All 6.6 billion inhabitants now live in a single interdependent universe. From financial crises to health epidemics, from borderless terrorism to global warming, we are moving into a world where more global governance (not global government) is needed to manage the growing interdependence. Instead, precisely when more is needed, humanity is either shrinking or weakening global governance. This essay will explain why. It will also argue that perhaps only one country can solve this crisis — India.

Global governance is shrinking because the West, which spun a rich web of multilateral institutions and norms after World War II, is losing faith in multilateralism. The Western powers were happy to be custodians of the main rules and processes of the global order because they were convinced that a more rules-bound universe, accompanied by greater trade liberalisation, would benefit the Western economies the most since they had the world’s most competitive economies. This conviction of economic superiority led the West to bring down trade barriers.

They had no doubt that the West would win on an open economic playing field.

John F Kennedy illustrated this confidence when he said in 1962, “A more liberal trade policy will in general benefit our most efficient and expanding industries.” The boundless optimism of Kennedy has been replaced by the boundless pessimism of Lou Dobbs, who is convinced that American workers cannot compete with Chinese or Indian workers. Sadly, Lou Dobbs is not an isolated phenomenon. Both Hillary Clinton and Barack Obama have joined the race to the bottom by declaring that each is more protectionist than the other. This reflects the new psyche of the American population. Europe is not much better.

If both America and Europe lose confidence in their ability to compete, how can they remain custodians of the rules that ensure fairness and equity? To be fair, humanity should thank both first for creating the 1945 rules-based order at the end of World War II. To understand how visionary the Western founding fathers of this order were, just contrast what they did after World War II with what was done after World War I. After World War I, the world order forced Germany and Japan to go to war as they tried to expand their political and economic space. After World War II, both Germany and Japan significantly expanded their political and economic space without going to war.

If humanity can sustain this 1945 rules-based order, this will enable both China and India to emerge as new great powers peacefully, just as Germany and Japan did. But there are differences now. Both Germany and Japan emerged when America and Europe (including Germany) believed that an open global order would naturally benefit the West. Today, China and India are emerging at a time when the West is losing faith in an open global order. This growing lack of faith explains the strange behaviour of both America and Europe towards global governance.

America has taken cynicism towards multilateralism to a whole new level. Just look at the issue of America and Iran. Every few months, America goes back to the United Nations Security Council (UNSC) to get a resolution against Iran. It hopes to use the legitimacy of the UN to send a message to Iran that the world disapproves of its behaviour. America is right. The UN does enjoy this legitimacy in the eyes of the world’s population, despite the many flaws of the UN. But the world has also become sceptical of America’s efforts to use the UN because America had violated the spirit, if not the letter, of the UN’s principles by going to war in Iraq without an enabling UNSC resolution. Most international lawyers and Kofi Annan believe that the American invasion of Iraq was illegal. Can a violator of UN principles become an enforcer? Can a thief become a judge?

In an act of even greater cynicism, America sent an Ambassador to the UN, John Bolton, who believed that his mission was not to strengthen but to weaken the UN. He famously declared that “if the UN building lost ten stories, it wouldn’t make a bit of difference”.

A favourite American expression is that there is no such thing as a free lunch. There is also no such thing as cost-free cynicism. The rampant American cynicism towards the UN in particular and multilateralism in general could now dangerously erode and destroy the 1945 rules-based order when the world has never needed it more. Both China and India will be the biggest losers if this happens. Its destruction could well prevent and derail their peaceful re-emergence of both these great powers.

It is as difficult to explain the critical importance of multilateralism to a lay audience as it is to illustrate the importance of oxygen. We know that without oxygen we would suffocate but we only truly understand this if we are thrown into a room without oxygen. By then, it may be too late. Similarly, one reason why the world is a reasonably stable place is because a sea of norms has been created in all fields to manage growing global interdependence. This sea of norms is a valuable heritage that humanity has developed.

But no norms can survive on their own. Neither would a sea of norms. Norms need custodianship. With America and Europe losing faith in multilateral norms, the responsibility should pass on to the new rising powers, China and India, to maintain these norms. Indeed, both China and India want to preserve them, but only India can provide the leadership to do so. China cannot, for a simple geopolitical reason. The rise of India is not generating alarm in Washington DC. The rise of China is. Hence, China, in an effort to assuage American concerns, is deliberately trying to avoid assuming any kind of global leadership. When the Cancun trade meetings failed, Indian Trade and Industry Minister Kamal Nath could confidently explain India’s position and challenge the American and European perspectives. The Chinese Trade Minister said nothing.

By default, the weight of global leadership may fall on India’s shoulders. Fortunately, India is well-qualified to provide such leadership. Its credentials as the world’s largest democracy; its open, tolerant and inclusive culture; its unique geopolitical and cultural position as a bridge between East and West provides it a unique opportunity to provide the leadership for forging new forms of global governance that spaceship Earth desperately needs as it sails into the future.
Kishore Mahbubani is Dean, Lee Kuan Yew School of Public Policy at the National University of Singapore.

