Dr. Anand Kulkarni
The prestigious Lowy Institute Asia Power Index recently released measures 26 Asian countries according to economic capability, military capability, resilience (resource security, internal stability among other things), future resources (e.g demographic factors), economic relationships (trade, investment), defence networks (e.g regional alliances), diplomatic influence (e.g diplomatic networks) and cultural influence (including information and people flows) https://power.lowyinstitute.org/ https://power.lowyinstitute.org/downloads/lowy-institute-2020-asia-power-index-key-findings-report.pdf
The top 10 for 2020 are in order: US; China; Japan; India; Russia; Australia; South Korea; Singapore; Thailand and Malaysia. This year’s power index has particular significance and resonance due to COVID-19 impacting on economies, global politics and diplomacy.
At the broad level the US has lost the most in score compared to last year, directly relating to its handling of the COVID-19 pandemic, as reflected in its weaker performance in economic relationships, capabilities, and global defence and political influence. In our view, this decline is a longer term issue, reflecting loss of competitiveness in key industries, and resurgent protectionism.
Using a graphic relationship between effective domestic handling of the pandemic on the one axis and improving or deteriorating international reputation on the other axis, according to the Lowy Institute the US is in the quadrant of not effectively managing the pandemic at home, and experiencing deteriorating international reputation. A number of other countries, including Russia, India, Pakistan, Indonesia and the Philippines are in the same quadrant. On the other hand are those countries which are very effectively managing the crisis and having enhanced international reputation. These countries include Australia, South Korea, New Zealand, Vietnam and Taiwan. China is a mixed bag being moderate-very effective at domestic management of the pandemic, but with diminished international reputation.
China maintains its overall second rank in the region in terms of power. Despite declining diplomatic status and prestige in the wake of COVID-19, its economy has, and is expected to rebound. China’s performance is not as all-rounded to displace the US in number one position. However, the US lead over China in the index is shrinking quite significantly.
India is an interesting case with a number of positives but also areas of some disquiet. On the positive side it has maintained its fourth overall position from last year, but is just short of being regarded as a superpower (which is the domain of the US and China). India’s defence networks, and growing political and military clout and cultural influence (although declining in score) regionally are evident. It is ranked number 1 in the region for armed forces. It is also well placed in future resources (3rd in the region), drawing on its demographic strength. However, demographic strength needs to be tied in with employment, entrepreneurship and trade to be meaningful.
Economically, the road ahead is challenging, exacerbated by COVID-19. India’s economic downturn is projected to have long term impacts, with its economy forecast to be 13% smaller by 2030 compared to the pre-pandemic outlook. By the end of this decade, India’s economy, according to the Lowy Institute, is expected to be 40% of China’s output, reinforcing the gap between the two most populous countries in the world. It should be noted that India fares well on corporate capability, and specific industry and technology related areas such as satellite capability, strengthening the economic- defence nexus.
There are other key areas for improvement. First, is in trade and related: India’s withdrawal from the Regional Comprehensive Economic Partnership (RCEP) is believed to be a factor inhibiting its economic potential. Likewise India’s performance in Research and Development expenditure, high technology exports and financial transactions offer scope for considerable improvement.
India’s ability to bounce back from the COVID-19 pandemic to further strengthen its influence in the region will be a real test. On the political- military sphere, India’s involvement in the quad defence arrangements with the US, Japan and Australia, points to a further enhanced role in the region.
On the economic side, in our view, a comprehensive and long term post pandemic revitalisation program is required, even as the pandemic is still persisting in India. Among the key elements of such a plan, we suggest, should be:
- Concerted development of employment intensive manufacturing, including the provision of stable, secure jobs. Such a scheme would progressively move up skill into higher value goods and services, for exports.
- Further innovation, emphasising new technologies, research and its commercialisation, as well as industrial conversion from existing industries to new growth sectors, and within industry from old to new business models, reflecting the new “COVID-normal”
- Strengthening local supply chains, including in agriculture, to promote efficiencies, productivity and dissemination of know-how through the supply chains, as well as to avoid costly disruptions of essential services, which COVID-19 has done throughout the world.
- Bolstering rural and regional economies, allied to local supply chain development, as a means of creating rural employment, and reducing inflow of mass migration into cities
The author’s book, ‘India and the Knowledge Economy: Performance, Perils and Prospects’ was published last year by Springer.
The views expressed in this article are the author’s alone and not necessarily those of Qrius
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