U.S. Rebalancing to Asia: A View From India

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Faced with the limitations of economic relations without political integration, Asian states have begun to reevaluate their prior relations and coalition structures to meet the demands imposed by U.S. rebalancing within Asia. Nowhere is truer than in the nuclear arena, where China, India, and the United States face questions over their ability to redefine their partnerships and the global nuclear order. Samir Saran, vice president and senior researcher at the Observer Research Foundation in New Delhi, spoke in the twentieth session of the “China-South Asia Dialogues” seminar series for senior experts. This was followed by presentations by three Tsinghua University master’s degree students: Mao Keji from China, John McGowan from the United States, and Ece Duygulu from Turkey. The students’ presentations were part of the “China and South Asia’s Future” seminar series for rising scholars. Carnegie’s Lora Saalman moderated.

Rebalancing Within Asia

Saran noted that while the United States is often seen as rebalancing “to” Asia, much of this reorientation has actually occurred “within” Asia. Even as Washington seeks to redefine the role that it will play, regional powers have begun to delineate their own identity, he asserted. In doing so, economic integration has begun to “reach its limits” in the face of unresolved political tensions and obstacles. Without addressing political integration and rebalancing among regional players, Saran suggested that an integration project designed and implemented by Asians themselves would be difficult to achieve.

•U.S. Regional Role:

Saran asserted that one of the driving motives behind U.S. rebalancing within Asia has been China’s reluctance to enter into a G2 construct, under which Washington and Beijing would serve as the primary players. Rather than resulting in comity or competition in a bipolar order, Beijing and Washington are both jockeying for their own national interests, said Saran. However, he added, the United States maintains a strong isolationist streak that could result in significant drawdowns in how it engages the region and guarantees its security. In the face of this uncertainty, Saran maintained that regional players would be best served by coordinated political integration fashioned by capitals in the region.

•India’s and China’s Regional Roles:

The futures of China and India are inextricably linked, Saran said. Chinese refusal to sign onto the bilateral U.S.-China agenda, coupled with the fact that Washington has already made its unsuccessful play for a G2 construct, means that Beijing is in the driver’s seat. As a result, he maintained that the U.S. pivot to Asia will ironically be “made in China.” In looking further afield for energy stores and cooperation, Beijing and New Delhi will also be faced with the need to guarantee passage throughout the Indo-Pacific, Saran added. Beyond the bilateral, he noted that engagement at multilateral forums has proven to be most viable for China and India, since it obviates confronting mutual tensions. Enhancing Cooperation

•India’s Role in Security:

Saran noted that preoccupation with traditional security misses the economic fallout and necessity of integrating political, economic, and military solutions, particularly when faced with new territorial disputes, piracy, drug running, and other asymmetrical threats. To this end, Saran asserted that India has a role to play. However, when it comes to territorial disputes in the East China Sea and South China Sea, he remained reluctant to predict a role for New Delhi. When asked about ties between New Delhi and Tokyo by one of the Chinese participants, Saran responded that Japan and India have similar interests, which become all the more evident in the context of China’s regional rise.

•Identity Crisis:

One of the Chinese participants spoke of allegations of China’s aggressiveness when it comes to its neighbors and suggested that this was tied to internal shifts in how China defines itself. He questioned whether India is undergoing a similar case of self-reevaluation. Saran responded that part of Beijing’s crisis of perception comes from the fact that despite its growth and creation of regional dependencies through donations and economic benevolence to its surrounding countries, it has not changed its behavior towards these countries. Similarly, given New Delhi’s growth, it seeks accommodation on its desire to be a “global manager.” Unlike China, however, he noted that India has global aspirations, but continues to be bogged down by domestic issues. A Chinese expert added that he felt China and India have more in common with each other than with the United States, advocating increased interaction and exchange to build strategic mutual trust.

•Mutual Respect:

A Chinese participant queried what measures would increase China’s respect for and willingness to cooperate with India. Saran responded that people-to-people contact, expanded media interaction, and investments leading to greater integration between Beijing and Delhi on all levels are key. Mao, McGowan, and Duygulu offered their takes on how this dynamic has played out in the nuclear sphere, with India’s pursuit of a nuclear capability to solidify its status and respect from countries such as China. A Chinese expert noted that when it comes to multilaterally binding arms control treaties, India still has a role to play, particularly with the Comprehensive Test-Ban Treaty (CTBT). Saran responded that trust must be mutual; as such, India’s signing of treaties like the CTBT will be dependent upon the actions of China and its decision whether or not to ratify them.