He is the author of The New Asian Hemisphere: The Irresistible Shift of Global Power to the East.

2008-03-16T05:02:00.002-04:00

India Rural Development Action Program Conference set for the weekend of May 3rd and 4th in Chicago

Conference Brings Together Indian Americans and Other Friends of India Who Wish to Learn More About Conditions in India’s Villages and Take an Active Role in Improving Them

A group of Indian American activists for India is coordinating and sponsoring the India Rural Development ACTION Program Conference in Chicago, Illinois the weekend of May 3rd and 4th, 2008. The primary purpose of the Conference is to develop concrete action programs for water development, healthcare, primary education and economic development of rural Indian villages. It is a follow-up to the December, 2007 Rural India Learning Journey undertaken by 24 Indian Americans.

The Learning Journey, to rural areas in the southern state of Tamil Nadu, gave the participants first-hand knowledge of how the villagers of India are faring compared to the rapid progress of the upper and middle-classes in the cities of India. Most of the areas visited fell within rain shadow regions in which livelihood is primarily agricultural and heavily dependent on scanty, seasonal rainfall. All of the villages suffer from acute shortages of drinking water and water for growing crops, as well as all of the other infrastructural deficiencies attendant upon poverty.

The experience, while certainly eye-opening, was perhaps unexpectedly a positive one. Some of India’s dynamic social entrepreneurs, otherwise known as NGOs (Non-Government Organizations), are already in action lending a helping hand to transform rural India. Many villagers themselves, in particular the women, are also pulling themselves up, making heroic efforts to conserve rain water resources, and improve their livelihood in all aspects. What the group saw and experienced, gave us renewed hope that rural India is NOT a basket case. Still a lot, lot more needs to be done.

Participants in the Learning Journey consider the Chicago Action Program Conference the logical next step by friends of India in the US, including Indian Americans, toward making a concrete contribution to the future of India. During the May 3rd and 4th Conference, participants in the Learning Journey and other veterans in grassroots development, will share their experiences and discuss the work of credible NGOs already making strides in developing rural India and how the successful models of village development could be scaled up and replicated elsewhere in India. Most importantly, they plan to formulate specific project possibilities and encourage others to participate in future Learning Journeys to different Indian states in 2008 and 2009.

Ultimately, the objective is to get together friends of India in the U.S. including Indian Americans. We want ALL of rural India to make progress during the next decade or two -- including the states of the north and east that have lagged behind.

For details about the Chicago Conference, visit www.usindiafriendship.net

If you would like to speak to some one, call

Ram Narayanan at 716 875 9976 ramn_wins@roadrunner.com or

Raj Rajaram at 630 915 6176 info@idc-america.org .

You are welcome to post your comments about the Conference on http://usindiafriendship.blogspot.com/

US-India Friendship is a 100 percent not-for-profit labor of love, devoted to continuous improvement of US-India friendship and cooperation, especially people-to-people relations.

PWC Report on "The world in 2050"- India tops the growth league table‏

2008-03-08T10:25:00.002-05:00

PriceWaterhouseCoopers(PWC) have just published (March 2008), a report titled, "The world in 2050 - Beyond the BRICs: A broader look at emerging market growth prospects." [The acronym BRICs stands for Brazil, Russia, India and China.]

This is an update of PWC's report of March 2006.

PWC affirm that they are now even more optimistic than in their 2006 report about China and India, given the two countries' recent very strong performance.

Some of the highlighted projections of their latest analysis:

**By 2050, the E7 emerging economies (Brazil, Russia, India and China, plus Mexico, Indonesia and Turkey) will be around 50% larger than the current G7 (US, Japan, Germany, UK, France, Italy and Canada). PWC are only projecting a relative decline in the size of the G7 economies. In absolute terms they might grow by around 150 percent in real terms between 2007 and 2050. In the long run, the growth of E7 and G7 will be mutually beneficial, reinforcing each other rather than competitive, as each will have the opportunity to specialise in its areas of comparative advantage.

**China is expected to overtake the US as the largest economy in around 2025.

**India has the potential to nearly catch up with the US by 2050.

** Thus, the three major economies in the world in 2050 are likely to be China, the US and India. There will be a huge gap between these three economies and the next largest viz. Brazil and Japan. ,

**Among the smaller nations, the projected list of fastest growing economies to 2050 is headed by Vietnam, and the top 10 includes Nigeria, Philippines, Egypt and Bangladesh

**By 2050, the Japanese economy is projected to be somewhat smaller than that of Brazil and not much larger than those of Russia or Mexico, having been overtaken much earlier by China (in around 2010) and India (in around 2025).

