To Indian leaders who have built up an exaggerated notion of the country’s global standing, the findings of the latest Asia Power Index by the Lowy Institute, Australia’s most respected think tank, should be sobering. India’s overall score declined 1.3 points compared to 2019. Lowy damns India, Asia’s third-largest economy, with faint praise by describing it as a “middle power”. The institute ranks countries on eight indicators. India made gains in four of them: Economic capability, military capability, resilience, and defence networks; it lost in terms of future resources, economic relationships, diplomatic influence, and cultural influence (the last constituting the biggest drop of -5.3).
It is significant that even as the government is congratulating itself on the handling of the Covid-19 pandemic, the health and economic toll of the pandemic has been the principal cause of the slide. Overall, the picture is one of opportunities lost and wilful underperformance: “India exerts less influence in the region than expected given its available resources,” the study observes. To be sure, all such rankings have an element of subjectivity, but the big point that stands out in the latest assessment is that China is gaining traction and India is losing it. China’s overall score remained unchanged over 2019 — despite a dramatic fall in the score for diplomatic influence, principally the result of accusations of withholding information about the severity of the Wuhan outbreak.
India and China’s varying positions on the Asian Power rankings are, of course, driven home by key differences. One is in current economic performance — China being the only major economy to expand so far in 2020 whereas India’s has shrunk. The second is in geopolitical capabilities, as evident in Ladakh, where India will have to accept that territory has been lost more or less permanently because the country lacks the required military and diplomatic heft to regain it. What is more, the power gap with China will continue to grow. From being five times India’s economy in recent years, China may become six times in a year or so. Indeed, in terms of economic relationships, the Lowy rankings show that India has slipped to seventh position, principally on account of its inability to forge regional trade integration efforts. China has already replaced it as the largest investor in Nepal, and India’s withdrawal from the Regional Comprehensive Economic Partnership has proven damaging for the country’s trade outlook. Meanwhile, the technology gap is also increasing, as is the military gap in naval and missile capability. The fusillade of missile tests over the past week is unlikely to convince anybody since they were for weapons systems that remain a long way from becoming operational.
The question confronting India is how to play the game when it is losing ground. On the economy, it has chosen to play defensive, focusing on import substitution rather than exports. The wisdom of such a stance can be questioned, given that no nation has grown by relying exclusively on domestic demand. In the military area, a defensive strategy will once again be the operating paradigm since India cannot hope to go on the offensive against China. The best option would be to use diplomacy and deterrent capability to avoid getting into a fight. In that context, the formal extension of an invitation to Australia to join the other Quad powers — Japan and the US — for the Malabar naval exercise is a good move and India needs similar alignments. At the end of the day, though, it is the economy, stupid.