•Demographic Pressures:

Much like “China’s Dream,” Saran cited “India’s Promise,” asserting that Beijing is waking up to New Delhi’s potential over the next ten to fifteen years. However, he cautioned that while demographic windfalls may shore up India’s production capacity in the short term, they are likely to pressure New Delhi to meet the employment demands of a young and disenfranchised population. As these numbers soar, Saran further predicted that the long-term implications of caring for the elderly would threaten the sustainability of India’s economic growth. Despite such pressures and the recent decline in Sino-Indian trade, Saran maintained that the two countries share common aspirations and challenges. More than simply reacting to U.S. rebalancing within Asia, Beijing and New Delhi should conduct their own regional recalibration, Saran concluded.

BRICS, In the News, Politics / Globalisation

U.S. Rebalancing to Asia: A View From India

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Interview of Samir Saran’s on Build-operate-transfers of India on China’s Phoenix TV

The news link of the story about India BOT is here

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BRICS and mortar for India’s global role

DEVELOPMENT PARTNERS: The grouping’s members can not only learn from each other’s development experiences and understand views on subjects like climate change but also define new rules for health care, education and Intellectual Property Rights.

New Delhi finally has a platform to assert its might and rewrite the rules of global, political and economic governance

India is at a unique geopolitical moment. On the one hand its neighbourhood and the larger Asian continent are being unpredictably redefined. The United States has declared, if somewhat ambiguously, its reorientation or “pivot” towards Asia, recognising the region’s economic force moving forward, or perhaps merely countering enhanced Chinese power. India and China are charting new geographies of contests, the Indian Ocean and South China Sea. The “Arab Spring” has exposed the fundamental inadequacies in Middle Eastern and North African governing structures but has also given rise to an uncertain political future in an important energy-producing region. Last, but certainly not least, China’s growing assertiveness in the Asia-Pacific region has led to increased, if sometimes seemingly unnecessary, conflict with neighbours in Southeast Asia and Japan.

On the other hand, the world is seeing a once-in-a-century churn. The global board of directors that sit on the high table and define rules for conduct of political and economic governance are now unrecognisable from the lot just after World War II. India must seize the moment to shape these revisions of rules devised by the Atlantic countries and defend its growth and development interests in areas such as trade, Intellectual Property Rights (IPR), space, climate, and energy policy, among others.

Regional order and global governance are both in flux and demanding India’s attention. This is not unique by itself. What is different this time around is that India has the capacity, increased capabilities and enhanced level of demonstrated intent to engage with this dual external relations challenge. In order to attain the global power status it desires, India must walk and chew gum at the same time. It must tend to its immediate and extended Asian neighbourhood while also engaging with the task of shaping a new rules-based political and economic order. BRICS represents a uniquely appropriate platform and flexible mechanism with which India can address this dual imperative.

Role for three

Engaging with China and Russia in an environment free of the sharp edges often wrought in bilateral negotiations will catalyse congruence over an array of mutually important issues. Any stable Asian order must have at its core, a certain level of accord among these three large continental powers. The past would need to be defrayed and the path for future integration would need to sidestep suspicion and history. Annual BRICS summit-level discussions on political and economic matters allow the three countries such an arena of tactical camaraderie. The current moment allows a unique opportunity for the three to shape a new construct for Asia amidst the regional flux. Perhaps at some stage it may be worthwhile having a summit level RIC meeting on the sidelines of BRICS to discuss this Asian project.

On resetting and reshaping economic and political governance, BRICS has the potential to be the new (and often criticised) game changer. The sheer size and rate of growth of intra-BRICS trade and economic exchange will allow each of these countries to exert their collective weight for their individual gains. Who gains more should not matter, as long as every member benefits from this dispensation and the order is visibly equitable.

There are a few benefits that India must seek through and with the BRICS. First, there are many multilateral organisations within which a “BRICS-bloc” can exert significant leverage. The U.N. and World Trade Organization are two such forums. While geopolitical and economic thinking among BRICS is not always in-sync, where there is consensus (and the areas are increasing rapidly) BRICS could be a compelling voice. Like they did on the debates on non-interference and “Responsibility to Protect.” Similarly, India’s views on climate change, financial norms, trade rules and so on could also benefit from BRICS’s aggregate voice. Of course the UNSC membership issue strikes a discordant note but it should not cannibalise the possible coming together on other matters.

Barrier against slowdown

Second, as economic powerhouses and regional hubs, intra-BRICS market integration can insulate these nations from western economic slowdown. The Organisation for Economic Co-operation and Development (OECD) stagnation is impacting BRICS growth, with multi-percentage point GDP dips in India and China. BRICS market integration could leverage the economic power of emerging world economies by sparking increased trade and foreign investment, especially if done in local currencies. Only China is part of India’s top 15 trading partners, making the BRICS forum an attractive stage from which India can promote economic ties with other dynamic economies. The BRICS development bank, option of holding each others’ currencies as reserves, stronger trade facilitation and eventually a comprehensive BRICS economic partnership agreement are all worthy possibilities.