**If the GDP in PPP(Purchasing Power Parity) terms of the US, the benchmark economy, is taken as 100, China will grow from 51 in 2007 to 129 in 2050, India from 22 to 88, Brazil from 15 to 26, Russia will remain the same at 17, Indonesia will grow from 7 to 17, Mexico from 10 to 17, and Turkey fro 5 to 10. Japan will decline from 28 to 19, Germany from 20 to 14, and both UK and France from 15 to 14; and Korea from 9 to 8.

**Over 2007-50, projected growth in GDP in PPP terms of India at 8.5 percent is expected to be higher than China's 6.8 percent; and GDP per capita in PPP terms will be 5 percent for India and 4.6 percent for China.

**India could rise from today’s relatively low levels to emerge as the third largest domestic banking market in the world by 2040 — and could ultimately grow faster than China.

**Impact of global growth on carbon emissions: The projections demonstrate that if countries sit back and adopt a "business as usual" approach, the result could be a more than doubling of global carbon emissions by 2050. Based on current scientific thinking, this could have potentially serious longer term implications in terms of global warming and related climate change. On the other hand, a scenario such as the "Green growth plus" strategy outlined in the report could allow for continued healthy growth whilst controlling carbon emissions.

**The major shift in economic power to emerging countries such as China and India should be grasped by those in established economies as an opportunity to boost trade rather than feared as an economic death knell.

"What might surprise some readers," the PWC report avers, "is that India rather than China, tops our growth league table." This reflects the following factors:

(a) significantly slower labor growth in China due in particular to the effects of its one-child policy; this will lead to a rapid ageing of the Chinese population over the next 45 years and a projected decline in its working age population, while India's working age population is projected by the UN to continue to grow at a healthy rate;

(b) the fact that average productivity and edication levels across the population are currently lower in India than inChina, giving the former greater scope to catch up with the OECD countries in the long run, provided that India can maintain the right kind of institutional policy framework to support economic growth (and also gradually overcome cultural barriers to female education in rural areas of India in partcular;

(c) China's growth to date has been driven by very high savings and capital investment rates, but experience with Japan and other earlier 'Asian tigers' suggests that such investment-driven growth eventually runs into diminishing returns once income levels approach OECD levels; as China ages, it is also likely that its savings rate will drop as assets are 'cashed in' to pay for the retirement of its ageing population, though it is still assumed that its savings and investment rates remain somewhat above the OECD average in the long run.

China is projected to remain the fastest growing BRIC economy over the next few years, but is gradually overtaken in terms of growth rates (though not levels of GDP) by India in around 2015 and Brazil in around 2025. The decelerating growth profile in China reflects the factors discussed above, in particular China's rapidly ageing population ( the same factor accounts for the marked deceleration in projected growth in Russia over the next 20 years). In contrast, the much younger and faster growing Indian and Brazilian populations are able to sustain a more stable rate of growth up to around 2030, although after that they too experience a gradual deceleration as their populations also begin to age.

[A question: What happens if, in the near future, China changes its "one-child" policy to, say, a "two-children" policy?]

Where India will not shine as much as the other nations is in GDP per capita. Here, clearly, its population size acts as a drag In constant 2006 dollars, India's GDP percapita in PPP terms is expected to rise from $2500 in 2007 to only around $20,000 in 2050, whereas China's corresponding figure jumps from $5200 to $34,500.

To read the complete report of PriceWaterhouseCoopers, please click: "The world in 2050 - Beyond the BRICs: A broader look at emerging market growth prospects"

**Tarun Khanna's book on "How China and India are reshaping their futures and yours"

2008-03-05T10:12:00.002-05:00

I have just finished reading Harvard Business School Professor Tarun Khanna's exhaustively researched book "Billions of Entrepreneurs: How China and India are Reshaping their Futures - and Yours." It presents a comparative analytical study of how entrepreneurship is making a big difference to the economies of both China and India.

First, a surprise -- the book makes no mention of the principal thesis of his previous paper published (jointly with Yasheng Huang of MIT) in 2003 in Foreign Policy Magazine which was titled, "Can India Overtake China?".

That article said:

"What’s the fastest route to economic development? Welcome foreign direct investment (FDI), says China, and most policy experts agree. But a comparison with long-time laggard India suggests that FDI is not the only path to prosperity. Indeed, India’s homegrown entrepreneurs may give it a long-term advantage over a China hamstrung by inefficient banks and capital markets.",

and concludes as follows:

"China and India have pursued radically different development strategies. India is not outperforming China overall, but it is doing better in certain key areas. That success may enable it to catch up with and perhaps even overtake China. Should that prove to be the case, it will not only demonstrate the importance of homegrown entrepreneurship to long-term economic development; it will also show the limits of the FDI-dependent approach China is pursuing."

The present book makes no such assertion, though it does admit that mainland China has "so few world-class indigenous private companies despite the creation of a juggernaut of an economy".

