India : Trends to look out for in 2019
Arvind Gupta, Director, VIF

The year 2018 was generally good for India. Relations with the US, Russia, China improved. Corrective action was taken to improve ties with the neighbours. The economy suffered to an extent due to external factors like high oil prices and increase in us interest rates. Indian performance on the export front was not good. Oil prices began to soften towards the end of the year.

Economic growth was sustained despite the short-term adverse impact of GST, demonetisation. Peaceful elections were held in several parts of the country.

On the domestic front, there were some negative trends too. The relationship between the RBI and the government came under stress. In an unprecedented move, some senior judges of the Supreme Court went public with their anxieties regarding the functioning of the highest court and the status of the judiciary. The opposition parties made some electoral gains which has opened up the race to the general elections and livened up the pre-election scenario in the country. While the ruling party is likely to highlight its record on development and governance and opportunism on the part of opposition parties, the opposition would focus on the issues of lack of jobs, ill-effects of demonetisation and GST, status of minorities and health of the institutions of governance. Pre-election period is likely to see more of rhetoric which could distract attention of the nation from the serious task of development and governance.

Ending its 5- year’s eventful tenure, the NDA government will be looking for a renewal of the people’s mandate in the 2019 general elections. The new government to be formed after the elections will face a turbulent and dynamic international situation.

In the last five years, India’s international status has risen significantly. Mr Modi made foreign policy as a tool of his domestic policy. At the same time, he single-handedly led India at numerous multilateral fora projecting India’s viewpoint on the important global and regional issue. India’s bilateral relations with great powers as well as with neighbours were strengthened.

However, the gains of last few years can dissipate rapidly if the follow up action is not taken. Implementation of the numerous initiatives taken on the foreign policy front will be key for the sustainability of India’s engagement with the rest of the world. Here, India’s record is patchy.

The world has welcomed India’s rise but still feels that India’s presence and engagement lacks weight. The world regards India as a swing state in international affairs. Therefore, its views matter. But the world feels that India does not exercise its moral authority sufficiently and continues to avoid taking clear sides on important issues. There is some truth in this.

By the time India goes to general elections, all other neighbouring countries would have held their elections and got new governments. Despite Mr. Modi’s ‘Neighbourhood First’ policy, India’s relations with Nepal, Bhutan, Bangladesh, Sri Lanka and the Maldives urgently need delicate handling and fresh initiatives. Relations with these countries would have to be re-built and stepped up particularly in view of rapid Chinese in-roads in South Asia and the turbulent nature of domestic politics in these countries.

Pakistan’s economy is in deep trouble. To divert attention from a domestic issue, Pakistan could instigate terrorism in Kashmir. Border infiltration is expected to continue and the Line of Control (LOC) would remain hot.

Relationship with Pakistan remains in the deep freeze and is likely to remain there in the coming years. It will remain a source of insecurity for India. PM Imran Khan has shown his penchant for harping on Kashmir. He has also not hesitated from interfering in India’s domestic issues.

It is in Afghanistan that major changes can be expected. The endgame in Afghanistan is beginning. President Trump has announced the reduction of American troops in Afghanistan. To cut their losses the Americans are trying their best to work out a deal which would bring the Taliban to power. The National Unity Government may be sacrificed in the process. Pakistan may also get renewed attention from the US thanks to developments in Afghanistan. India will need to secure its interests and ensure that it has a say in the final deal.

China is also undergoing changes. China’s economy is slowing down. Its trade and economic relations with the US are fragile. The trade war, if it happens, will shake the Chinese economy to the core and interrupt its rise. Sensing the change, China is making overtures to India particularly after the Wuhan informal Summit between Xi and Modi. However, so far there are no signs that China will make long-term strategic adjustments in its relations with India particularly on border, trade and other issues. China’s military modernisation, the China Pakistan Economic Corridor (CPEC) and China-Pakistan strategic nexus will remain unchanged. For India, engagement with China is inevitable, but due caution needs to be exercised so that India’s core interests are not jeopardized.

Russia is trying to cement its position in the global system. It played its role in the defeat of Islamic State of Iraq and Syria(ISIS) in Syria. It met with some success in Syria from where the Americans are withdrawing completely. But its capability to rebuild Syria and facilitate a final settlement is in doubt. Spurned by the West, Russia is deepening its partnership with the Chinese. It is also using the Eurasian Economic Union (EEU) as a tool to counter China’s pressure in Central Asia.