For inclusive growth

Third, the BRICS are each experiencing rapid development with uniquely national characteristics. However, despite growing middle class populations, BRICS hold the lion’s share of the world’s impoverished population. These nations must take increased responsibility for a new global development agenda, incorporating inclusive growth, sustainable development and poverty alleviation. BRICS is a platform not only to learn from each other’s development experiences but also the instrument that can define new rules for health care, education and IPR for the billions at the bottom of the pyramid.

The collective BRICS experience around social policy could be beneficially shared with others as well. A forum (like the OECD) or clearing-house to disburse this information would prove a relatively low-cost measure producing substantial insight into development efforts, technology sharing, low-cost and sustainable energy generation, information technology and manufacturing.

By drawing on collective BRICS brainpower, local development efforts will be catalysed. For example, sharing China’s experience on infrastructure development or poverty reduction or Brazil’s in clean-fuel generation could be beneficial for India currently lacking the ability to take full advantage of its economic potential.

Is BRICS just a catchy acronym masking the haphazard, slapping together of five developing, yet ultimately incompatible, nations? India should respond with an emphatic no. At this unique moment, when India faces a multitude of challenges seeking its attention both towards the region and the global stage, BRICS provides a flexible platform to respond to both.

(Samir Saran is vice president and Daniel Rubin is Henry Luce Fellow at the Observer Research Foundation.)

BRICS, Columns/Op-Eds

Why BRICS is important to Brazil

Original article can be found here

Brazil has a prominent role to play in the global governance architecture. The country has sustained structural economic growth on the back of favourable demographic drivers, growing middle class consumption and broad scale socio-economic transformation. As a result, the business environment in the country has steadily improved; and the number of people living in extreme poverty have halved over the last decade. It is time for the country to place commensurate emphasis on consolidating its position as a regional leader; and as a key stakeholder on the global governance high table. BRICS provides the perfect platform to marry the dual imperatives.

HOT TOPICS: BRICS

Brazil boasts of one of the world’s largest domestic markets and a sophisticated business environment. It ranks 53^rd on the World Economic Forum’s Global Competitiveness Index (2001-12), and is ahead of the rest of the BRICS nations in the availability of financial services among other key indicators of financial market penetration. Brazil’s upwardly mobile middle class and its elite have inexorably embraced the liberal globalisation framework, promoted by the developed world. Consequently, since the 1990’s they have shown a greater willingness to engage with the international system, and accept transnational regulations and norms.

As a willing signatory to international norms, ranging from those around mitigation of climate change to preventing nuclear proliferation, Brazil has often broken its own historical typecast of being defensive. What superficially seems to represent a systemic re-prioritisation – requires deeper investigation. According to the Economist’s Economic Intelligence Unit, domestic savings rates in the country are below 20 percent. Mid-sized industries still largely rely on external markets for raising money and channelling investments. By default, international perception about the Brazilian economy is an important component of national strategy. Concomitantly, the Latin American identity is one that successive governments have strived to shed.

Being part of the BRICS grouping has helped Brazil to leverage its ‘emerging market’ identity and de-hyphenate from its Latin American identity (which had its own convoluted dynamics in any case). This is evident both in the global economic and political spheres. BRICS has provided Brazil with a platform to engage with the international system more progressively. It can now navigate the international rules based architecture, with greater bargaining power and seek greater representation in institutions of global economic and political governance. Using the BRICS identity, Brazil no longer has to drive a wedge between its development and growth imperatives. It can shield its poor from international regulations, without fear of its ‘investment worthiness’ being diluted. It can participate at the global high table, while simultaneously catering to nuanced regional imperatives.

The recent death of Hugo Chavez was termed “an irreparable loss” by Brazilian President Dilma Rousseff. This serves as an example of the ideological flexibility, which the country employs to engage with a neighbourhood that is strictly divided on the Venezuelan President’s legacy. Indeed fine balancing tactics are not new to Brazilian foreign policy, also termed ‘a study in ambivalence’. The pluralistic construct of BRICS fits perfectly with Brazil’s strategic outlook on its neighbourhood and the world. Brazil has taken on more regional commitments over the same twenty year period during which it has enhanced its engagements with the international system. This is evidenced from increased participation in regional working group meetings, official summits and informal gatherings by the government.

There are numerous accounts of Brazil’s deployment of regional priorities as a bargain chip. Through MERCOSUR (Southern Common Market), Brazil has been able to successfully negotiate trade agreements in favour of its national interests. It is a pivotal founder member of the five-member trading bloc, which recently included Venezuela within its fold. In the on-going negotiations for a Free Trade Agreement with the European Union (EU), Brazil has pulled out all the stops, shielding its local industries from cheaper foreign made imports; with support from other members including Argentina. Similarly, common interests rather than common ideologies dictate the BRICS agenda. Brazil’s membership of the grouping is in complete consonance with its regional and global strategic imperatives.