I asked the Professor a straight question by email:

"Will India's dynamic private sector help India beat China as an economic power by mid-21st century?".

The following was his email response:

"Indeed, it is the central theme of some of the chapters. In China, the government is the entrepreneur, in India it is almost exclusively the privatre sector and civil society that innovates. Though the book is really a ‘big tent’ book on entrepreneurship, as I say, not just folks taking companies public and making billions, but also entrepreneurs who circumvent social and political constraints, discover new ways to better lives etc., and do so very differently in both China and India. But I do say at the end that the question’ which is better’ is less interesting than the fact that there is so much good happening in both; each has its own warts, and they are different in different places."

My reply:

"I was NOT really interested in the question "which is better", but whether a dynamic Indian private sector will in the end be able to take India above China as a global economic power house?".

His response:

"Dynamic Indian sector is becoming more dynamic as we speak. It has to compensate for the state’s weaknesses, and hopefully ‘infect’ the state with its own competence, so that collectively it can match other fast growing nations".

A point that puzzled me at the outset was the title of the book, "Billions of Entrepreneurs". How could there be billions of entrepreneurs in China and India when the total population of the two countries is only 2.4 billion.?

Now for some excerpts from the book:

**Whereas harmony through merit-based autocracy is a defining characteristic of the Chinese state, the Indian state is probably best characterized by pluralism. India's diversity is so great that a key to sustaining its democracy has been finding a way to balance the often inconsistent demands of various groups with the needs of the collective. The good news is that the Indian system has worked to devolve power so that influence and prestige are distributed to more than the usual socio-economic elites to include several disparate historically disenfranchised groups. The bad news is that this accommodation has often come at the expense of useful collective action.

**Information accessibility in China and India: The Indian system generates noisy but unbiased information; the Chinese system generates noise-free but biased information. In China, can I believe the financial information in a company's annual report? Not really. Is it easier to find reliable information about a company in India? Yes.

**The continuing power of the Party hierarchy is evident in the black lists of individuals prohibited from visiting China. I know of no such lists for democratic India.

**Despite Chinese opacity and Indian transparency, US media give significantly more coverage to China than to India.

** Why China can build cities overnight and India cannot? Institutional inefficiency -- resulting from well intentioned constraints on the government, like the free press, judicial processes, and civil society -- has checked and balanced India into paralysis.

**Over two decades the world watched in awe as the CCP (Chinese Communist Party) transfomed China economically. China's GDP per capita rose from $673 in 1978 to $5,878 in 2005. Further, the number of people living in absolute poverty dropped from roughly 250 million to an estimated 26 million.

CHINESE and INDIAN FINANCIAL FIRMAMENTS and CORPORATE SUCCESS:

**Despite severe government intervention and control of Chinese capital markets, the country grows by leaps and bounds. If China can grow with a non-existent domestic capital market, perhaps that 'necessary' condition for economic growth is not necessary after all. Indian bourses, on the other hand, have achieved significant credibility. Mumbai now boasts of an equity market of very near first world status. The response to financial scams: The Chinese government opted for more regulation, control,, and draconian punishment. While technology, best practices, and corporate governance became the new mantra on the Indian market, in China regulation and centralization of powers triumphed over a structural reform of the markets.

**Unlike India, where capital markets however imperfectly, strive to serve the most efficient firms, the Chinese government chose to list only firms whose objectives aligned with the government's political goals. Favored firms, virtually all state-owned enterprises, had very little to show on their bottom lines and were often "bailed out" either by falsifying financial statements or government-led management, to use a euphemism, of their stock prices. India's capital markets, particularly on the equity side, and on the provision of bad debts, are far ahead of China's.

**In China, where capital is allocated by fiat, domestic savings are channeled through government-owned banks to recapitalize distressed state-owned enterprises. The banks themselves are bankrupt, the stock market is riddled with inefficiencies, and capital does not find its way to where it is most needed. The indigenous private enterprise that does exist in China -- and the numbers of would-be entrepreneurs are large -- is constrained from attaining anything near its full potential. State-owned enterprises, while their numbers have shrunk, continue to account for half of all of China's assets, and virtually all of its massive non-performing loans. Indian equity markets, in contrast, rely on the existence of thousands of publicly traded but privately owned indigenous firms and on an industry of independent purveyors of reasonably reliable information that allow individual savers to choose where to invest. New banks are forcing the old deadwood to pick up the game. Competition is the norm, rather than the top down decision making and intervention seen in China's capital markets.