Russia-India relations have shown improvement. Following the Sochi informal summit and the agreement on the purchase of S-400 missile defence system by India, Russia-India relationship has strengthened, but problems still remain. Russia remains guarded about the Indo-US relations. It is also making overtures to Pakistan insofar as Afghanistan is concerned. The Indian and Russian narratives on Taliban are very different. Russia gives importance to BRICS (Brazil, Russia, India, China, South Africa Group) and Shanghai Cooperation Organisation (SCO) to strengthen multilateralism and hopes India would play along. BRICS is dominated by China. India has still to come up with a coherent plan to deal with the SCO.

The world’s attention would remain focused on President Trump in 2019 also. He is an enigma to the outsiders. His daily tweets cause anxiety and concerns to his supporters and adversaries alike. Outsiders find it difficult to grasp the import of President Trump’s policy announcements made on this twitter handle. How sustainable are these? Immigration and trade are the key issues on which the US policy is built. The US foreign policy is now completely dictated by US domestic interests as defined by President Trump. It would appear that Trump is signalling to slash its global commitments.

By the end of 2019, the focus in the US will start shifting towards the 2020 elections. President Trump could be expected to follow policies which would strengthen his core constituency of blue-collar, low paid, anti-immigration, anti-globalisation, sceptic white Americans. One will have to watch carefully the second half of Trump Presidency as he comes under pressure on account of numerous cases which have been filed against his staff and allies. The friction between the President and the Congress is likely to increase as the Democrats, who now control the House of Representatives, adopt confrontationist policies, keeping 2020 elections in mind. The shutdown of the US government in 2018 December over immigration issues was an example.

With the US withdrawing from Syria, it is anybody’s guess how the situation in the Middle East will develop. Israel is in panic and Turkey is emboldened. Iran may be the ultimate gainer. The Saudi Crown Prince has come under external and internal pressure after the Kashoggi murder case. Saudi Arabia-Iran rivalry is deepening. The Gulf remains divided with Qatar following an independent path not liked by other Gulf States including Saudi Arabia and the UAE.

The impact of sanctions on Iran will also take effect during the coming year. There are some positive signs on Yemen but a lasting solution seems elusive. The Israelis continue to talk about impending war due to increased Iranian influence in the Middle East. They have bombed locations in Syria. The chances of a fresh conflagration in the Middle East cannot be ruled out.

In 2018, there were unexpected but positive developments on the North Korea front. However, since the meeting of President Trump and Kim Jong- un, no major initiative has taken place. The situation is likely to remain in a limbo. However, the prospects of Kim Jong-un taking some unexpected action on the nuclear and missile front cannot be removed cannot be ruled out.

China’s hold over South China Sea would be further consolidated during the year. The Association of Southeast Asian Nations (ASEAN) is too weak to do anything effective about it. Indonesia has decided to build a naval base in the Natuna Sea which it controls. The ASEAN counties seem lukewarm to the idea of Indo-Pacific and the Quadrilateral grouping (QUAD). The QUAD countries are expected to flesh out the objectives of the grouping further.

Europe has plunged into great uncertainty and turmoil. Migration crisis has divided Europe. Brexit has dented the European unity. Britain is in an uncertain political and economic situation. French president Macron’s popularity, following the protest, has taken a severe knock. His ability to reform the French economy is now in serious doubt. Chancellor Merkel in Germany is no longer as strong as she used to be as she faces domestic backlash on her pro-migrants policies. There is widespread lack of faith in the Brussels bureaucracy. Several countries are following their own policies. The year 2019 may see a further weakening of European unity.

The world is watching India’s growth story and is generally impressed. An economically strong India would be in a position to have a strong foreign and defence policy. So, the focus must be on ramping up and sustain a high growth rate. Governance deficit must be overcome. India is getting a bad name globally for air and water pollution that its citizens are suffering. The world’s eyes are on India’s energy policies and its strategies to mitigate emissions. The NITI Ayog has come out with a strategy document titled Strategy for new India@75 which outlines the strategy for transforming the Indian economy and ensuring high growth rates of eight to nine percent and making India into a $5 trillion economy by 2025. Surprisingly, the document is silent on the external factors which have a serious impact on the Indian economy.

For India, 2019 will turn out to be a crucial year mainly because a new government would be formed. A continuity in policies can be expected if the NDA government comes back to power which is a possibility given the lack of unity amongst the opposition parties. The external factors are also dynamic and unpredictable. It is imperative that potential uncertainties due to elections are not allowed to come in the way for dealing with the pressing challenges at home and abroad.

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