Aside from the adaptive flexibility that the informal BRICS grouping offers, it allows Brazil great latitude in bringing specific agendas around innovation, intellectual property rights and green growth at its core. Brazil is home to nearly half of the world’s biodiversity; the overarching sustainable development agenda is not surprisingly a national priority. Similarly, Brazil has the opportunity to use mechanisms such as the BRICS Exchange Alliance for attracting investments. While the current framework enables investors to trade in cross-listed futures indices, if there is political will, the mechanism could eventually encompass various products with different underlying assets including equities. Another relevant sector specific example is commercial aerospace cooperation, where Brazil has unmatched expertise within the grouping.

There are in fact multiple opportunities for Brazil within BRICS, not limited to the economic sphere. In many ways, the grouping brings Brazil from the left corner of the world map to the centre, where the geopolitical theatre is most active; in Asia and the Indo – Pacific. However there are two oddities in the Brazilian agenda which would require circumnavigation if Brazil is to be brought to the heart of the geopolitical discourse. The first is to moderate its insistence on pursuing ‘euro-styled’ agendas such as interventionist doctrine ‘responsibility to protect’ (R2P), with an ambiguously defined alternative ‘responsibility while protecting’. Sovereignty matters to other BRICS and there is some time before supra-national initiatives would pass muster. And the second is to shed its reluctance on the agenda for creation of a BRICS led Development Bank. In this instance Brazil, with its considerable Development Bank experience, can help shape a credible institute that will empower billions south of the equator.

Vivan Sharan is Associate Fellow and Samir Saran is Vice President at the Observer Research Foundation (ORF), New Delhi.

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A French Five-Course Meal: The French president brings an extensive menu of strategic partnership options with him

Original of this article can be found here

French President Francois Hollande is arriving in the Indian capital today for confabulations with the Indian leadership. This first visit of the new French president is missing the hype and hoopla that would have accompanied, say, a visit by the US president. Perhaps this is a reflection of the persona of the man, who is stated to have an understated style. Or is it a sign of the strength and maturity of the bilateral relationship?

France is arguably India’s longest standing all-weather friend, save Russia. It sought to limit the impact of the US-led anti-India sanction regime following the nuclear tests in 1998. It was the first to propose the integration of India into the global order, and it has been the first and most vocal supporter for India’s inclusion in the Security Council as a permanent member.

This is indeed a good time to move the engagement from one that is still tactical and transactional to one that is more strategic and sustainable. This partnership must be consummated with determined progress on five fronts.

The first is to realign cooperation in the defence sector. Multibillion dollar transactions are on the anvil with sales of aircrafts under negotiation, agreements on co-production of missiles, technology for the Tejas aircraft and a submarine deal. India has served as a lucrative market for French defence industry; the relationship now needs to move beyond this ‘vendor-buyer’ paradigm.

It must strive to unleash the market potential and entrepreneurial dynamism of the Indian private sector in tandem with French capabilities. While the glass ceiling that excludes private enterprise remains, some developments give hope and direction.

The local subsidiary of DCNS, a French company, has teamed up with private Indian defence component manufacturers to coproduce equipment for Scorpene class submarines. Can we be ambitious and jointly build nuclear submarines as well? This is something that the French are working on with Brazil already. Similarly, can

the French Thales Group and an Indian company create armoured personnel carriers like they have done with Australia? Can we hope to jointly develop drones and unmanned combat aerial vehicles, needed for the asymmetric battlefields of the 21^stcentury?

This ambitious co-creation agenda leads us to the second project that India and France must embark upon. There is urgent need for a roadmap leading to India’s entry into the four global export control regimes. France must work with the Europeans and the US to facilitate India’s entry into the Nuclear Suppliers Group, the Missile Technology Control Regime, the Australia Group and the Wassenaar Arrangement. Membership of the four regimes will allow partnerships and development of new markets in the large high-tech sector for defence and civilian applications.

The third area of focus must be India’s civil nuclear sector. India and France have partnered on civil nuclear energy initiatives since 2008, with France being the first country to sign a civil nuclear agreement with India. Nicolas Sarkozy had promised “full’’ civil nuclear cooperation, including the transfer of uranium enrichment technology. Hollande must now implement that promise.

Without access to enrichment technology, the growth of nuclear energy in the country will remain modest and India’s ability to emerge as supplier of a full range of nuclear services will be limited. The opportunity to develop India’s manufacturing industry to cater to the nuclear sector at home and abroad is immense. France is the most obvious partner and co-beneficiary.

Fourth, homeland security offers broad scope for collaboration. Faced with threats ranging from cyber attacks to terrorism, India can benefit from best in class French security technologies. The Safran Group offers a spectrum of security solutions and is a world leader in biometric technologies. It is already engaged with the Unique Identification Authority of India.