**One estimate suggests that the better banks in India have reached 55 percent of the efficiency of U S banks, with India's best banks comparable to the best worldwide. On a per transaction basis, the cost structure of the best Indian banks is 10 percent that of a comparable transaction in a global bank. In China, the four largest state-owned banks still dominate the banking landscape, acounting for 75 percent of loans and capital and presiding over non-performing loans worth $230 billion. Several attempts to recapitalize these banks have accomplished little. Their fates are tied up to bankrupt state-owned enterprises virtually impervious to reform.As The Economist asks: "What kind of bank makes loans of which a third will not be repaid? The communist kind."

** Weak financial institutions make corporate governance an oxymoron in China. Ratings of firms across several emerging markets published by investment banking firm, Credit Lyonnais Securities Asia, dramatically highlighted China's failed corporate governence. The criteria used to assess corporate governance were management discipline, transparency, independence, accountability, responsibility, fairness, and social responsibility. India ranked sixth in the study, China ranked 19th.

**Corporate success in China commonly comes at the government's bidding, with the CCP(Chinese Communist Party) deciding how, when and where to project China. Indian companies, especially successful ones, rarely do the government's bidding. Rather it might be only a slight exaggeration to say that the government bows to the suggestions of of successful firms such as Infosys regarding the most expedient course of action to improve the Indian business climate. As a commentary on both the adaptability of indigenous entrepreneurs and the morass of government enterprise, even in the 1960s the private sector contributed as mush as 87 percent of India's GDP and was a key employment generator for the country.

** Much of China's growth seemed to come from plowing in more inputs, rather than from more efficient use of a given quantity of inputs over time.

**China and India could have a stronger impact on each other and the world than either country could alone. What China is good at, India is not, and vice versa. This complementarity creates grounds for an economic cooperation that has already begun, as native entrepreneurs tap into each other's backyards in a reprise of their long-term historical cooperation rather than their recent four decades of hostility. [Khanna does not discuss the point that though China-India business cooperation has zoomed in recent years, the "trust deficit" that persists is unlikely to take that cooperation far, unless China stops coveting populated Indian territories.]

**For the first time since the rise of the West, entrepreneurs in Asia can ignore New York and London almost entirely, and still build companies worth billions. The economic center of gravity is moving toward the east.

**There is rampant corruption in both countries, but the corrupt in China are demanding a piece of something new that is being created - the government is the entrepreneur - whereas India's corrupt are content to help themselves without any real contribution. The good news in India comes not from the government, but from civil society and the private sector, who are increasingly embracing some of the government's tasks....While the government is more efficient in China, the foundations for a market economy are much more robust in India.

**The mirror-image quality image of China and India: one favors multinationals over indigenous private companies, the other advantages its locals and shuns its foreigners.[One might question whether India really "shuns" foreigners, though it's true that China, unlike India, has gone out of the way to favor foreigners over its indigenous entrepreneurs.]

**In India, where entrepreneurship is almost inconsistent with the sclerotic bureaucracy, the government remains chronically incapable of matching China's display of hard power. This is most dramatically seen in how China is out-muscling India in its search for oil. Instead, India oozes soft power. In India's noisy political economy, creativity and the arts thrive. Entrepreneurs run amuck. The expansion of influence -- whether by India's film industry, international expansion by individual companies, or the soaring presence of yoga in the West -- amounts to influencing the world through soft power.

**Although competitioin from the state in China and from local companies in India will always, to a certain extent, constrain multinationals, research shows that both these forms of competition are equally effective. It is unclear that multinationals do unambiguosly better in China than in India, or vice versa. The most successful multinationals, those building long-term positions in either country, invariably pay more attention to contributing to local welfare than to their bottom lines. Landing on foreign soil to make a quick buck virtually never pays.

On greater annual FDI flows into China as compared to India: Multinationals find investing in China attractive. But Yasheng Huang (of MIT) has argued that China is forced to rely on FDI because it does not have the means to effectively channel domestic savings into productive investments. The state-owned and state-directed banks are largely defunct and used primarily to prop up state-owned enterprises that to a large extent continue to burn money. Much investment in the 1990s was from small and medium size enterprises from Hong Kong, Macao, and Taiwan, not from typically large Western multinationals. Much of the money coming into China is not being used to finance productive investments in ways that most countries use FDI; rather it is being used to repurchase assets previously owned by state-owned enterprises. India, unlike China, has a viable stock market that is more welcoming of foreign investment and provides numerous asset categories in which foreigners can chose to invest part of their portfolios. For example, the foreigner might opt to buy stock in a factory-owning company listed on an Indian stock exchange, but might be forced to use FDI to open a factory in China. Thus a comparison of FDI numbers would disadvantage India inappropriately precisely because India has the better financial infrastructure.

**Perception plays a big role in encouraging foreign investment. Even managers of Asian companies I visited were sure that their Indian operations outperformed their Chinese operations but were convinced that the Chinese operations mattered more to headquarters. Because much of the hype about doing business in China is not grounded in facts and figures, many senior executive meetings will continue to start with the well meaning but uninformed assertion, "We simply MUST be in China".

