07 june 2013
South Asia 2013–2020: Russia’s Opportunities and Risks
The Republic of India, the world’s second most populous country, is the core and central component of South Asia. To the north-east it borders Pakistan. Indian maps show Jammu and Kashmir marked as Indian territory and also its common border with Afghanistan. Along the Himalayas to the north-east its neighbors are the Peoples’ Republic of China (Xinjiang Uighur and Tibet autonomous regions), Nepal and Bhutan, with Bangladesh and Myanmar slightly further south, traditionally included in South-East Asia.
The island states of Sri Lanka and the Maldives can be viewed as offshore extensions of South Asia. In geopolitical terms, for Russia it is the North-West regional segment, including Pakistan and Afghanistan and those historical routes to Central Asia, that is the most important, as it borders Siberia and the Ural-Volga region. Russia’s main opportunities in the region are linked to its strategic relations with India and trade and economic cooperation with other countries in the region, while the risks stem from the possible destabilization in the North-Western region of South Asia, with the ever-present threat that this could spread to the Central Asian republics.
The second group of risks comes from worsening relations between India and Pakistan that, in the worst-case scenario, could escalate to military conflict involving the use of nuclear arms. There is yet another area of risk – humanitarian and environmental issues. Piracy in the Indian Ocean’s northern waters should be taken into account when calculating risks in the area, alongside natural disasters.
Published forecasts predict that, in the coming 20 years, the Indian economy will grow by 7–7.5 percent annually. Its share in the global GDP is set to rise from 5.4 percent in 2010 to 7.2 percent in 2020. India’s GDP will exceed $ 8 trillion (in 2009 $ prices), and PPP will be third in the world, reaching $ 3 trillion at the current exchange rate (putting it in 6th place) . This rapid economic growth will be built on the consumer and industrial segments of the economy, and by the expanded foreign markets for Indian goods and services.
Hi-tech products, mainly IT and communication devices will continue to expand their share in overall exports. India will increase the gap with many other developing countries in the electronics, software, programming, and web-services sectors. Outsourcing and Internet-based services provided by India’s relatively inexpensive but highly-qualified export-oriented companies (e.g. Tata consultancy, Infosys, Wipro etc.) can also be expected to grow. The rapid development of the IT sector that started in 2000 will continue. IT’s share in the export of goods and services will rise from 18 percent ($ 70 bln.) in 2012 to 30 percent in 2020. Export structure will change, with a greater proportion of high- and medium-tech products: motors and generators, telephone equipment, scientific and measuring instruments, pharmaceuticals, medical equipment, chemicals, machinery and other equipment [2.
Published forecasts predict that, in the coming 20 years, the Indian economy will grow by 7–7.5 percent annually.
A breakthrough can be expected in aerospace industry, related to the defense sector. The role played by nuclear power and other non-conventional energy sources will rise, but for several reasons this will not deliver a major change – the nuclear industry is expected to account for 7 percent of total volume, rising from 4 percent . India has to meet exceptional challenges in terms of physical infrastructure such as road-building, the development of port facilities, expanding the gas-supply system and broadening the reach of the power grid. The Indian economy’s division into the organized sector, which includes large corporations (public and private) on the one hand, and the non-regulated business and labour sector on the other, will not be overcome.
The country’s total population will increase considerably, despite some slowing in its annual growth rate to 1.5 percent (from 1.7 percent between the censuses of 2001 and 2011) . By 2020, over 1.35 billion people will live in India, which is 150 million more people than in 2012. The proportion of the population classified as “living in poverty” is also set to rise – different estimates place this forecast at from 25 percent to 40 percent (or more than 300-500 million people).
Middle way of India
About a third of the total population, 50 percent of women, are illiterate, and this is not expected to change. At the same time, further improvements are expected in higher and special education, training and recruitment of employees at firms and in-house training, and in exchanges at specialist-level between India and economically more developed countries .
There is little doubt that the income gap between the rich and poor will widen, and that the gap in quality-of-life and living standards in the cities, particularity in major urban areas such as Delhi, Mumbai (Bombay), Kolkata (Calcutta), Chennai (Madras) etc. and rural areas will deepen. Benchmarks for progress and modern living standards will be set in the country’s IT leading centers such as Bangalore (India’s Silicon Valley), Hyderabad, Pune etc. The gap between the richest states in the country’s west (Maharashtra, Gujarat) and poorer states in the east – Bihar, Jharkhand, Odisha, and West Bengal etc. will expand.
Given this environment, the authorities will struggle to cope with Maoist-Naxalite terrorist groups. The political situation in the country’s south, in the states of Andhra Pradesh and Tamil Nadu as well as in the north in Jammu and Kashmir may well worsen. But internal confrontation will not reach critical levels or undermine Indian national consolidation.
Russia and India: Cooperation
The difficulties in India’s internal political environment may impact cooperation in the highly promising industrial sector of nuclear power.