The Thales Group offers a range of integrated security solutions for urban infrastructure and has been in India since 1953. There is a growing appetite for the sector within Indian corporations. The two governments must act in concert and provide policy signals that catalyse this private sector interest.

Finally, both countries must start looking together at the region and the world. The Indian Ocean is an important region for both countries. France has long been an Indian Ocean power with numerous bases in the region, and is dependent on oil imports from the region much like India.

A Franco-Indian vision document could be a vital first step towards developing a cooperative framework for stability and security in the region. It would help the two countries understand capacity hurdles and technology gaps that need to be overcome. Be it cooperation on maritime domain awareness, submarines, missiles or at the very least joint operations, anti-piracy efforts, information sharing and data access, the scope is immense.

The relationship must be purposeful, nimble and creative. If the Rafale negotiations hit turbulence on price issues, India’s interests in obtaining certain technologies could offset this hurdle. Similarly, a repeat order for Scorpene class submarines could be considered alongside co-development of nuclear submarines that India seeks for a credible triad. As the world becomes increasingly fragmented, and interests dictate relationships, France and India have a historic opportunity to circumscribe their interests within a comprehensive strategic framework of cooperation.

The writer is vice-president, Observer Research Foundation.

Columns/Op-Eds, Politics / Globalisation, Uncategorized

No solace in this quantum of accountability

The original article can be found here

On February 11, the Supreme Court issued notice to the government, seeking its response on making intelligence agencies accountable to Parliament. This question is pertinent and in some ways captures the sentiments expressed by many and best vocalised by two leaders in recent times. Vice-President Hamid Ansari had said in his 2010 speech on this subject “….responsibility to the legislature, and eventually to the electorate, is an essential element of democratic governance to which we are committed by the Constitution.” Thereafter, the Private Members Bill introduced by Manish Tiwari (now Minister of State for Information and Broadcasting), The Intelligence Services (Powers & Regulation) Bill 2011, sought to empower intelligence agencies through a legally mandated charter that included well-thought-out elements of supervision and oversight.

Mr. Tiwari’s effort was supported by a research initiative at the Observer Research Foundation over a period of about two years. Views of and feedback from over 150 experts, politicians, social scientists, mediapersons and security professionals were solicited. The resulting analysis questioned obsolete notions of national security liberally deployed by the security community to protect turfs, prevent change and indeed to defend the indefensible. In this context, four core issues stood out and need early resolution even as the court is appraised of this matter.

Regulatory framework

In modern democracies, intelligence agencies are legally created by and operate under a charter drawn up by the legislature. India’s agencies however bear a chilling resemblance to Haiti’s Tonton Macoute, a voodoo police named after a phantom bogeyman having no charter, rules or limits. In effect it is an extra-constitutional body, prey to individuals and politics and, like such institutions, is totally unaccountable. Setting a charter improves efficiency, focussing resources and minds on what needs to be done. It directs operations on the basis of policy, not individual whim. For example if folklore has it right, if RAW had a charter, it would have legally pre-empted a former Prime Minister’s order to abandon operations in Pakistan. It cost India 30 years worth of accumulated ground assets and priceless reach.

Intelligence ombudsman

Intelligence agencies such as Mossad, CIA and MI6 have reformed their structures to include operation and financial audits which have improved their efficiency. These agencies, prior to reforms, had a history of personal and political abuse. Institutions are based on trust, but there is no incompatibility between trust and verification. The taxpayer needs to know from a competent authority that his rupee is not being misused on ballerinas, champagne and settling personal scores. The state has a responsibility to verify and audit. The reports that these agencies are used to spy on political opponents, blackmail them and purchase parliamentary votes are too regular and too consistent to be ignored. “Watergate” was the most visible example of such abuse. Closer home, leaked telephone conversations (recorded dubiously) and allegations of keeping a tab on political opponents tell us that “Trust me” is simply not an argument — unless the government can prove that these agencies are staffed by people with a special mitochondrial DNA that makes them free of incompetence, inefficiency and corruption. As all details obviously cannot be divulged, an independent intelligence ombudsman with the highest level of security clearance is the optimal answer.

Collective responsibility

A National Intelligence and Security Oversight Committee will address the issue of control. Democracy is about deferring to the wisdom of the many. In our system, the Prime Minister is primus inter pares; all governmental decisions are passed by cabinet committees. The Prime Minister therefore, must not have permanent and exclusive control over such agencies. Far from making the process of intelligence collection tedious, collective control leads to better absorption of intelligence and enables the system to efficiently analyse the same. Interdisciplinary inputs would allow holistic analysis insulating the Prime Minister from tainted or bad intelligence. Inconsistencies may be better detected resulting in moderation and course-correction. Optimally, such a collective must include parliamentary opposition to ensure national consensus and continuity. A recent example of abuse is the 2003 invasion of Iraq. It was because powerful individuals hijacked the intelligence apparatuses of the United States and the United Kingdom that intelligence was allowed to be concocted to build a bogus case for war.