RURAL CHINA, RURAL INDIA, HEALTH and POPULATION ISSUES:

**Paramount in Westerners' thoughts of China and India are imagesof desperate poverty, malnourished children trudging barefoot on a dusty road, ragged peasants toiling. In India as many as 390 million live in grinding poverty, if poverty is measured by the international standard of those exisitng on less than $1 a day. The situation is a bit better in China. In 2001, the World Bank estimated that 400 million Chinese had been lifted out of poverty over the prior two decades. China's rising incomes among its rural population are a testament to the government's efficiency in planning, leading and executing change. In India, however, political emancipation and empowerment for people at the bottom of society has not translated to economic and social gains. The government has not yet learned from the private sector and civil society, which are currently easing individual pockets of poverty.

**Henan Province is among China's poorest, Gujarat State is among India's richest; yet villagers in Henan seemed better off than those in Gujarat. What struck me most [in Chengguan town of a 100,000 people, in Henan] were the street sweepers, hard at work in the early morning hours, face masks protecting them from the dust. The street was entirely free from garbage. How different was this from India, where the city government hires unionized street sweepers who can fail to show up and not worry about being fired because prolabor legislation and electoral politics prevent any threat of retaliatory government action from being credible. Even if the city government farmed out the city cleaning contract to a private entrepreneur, corruption would likely ensure that the contract was awarded to a crony who would not do the work.Any run in even a major Indian city, let alone a smaller one comparable to Chengguan, would be an exhibition of squalor even at dawn.

**I drove from Chengguan to Qiu Village and was impressed by the paved roads we traveled, as well constructed as the Massachusetts turnpike I know at home. Good roads mean that the trip from the Village to the county hospital is less than a half hour, and summoned ambulances arrive as reliably as they do in the US. Again I was struck by the contrast with Indian villages, where only the most rudimentary medication is available, and ambulances are non-existent. Qiu Village displayed not exactly prosperity but at least the absence of the desperation of many Indian villages.

**In 2002, 91 percent of the Chinese populace aged 15 and older could read and write; 87 percent of females and 95 percent of males in that age group were lierate. In contrast, the Indian adult literacy rate was just 60 percent in 2002, with only 48 percent of females and 70 percent of males literate.

**The drive from Ahmedabad to the village where I was to meet SEWA (Self-Employed Women's Association) members was in some ways similar to the one I took in Henan, but in other was it was quite different. Although Henan is one of China's poorer provinces, its countryside seemed far more prosperous than that of Gujarat, one of India's richest states. The road from Ahmedabad, like most roads in India, were bumpy, with slow-moving traffic interrupted by wayward trucks, animals of all sorts, and penurious figures trudging precariously alongside.

**In a sense, civil society [NGOs like SEWA] and the private sector [companies like ITC], rather than the government, have provided health, education and sanitation to rural India. SEWA's and ITC's innovations are based on a simple but powerful idea, borrowed from the world of technology: the more participants a network has, the more powerful the netwotk becomes.

**By Indian standards, public hospitals in China are reasonably well functioning. They are clean, free of crowds, and well run. But as of 2003 some 80 perecent of China's rural population -- roughly 640 million people -- still lack health insurance. In a ranking of 191 member nations on the overall health of their populations, the WHO's 2000 report ranked China 81st and India 134th. In terms of equitable distribution of health, the same report ranked China 101st and India 153rd. Although India has a number of charismatic individuals whose work in private sector entrepreneurship is heartening, India's public sector health failure, which is far more prevalent, is absolutely heart-wrenching.

** To complicate the picture, India [the private sector] has begun to offer world-class health care to those who can afford it, including foreigners in the West. When Europeans and Americans fly to India for complicated, highly skilled surgeries that cost a fraction of what the procedure would cost at home, they receive not only a mended heart or hip, but also a revised image of India. No longer can these Westerners hold onto the stereotype of India as a poverty-sticken cow-populated country. Medical tourism is changing Westerners' ideas about the meaning of what Kipling termed the "white man's burden."

**China's working-age population grew by only 2.1 percent annually from 1975 to 2000, and that growth rate dropped to 0.5 percent in the next quarter century. Meanwhile, steady growth in the nation's dependent population means that China will not be rich when hundreds of millions have grown old and are afflicted with poor health. India's demographic projections appear more optimistic. Growth in its working-age population has shrunk from 2.3 percent to 1.6 percent anuually, but more importantly the annual growth in its dependents has fallen from 1.5 percent to 0.5 percent. India now expects to benefit from a demographic dividend of the sort that China did at the onset of the latter's reforms. However, complacency in India is unwarranted. An unhealthy working-age population, no matter how young, cannot spur economic growth.

CHINA'S HARD POWER :

**In recent times China's hard-power global expansion has been the result of premeditated and orchestrated state policy, while India's influence in the world has largely been achieved through soft power.