The difficulties in India’s internal political environment may impact cooperation in the highly promising industrial sector of nuclear power. Opposition to the commissioning of Kudankulam Nuclear Power Plant (NPP) in Tamil Nadu by locals under the influence of certain political forces can serve as a clear warning to both parties that their cooperation on a peaceful nuclear program may bring fewer results than expected. The Kudankulam NPP (4000 MW) is set to be completed by 2020 and that by then construction work on two other agreed NPPs will be at the initial or advanced stages.
Mutual investments will significantly increase by the end of the 2010s. By that time, India will become an economy with considerable investment in foreign countries. In Russia, it will expand its participation in the oil and gas sector (the Sakhalin projects) in industry and services (banking and insurance). The parties will make progress in the coordination and implementation of projects for the exploration of natural and mineral resources in Siberia and the Far East.
Russian companies will likely invest in oil and coal extraction, the construction of thermal and hydropower plants, gas production in the Bay of Bengal shelf and smelting (India has great plans to increase steel production).Russian companies may help build subways and airports in a number of cities, develop port and river facilities and upgrade railways. Bilateral cooperation in civil aviation may involve the design of a new passenger aircraft. Joint efforts by private and public companies in edge-cutting areas of science and technology will deliver substantial results, which will only be obtained through fierce competition for the right to enter the Indian market.
The Russian side must abandon its attitude to India as a “student nation” and recognize jts experience and knowledge in innovation and the essential industries in today’s information age. India’s experience in staff recruiting and training, in-house management systems and approach to business may prove very useful for Russia.
The Russian side must abandon its attitude to India as a “student nation” and recognize jts experience and knowledge in innovation and the essential industries in today’s information age.
Cooperation in what has traditionally been the most successful area of military-technology may seem very promising, but it is not without its challenges. India’s requirements as regards the quality and reliability of military equipment supplied by Russia will become more stringent. Further deficiencies in this field, new delays in the execution of major orders, such as the retrofitting and modernization of the Admiral Gorshkov heavy aircraft carrier, named Vikramaditya (Victorious) by the Indian side, may erode or destroy established approaches to the procurement and use of Russian weapons. It is highly likely that India will seek to diversify the supply and replenishment of its arsenal, effecting a partial shift away from Soviet-Russian to American-European standards. At the same time, Russia will maintain its absolute priority in military supplies. Joint research, design, development, testing and production all stand a good chance of continuing. They will expand in relation to the improvement and extension of the range for Brahmos cruise missiles and the development of fifth generation of fighters based on the export version of T-50 fighters. A multipurpose military transport plane will be completed together with the modernization of Indian Su-30 MKIs and MiG-29s.
Russia will supply the Indian Navy with warships and submarines, including nuclear ones. The Indian Air Force will receive several lots of upgraded Mi-17 military-transport helicopters. India will probably not pass on the joint development and use of the GLONASS satellite navigation system and is likely to participate in other joint projects in outer space.
The Indian Aircraft Carrier: The Search for
The successful increase of the tonnage and upgrading of India’s commercial and naval fleets would bring with it significant opportunities for Russia. The Indian Ocean offers priority transportation routes connecting the rich in oil Middle East (and Africa) with China, Japan and the Asia Pacific region. Today, these routes account for 50 percent of global container traffic and over 70 percent of the global shipment of oil products. The strategic importance of India and states forming the “offshore extension” of South Asia will grow considerably by 2020 and strengthening ties with them will be a good fit with programs covering the protection of Russia’s national interests at these distant boundaries.
Potential for cooperation between Bangladesh, Nepal and Sri Lanka and Russia
The People’s Republic of Bangladesh has the greatest population with the lowest per-capita income of any of the poorest countries in the world. The delta of the great rivers – the Ganges and Brahmaputra – has long fed the agricultural (rice producing) subsistence economy in the region, supporting a large number of people on an area of 145,000 square kilometers. Bangladesh is in the eastern, least developed, segment of South Asia, where the population may rise to 180 million by 2020. Despite this exceptional population density (over 1,000 people per sq. km) and extremely low income, average life expectancy is rising, and today stands at 69 years. The situation is unlikely to change considerably within the foreseeable future, but global warming may have dangerous implications for the country due to devastating floods. Poverty predefines low labor costs, making Bangladesh an attractive destination for foreign capital. Foreign and local businessmen mainly invest in the prêt-a-porter industry employing mostly young women.
The strategic importance of India and states forming the “offshore extension” of South Asia will grow considerably by 2020 and strengthening ties with them will be a good fit with programs covering the protection of Russia’s national interests at these distant boundaries.
Cheap goods from Bangladesh are exported to the United States and Europe under quotas fixed for the country. The lack of electricity is one acute issue. In 2011, Russia signed an agreement to build a 2000 MW nuclear power plant in the Ruppure district of the country’s capital Dhaka (Dacca). Construction work is scheduled for completion in 2016. In the years to 2020, the Russian Federation may also help develop rich oil, coal and gas fields, build thermal and hydropower plants and modernize the country’s main port – Chittagong.
Russia’s “return” to Bangladesh may take place alongside the revival of its contact with another longstanding partner – Sri Lanka. The end of a quarter-century-long civil war (1983–2009) opens up certain opportunities for the Sri Lankan economy. But the suppression of the armed resistance by members of the Tamil minority, which incurred heavy casualties, will have a continuing negative impact. However, we may forecast an uptick in trade between Russia and Sri Lanka and the participation of the latter in the programs of infrastructure development.