Protecting the protectors

There is a case for a National Intelligence Tribunal that protects the public at large but also those serving within such institutions. Extra-constitutional institutions are usually rife with turf wars: a person trapped within such a phantom has no way to protect himself against individual caprices with no system of grievance redressal. Becoming a breeding ground for cronyism and negating merit has an enormous negative impact on professionalism and morale. After all in such a dangerous line of work, personal enmity can translate into a death sentence. A special tribunal will protect both the interests of intelligence employees as well as shield the general public from their excesses.

Deploying the “National security” argument against reform is a fig leaf for defending cronyism, incompetence, inefficiency, and corruption. A proper regulatory mechanism can only strengthen national security, not weaken it. It is time to bring in facts and lessons from global best practices to this debate as it unfolds in the highest court of the land.

(Samir Saran is vice-president and Abhijit Iyer-Mitra is programme coordinator at the Observer Research Foundation.)

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Generosity within BRICS offers China passport to power

The original article is available here

George Orwell once remarked “Whoever is winning at the moment will always seem to be invincible.” China’s long-running growth juggernaut has resulted in a steady conversion of China skeptics into believers, so much so that a Pew Global Attitudes report released in July 2011 indicated a widespread perception that China has either replaced or will replace the US as the world’s sole superpower, with the Americans themselves just about equally divided on the subject.

For the Chinese establishment, even as being the preeminent global power remains their ultimate aspiration, China’s own outlook has been far more pragmatic.

There is a realization that the critical vectors that fuelled China’s impressive growth have either played out or are near to playing out their potential.

Exports are slowing, and the near double-digit growth in domestic consumption leaves little room for additional growth without triggering unbridled inflation.

Compounding this is fast depleting surplus labor in China’s rural backyard and steady increase in wage costs, which have grown at an annual rate of 15 percent over the past years.

This and stagnating Western demand for goods are impacting China’s growth algorithm built around the premise of inexpensive labor and competitive exports.

China’s redemption as the preeminent global power is hinged as much on its capacity to sustain its economic momentum as in its ability to influence the principles, values and rules that define global institutional mechanisms and frameworks.

However, China’s stellar economic engagement with the world has not resulted in commensurate political weight or perceptional dividends within global institutions.

To realize its aspirations, China urgently needs to find a way around this predicament, and BRICS offers it a plausible option and opportunity.

BRICS is today the most promising entente of high growth economies. BRICS’ national economic and political transformation agendas are fuelling huge domestic demand for newer types of products and services. China is uniquely positioned to gain enormously from this dispensation.

Standard Bank estimates China is party in over 85 percent of intra-BRICS trade flows, which have grown by about 1,000 percent over the last decade to over $300 billion, and are estimated to reach $500 billion by 2015.

While intra-BRICS trade accounted for close to 20 percent of BRICS’ total trade in 2012, it remains disproportionately weighed in China’s favor. Hence in any BRICS growth story, China will be the biggest net gainer.

While the BRICS nations have formed a close bond between themselves, they haven’t consummated any traditional model of interstate alliance.

The model affords sufficient space to accommodate intra-group differences and independent strains of national discourse.

It is still bilateral relationships rather than allegiance to group ethos that predominantly inform the intra-BRICS economic and political dynamic.

Group identity and collective consciousness will result from co-creating and co-managing institutions and instruments. A BRICS development bank, a stock exchange alliance and a BRICS fund are all vital next steps.

For China to unleash and benefit from the full potential of the group, it needs to work on such initiatives. These will offer it a new economic landscape and will also help take the edge out of bilateral relationships.

However, for China to command the moral weight to realize its power ambitions through BRICS, it needs to morph from a trading partner seeking profits to a strategic ally helping shape a common world.

As the partner that stands to benefit the most from any expanded BRICS play, China needs to be singularly more magnanimous and mindful in accommodating the legitimate interests and aspirations of other member states.

A disproportionate generosity, whether it is in resolving bilateral disputes or legacy issues, or, sharing of power at BRICS institutions, independent of economic contribution and effort, will reap very rich political and economic dividends, while also permanently insulating China from the politics of power imbalance within the group.

Samir Saran is vice president at Observer Research Foundation and Jaibal Naduvath is a communications professional in the Indian private sector. opinion@globaltimes.com.cn

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Terror attacks: A call to look within

SAMIR SARAN

Terrorists have struck again in India. This time, they targeted the city of Hyderabad. Two bombs, which exploded on Thursday evening in a span of few seconds, have so far killed 16 people, besides injuring scores of people. Last year, 13 people were killed in the capital city of Delhi when bombs exploded outside the High Court in September. One month before, low tensity bombs, planted in Pune, had injured one person.