**Despite criticisms of its human rights violations, over the last five decades China's presence has gradually and convincingly eclipsed India's in South-east Asia, the region comprising modern Brunei, Cambodia, Indonesia, Laos, Malaysia, Burma(Myanmar), the Philippines, Singapore, Thailand and Vietnam. The ascent to economic dominance is especially dramatic because India's influence in the region was at one time unrivalled. [I am not certain that Khanna's assessment is entirely valid so far as Singapore and Vietnam are concerned. In Singapore, the Indian economic presence is growing fast.]

**[Both China and India are short of oil.] But the Chinese trio of CNPC, CNOOC, and SinoPec outmaneuvers India. For example, Angola's state-owned oil company Sonangoal blocked India's state-owned ONGC from buying Shell's 50 percent stake in Sonangoal. The deal would have yielded about 5 million tons of crude oil daily for India from 2008.Angolan authorities did not appreciate Shell's direct deals with the Indian company. India, after all, offered only $200 million for developing railways, whereas the Chinese were willing to ante up ten times as much for several projects in Angola. Not surprisingly China won the deal. "Aid for oil" has emerged as part of a multidimensional Chinese approach toward energy-rich states. Chinese leaders have been all over Africa in recent times. In Zimbabwe, dealing with Robert Mugabe's unsavory regime, China has invested in minerals, roads and farming and supplied the dictator with jets and other weaponry. No conditionality is attached to these deals, especially in terms of political reforms.

**Virtually every Chinese energy company is active in Burma.China's ability to use its wealth and its willingness to deploy it in places where the Western world's oil companies are constrained, has made it the leading influence in Burma. Meanwhile, India's oil policy, from condemning the "generals" to accommodating them, thereby taking a page out of China's book, continues to lack the sure-footedness that the Chinese have perfected.

**Whether by engaging in diplomaic niceties, exchanging Chinese weapons for oil and gas from pariah states, or investing in cobalt and copper in civil-war torn Central Africa, China leads with its wallet, unrestrained by politically correct norms of international relations. Chinese rhetoric today, which privileges its "peaceful rise" and "harmonius society" while continuing to operate with abandon in war-torn Africa, echoes China's behavior in 1955 when it took aggressive action in Tibet and Korea while charming delegates at the Bandung conference with its talk of peaceful engagement.

INDIA'S SOFT POWER:

**According to the political scientist Joseph Nye, "Much of American soft power has been produced by Holywood, Harvard, Microsoft and Michael Jordan." What are India's channels of exporting soft power? India's film industry -- Bollywood -- is the principal means by which India exports its soft power. The scale of Bollywood has eclipsed that of Hollywood, in 2003, 3.6 billion people attended 1100 Bollywood movies compared with the 2.6 billion moveigoers who attended 600 Hollywood films. Film star Amitabh Bachchan outpolled Chaplin, Olivier, and Brando in a BBC online vote as the "greatest star of stage or screen." The most obvious other candidate is the software industry -- the major reason India has reemerged on the world economic map. Another viable contender among India's primary soft-power exports is the nation's intellectual tradition. The last 200 years have witnessed many examples of what the 19th century diplomat Sir Charles Eliot called "the spread of Indian thought." One of the most significant was Swami Vivekananda, the orange robed monk who took the Chicago Conference on World Religions by storm in 1893. His influence survives in the dozens of missions that continue his teachings in the US over a 100 years later. A more modern cultural ambassador is Deepak Chopra, the Indian immigrant and doctor who is America's resident self-healer. Over the past two decades Chopra has emerged from the mainstream of American medicine to propagate inner healing and to spread the gospel of yoga.

**China has no comparable cultural ambassadors. Why the discrepancy? One reason lies in the role of the government in culture of the two countries. As one scholar put it, during four decades under the communists, Chinese cinema "often seemed one long reel of propaganda." Even after the 1978 opening up of China, the "Growth first, freedom later" slogan was applied most cruelly to the film industry. Content had to reflect the values of the "social spiritualist society," values that dominated artistic or commercial considerations. Film makers and artists in China are on the government payrolls, serving as mouthpieces of official propaganda rather than as ambassadors of culture. Indian artists are nothing if not loudly critical.; indeed, that is the source of their legitimacy. The messages these ambassadors send are not always cohesive and reveal no overarching national algorithm to reach superpower status. India's soft power cannot follow a disciplined plan because its decentralized message emanates from its diversity, its entrepreneurial spirit, and more recently its international ambition. On China's side the baton is passed from premiers to generals to party cadres. Team India passes it from internationally acclaimed film director Mira Nair to spiritual strongman Deepak Chopra to academic conscience Amartya Sen to software czar Azim Premji.