According to the Global Terrorism Index, India is now among the top five terror-hit nations in the world. The others are Iraq, Pakistan, Afghanistan and Yemen. The terror index, published by the US and Australia-based Institute for Economics and Peace think tank, was based on data from the Global Terrorism Database run by a consortium based at the University of Maryland, a commonly used reference by security researchers.

Despite being a victim of terrorism for decades, India has demonstrated remarkable consistency in the irrational and incoherent response of its policy makers, people and sections of its mass media to dramatic and outrageous terrorist violence inflicted on the country. Most terror attacks have been followed by a typical though distinctly more pronounced response from all quarters. Much of the public debate following these terrorist attack has focussed on internal security systems (or the lack thereof) and the effort to punish the perpetrators. The public sphere including the media and academic dialogue seem to be preoccupied with ways to bring in line the truant Pakistan.

Such approach has failed consistently. The major flaw with placing the blame entirely on Pakistan is the premise that Pakistan or its proxy warriors could have executed any of these outrageous acts in the absence of serious internal vulnerabilities. Though some of these vulnerabilities are acknowledged by many after the Mumbai attacks, they remain limited to the domain dealing with foreign policy, internal security and intelligence gathering.

Even now there is complete silence on a most crucial aspect that we must recognise; Indian Nationals collaborated with the Pakistani perpetrators in planning and executing this barbaric incident. The law enforcement agencies and the politicians are yet to provide us any clue on the identity of the perpetrators who were killed and on the countless others who helped in the various stages of this act. India, its media and its polity have not even attempted to articulate this dimension in their prescription for preventing these events from occurring again. The increasing presence of radicals in India, in this case those who justify violence in the name of Islam, is a clear and present danger and must be halted if any degree of success is to be achieved in India’s endeavour to tackle the menace of terrorism. It is imperative that Islamic radicalism be recognised as such and then efforts be made to prevent its spread. It is equally important to enact policies that resolve conditions that aid the spread of this violent radicalism.

This reluctance to look within, it may be argued, is due to the inherent predisposition of nations and societies to externalise such incidents. The US and much of the western world has frequently treated terrorist violence as a distant third world phenomenon attributing its cause and origin to the ’impoverished and backward regions’ of Afghanistan, Pakistan and the Middle-East. This propensity of the western world is a legacy of the colonial/orientalist discourse. It also prevents societies from looking within and engaging with shortcomings in their own socio-political landscape. This is evident from the alacrity with which the West categorises its Muslim citizenry as ’Moderate and Progressive’ while denouncing the Muslim perpetrators (even when they are from their own populace) as ’Islamic Terrorists’ motivated and created in alien societies devoid of freedom and liberty. To admit to the existence of discontent and outrage amongst its own Muslim population would be to admit to shortcomings within their own brand of liberal pluralism.

India, its government and people, have responded to the Mumbai attacks and other terrorist action in the past in much the same manner. The origin of these violent incidents have been distanced from within and located entirely in the ’fundamentalist and undemocratic’ Pakistan. This is simplistic and dangerous. The sophistication, planning and increasing frequency of terror violence in India demonstrates strong local support for this radical Islamist ideology that propagates violence. Irrespective of the existence, contours and construct of a global Jihadi network, it is irrefutable that social conditions do exist within India that create disaffection and hopelessness and allow this population within the Indian Muslim community to be lured to the ideology that many today term ’Radical Islam’. The existence of SIMI and their violent brand of political agitation confirm to this growth of radicalism in the local Muslim community. The participation of home grown terrorists from educated and middle class backgrounds points to the presence of this radicalism in all strata of society and within the urban mainstream of India.

Radical Islam is not a primeval phenomenon, nor is it unsophisticated. It is now a post-modern ideology able to attract a diverse demography. It also makes use of modern media and communication platforms and positions itself effectively as an alternative and preferred form of habitation for persons seeking an outlet and release from their existing social reality. This presence of Radical Islam demands two specific investigations that India must undertake if it is to effectively respond to its dangerous proliferation. The first must involve an honest study of political, economic and sociological factors that shape anxieties of the Indian Muslim today. This would help in identifying vulnerable sections and vulnerabilities in our systems that may be exploited. The second investigation must construct how Radical Islam offers its ideology to the Indian Muslims as a relief from their current anxieties. It should understand the substantive messages that are communicated by the supporters of this ideology that address the current day issues of the Indian Muslims across the social spectrum.

An understanding of these vulnerabilities and the messages may offer a point of departure for the policy makers and civil society and help to develop a response comprising of both, security and socio-economic dimensions. This would aid policies and processes that would not only make India safer but also enhance its democratic depth.

Books / Papers, Water / Climate

“Mitigating Carbon Emissions in India: The Case for Green Financial Instruments”

New Delhi, 18th of February 2013
Please find here the link to download the report.

Executive Summary
With the sun gradually setting on the Kyoto Protocol (Phase One), it has become quite apparent that the global response to resource scarcity and climate change is going to be variable and disaggregated. Increasingly, countries and businesses across the globe are adopting various financial mechanisms and policies in order to manage such challenges. However, many such responses are restricted to advanced, developed countries, whereas the effects of climate change and the increasing cost of resources such as fossil fuels are likely to be more severe for developing countries. This dichotomy in response measures needs to be urgently addressed, and this report is an attempt to highlight the benefits of an inclusive growth oriented financial response mechanism with particular focus on India.

In its first chapter the report briefly outlines the relevance of GHG emissions mitigation through in- clusive market based mechanisms in India. With shifting patterns of economic growth and increased global demand volatility companies and investors in emerging economies, such as India, need to rec- ognise the value created through the supply chain of business deliverables by mitigating emissions. Mechanisms which exclude companies that do not meet global benchmarks, whether by way of share- holder advocacy and investment exclusion, or regulatory policies, will have a significant impact on the way that these companies choose to grow.

Low carbon strategies can only be implemented if the emissions landscape and its effects on sustainable growth are clearly defined and understood. The second chapter outlines emissions trends in India in order to map the carbon landscape and set the context for the rest of the discourse. Chapter 3 examines the trends of energy consumption and emissions at a sector specific and firm specific level (within the assessed sector). It is found that firms in the assessed sector (cement) are operating in sub optimal con- ditions, along with a lack of policy frameworks and market based emissions reduction incentives – there are no indigenous market based mechanisms to incentivise and stimulate change.
A firm level case study of one of the bigger private players in the Indian cement sector has revealed that the firm’s financial performance could have been better. At the same time, capacity additions and increased output have caused the total emissions of the company to increase, which is not sufficiently offset by the revenue gains. As a result, the firm’s emissions intensity has been rising consistently for clinker production. However, enhanced use of additives has kept the overall GHG intensity of cement based revenue lower. The average emissions intensity of the company was higher for three years than the sector average for the same period. The high correlation between the firm’s environmental perfor- mance and its financial performance has been highlighted.
The results of chapter 3 are aligned with the philosophy that environmental performance must not be excluded from the range of parameters that are used by investors while choosing a stock, especially a long term investment. This is true since the two concepts are inherently interlinked under the overall aegis of sustainable growth. It highlights the need for developing market based mechanisms to signal investment opportunities based upon carbon efficiency and financial performance, as both tend to complement each other in the medium to long term.

Chapter four concludes that; companies preparing for risk are not risk averse, but rather are risk prepared. The difference is subtle but important. Market based mechanisms which incentivise good performance by channelling investments to firms that respond to risk better than their competitors in a given environment, help investors realise this distinction clearly. For “green” market mechanisms and investment vehicles to be viable and effective, they must efficiently ensure that the transmission mecha- nism works and only performance based, credible signals are relayed to the open markets. This becomes even more important in the context of a developing country due to the nascent capital markets, and urgent need for scaling up sustainability initiatives – both at the firm and policy levels.

Capital generation should not be looked at as the problem. Rather, redirecting existing and planned capital flows from traditional high-carbon to low-emission; resilient investment is the key challenge of financing transition to a low-emission economy. In order to facilitate such transitions, a universally replicable model will be used – a multipronged approach to achieve the above objectives. This would involve creation of innovative financial products based on purely quantitative data, create and publish sector wise and cross sectoral market reports, and facilitate progressive policy advocacy in order to en- able market realisation for its products. It will further seek to replicate the model in other developing countries through a hub and spoke approach to expansion.

Books / Papers

Chapter in ORF publication: “The Global Economic Meltdown”

Samir wrote one chapter in the new ORF publication “The Global Economic Meltdown”.
Please find here the original link

Please find here the full document (PDF version): Deconstructing India’s Inclusive Development Agenda

The Global Financial Crisis (GFC) of 2008 is widely recognized across the globe as the most severe economic downturn since the Great Depression. The prolonged global economic slowdown has stymied the US economy, brought the Eurozone to the precipice, and continues to retard growth momentum throughout the world. Even developing economies that were previously thought to be crisis-averse are now experiencing the rough waters after an economic tsunami.

The writers in this compendium address the many complexities of the GFC and present a holistic overview of its background, how it unfolded and how many nations sought to respond to it. This publication is unique in its approach of the crisis from a global perspective, with pieces focusing on India, Europe and the United States. Furthermore, the book provides a thorough examination of the economic, political, environmental and social implications of the crisis and offers glimpses of the road ahead, replete with policy recommendations for a more stable and prosperous future.