**While traditional Chinese medicine and martial arts have plenty of followers in the West, no single ambassador has achieved the fame and influence of Vivekananda in his time, or Chopra today. The paucity of such Chinese ambassadors surely has something to do with the attitude of the CCP to cultural activity over the past decades. Censors' intervention in the world of film is just one example. Remember that this stifling attitude was superimposed on a society where creativity, freedom of thought, and intellectual activity had been comprehensively wiped out during the Cultural Revolution.

ARE THE CHINESE MORE WILLING TO LEARN FROM INDIA THAN INDIA FROM THE CHINESE?

**The Chinese are attempting to learn. Are the Indians doing nearly as much? In sharp contrast to China's state-led and state-executed plan to invest in creating an environment that fosters learning from the best in the software business, and in contrast to Indian entrepreneurs' eagerness to become part of that environment, stands the inability of the Indian state to plan or execute similar investments in areas where India lags behind the Chinese. India could, for example, learn from China's success in the hardware sector, among the most efficient in the world today. Over the last 20 years the world's technology giants have taken advantage of the low labor costs and incentives offered by the Chinese to set up factories on the mainland. By 2003 a fifth of total exports - and more than a third of the growth in China's exports - came from such factories.

**Kiran Karnik (head of India's NASSCOM, the software industry lobby group) told me that the Chinese sent delegation after delegation to Bangalore and Hyderabad to study and learn about India's software success. The Indian government has failed to create even the semblance of a framework within which Indian firms can learn from Chinese prowess. Although Indian firms like Infosys, TCS, and NIIT are all invited to educate Chinese graduates in the best practices of India's software industry, India does not attempt to learn from China.

[The obvious answer: In India this role MUST be filled NOT by the government, but by CII (Confederation of Indian Industry) and FICCI (Federation of Indian Chambers of Commerce and Industry) jointly. Will they take up the challenge?]

CORPORATE BRIDGES: LINKING CHINA, INDIA AND THE WEST:

**My favorite example of a company that has changed both China and India for the better is GE. GE has figured out how to profit from being in China and India and to contribute substantially to both countries. Its operations in China and India have learned to work together, making the proverbial whole greater than the sum of its parts.Said William Castelli (of GE): "India will plug into our global research and development engine. We have large laboratories in Shanghai and Bangalore. [GE's Jack Welch Technology Center in Bangalore is larger than similar centers in Munich and Shanghai.] What we are finding is that the research coming out of Bangalore is more affecting GE's global operations in plastics, medical devices, aeronautics, and complex statistical algorithms. GE Healthcare in particular has over 2000 algorithm writers in Bangalore.....The Indians are very hungry for success. They will stop at nothing."

**GE adapted to India, just as it did to China.But the results of the adaptation were different in the two countries, reflecting different local circumstances. For example, in China GE's strategy accounts for the presence of several of the company's major Fortune 500 customers - Dell. Nokia, Samsung, Hewlett-Packard - and for the dependability of manufacturing facilities in China. This is not the case in India. Not only has GE not acquired a critical mass of clients that are multinational companies, but also GE India has yet to achieve excellence in manufacturing. In India GE taps into what Indians do best - software and intellectual capital.

[I hope CII/FICCI has made or will do a study in depth as to why GE, in spite of being in India for so long, has not been able to achieve excellence in manufacturing, as compared to its China manufacturing operations. It's important that India's manufacturing capability takes off over a wide spectrum of consumer, intermediate and capital goods, because it's manufacturing that will create the much needed jobs for the masses of India, while research and software will help only a comparatively small minority of Indian elites to secure jobs.]

Khanna offers many interesting insights throughout the book such as on 'China's art of Diaspora Management' versus 'India's Art of Diaspora Mismanagement.'

A point that I noticed at the outset: of the five advance comments on the book published on the back cover, three were from Westerners including at least two Americans, while the remaining two were from Indians; there was not a single comment from a Chinese person. While reading the book, a quesion that came uppermost to my mind: would a Chinese translation of the book be allowed to circulate freely in China?

Overall, Khanna's book is a major contribution to the literature on the comparative aspects of Asia's two emerging economic powerhouses and their impact on the US and the world.

It's a 'must read' book .

Rural India Learning Journey Conference

2008-03-02T12:41:00.006-05:00

In December 2007, 24 Indian Americans embarked upon a Rural India Learning Journey trip which proved to be inspiring -- and exciting -- in terms of what we, Americans, can do to work with India's dynamic NGOs and the rural folks, to ensure that Bharat, as distinguished from India, can catch up and run.

The group has decided to convene an "India Rural Development ACTION PROGRAM Conference" in Chicago on the weekend of May 3rd and 4th, 2008. All Americans interested in the development of rural India, including of course, Indian Americans, are invited to participate in this unique week-end ACTION-ORIENTED Conference.

To see the Agenda and learn how to register, click Conference Agenda.

If you wish to read the report of our December 2007 Rural Learning Journey, visit Learning Journey Report