One forecast indicates that Pakistan’s economy will grow by an average of 4-5 percent each year; the country will upgrade its world ranking in GDP terms, the middle class will grow and poverty rates will fall.
The end of the long-running struggle by extremists in the poverty-stricken highlands of Nepal was less painful. Radical leftist rebels (Maoists) who protested against the government throughout the period 1996-2008 were neither defeated nor eliminated, as had happened in Sri Lanka. Instead they took up an active role in the country’s political life, won elections, and for a time headed the government of the state that was transformed from the kingdom into a republic. For Russia, this return to Nepal may be related to assistance offered regarding the development of water resources.
Pakistan and Afghanistan. Outlooks, possibilities and risks
One forecast indicates that Pakistan’s economy will grow by an average of 4-5 percent each year; the country will upgrade its world ranking in GDP terms, the middle class will grow and poverty rates will fall. However, this seems overly optimistic, even ignoring pressing issues aside from demographics and environmental problems. The last census showed that Pakistan’s population grew by 3.5 percent each year in the period 1998-2011. This is 1.5 percentage points higher than predicted by many estimates. If this transpires, it means the population will grow from 198 million to 250 million people from 2012 to 2020. Even with a slower growth rate, Pakistan’s economic development will be limited by overpopulation and the continuing lack of fresh water. Today, Pakistan can supply just 1,000 cubic meters of water per person (a critically low level). The country is teetering on the edge of a social and economic crisis that could turn into a catastrophe in years when rainfall levels are low. Only half the population (and one third of the women) is literate, and this is unlikely to change in the near future. Despite progress made in higher education, Pakistan, unlike India has not found a hi-tech niche in the global labor market. Scientists, engineers and technicians are chiefly needed by the defense sector, particularity the nuclear missile complex. Most university and college graduates in Pakistan aspire to move abroad. The development of a strong middle class in the near future seems unlikely.
At the same time, Pakistan is unlikely to disintegrate or split into several states and will maintain control over its borders. But the further shift in its domestic political axis toward radical “Islamic nationalism” is likely and may see the country become a hub for extremism in the broader Muslim area. Weak economic growth and a political uncertainty could inspire a new cycle of tough confrontation with India over nuclear missile parity. Terrorism and of the worsening situation surrounding Kashmir could be potential triggers of a conflict.
To ease tension in the region and ensure a balanced policy in South Asia, Russia is likely to seek to strengthen economic cooperation with Pakistan in part by helping build gas pipelines from Iran and Turkmenistan.
To ease tension in the region and ensure a balanced policy in South Asia, Russia is likely to seek to strengthen economic cooperation with Pakistan in part by helping build gas pipelines from Iran and Turkmenistan. The construction of the IPI (Iran-Pakistan-India) and TAPI (Turkmenistan-Afghanistan-Pakistan-India) pipelines can is unlikely to come to pass before the end of the forecast period or even later. Russia will probably participate in the CASA-1000 project to transfer the extra electricity from Tajikistan and Kyrgyzstan to Afghanistan and Pakistan. The implementation of other collaborative projects cannot be excluded, e.g. scaling up metal works in Karachi and cooperation on security using the growing potential of the Shanghai Cooperation Organization (SCO) and the “Dushanbe four” (Russia, Tajikistan, Afghanistan and Pakistan).
The future of Afghanistan, which has been home to forces from the US and their NATO allies (UK, Canada, the Netherlands, France etc) since 2001 now depends on the plans in Washington and Brussels to transfer full responsibility for security and order to the national Afghan forces (army and police) by the end of 2014. In cutting its military presence in Afghanistan, the West is attempting to avoid the strategic defeat at the hands of Islamic extremists by relying on international economic support programs.
Taliban: not a defeated party
Afghanistan’s economic recovery after a decade of civil war has already delivered some results. This process slowed, due to the “reappearance” of the Taliban in Pakistan in the mid 2000s, and the externally-stimulated negative elements of the economy became visible: the embezzlement of funds destined for Afghanistan, and their misappropriation and misuse within the country. The population’s displeasure at the continued presence of foreign troops in the country, and the slow pace of improvements have further strengthened the position of Taliban and opposition forces.
There two possible scenarios for the development of events after law enforcement powers are transferred to local, Afghan, authorities. One scenario involves maintaining the current state architecture with Presidential and Parliamentary elections, economic growth and a reduction in the cultivation and production of narcotics. This can be described as a constructive scenario. At first, order will mainly be ensured by the presence of a limited number of NATO troops. At the same time, Pashtuns (particularly former members of the Taliban) may become better represented in government structures. At the same time, Kabul will refrain from interfering in non-Pashtu regions in the north, center and west of the country.
A worsening situation in South Asia and its potentially destabilizing effect in Central Asia pose a serious danger for Russia.
The second (catastrophe) scenario assumes that attempts to maintain balance and stability in the state will fail, if not immediately after the transfer of power to the local authorities, then later, when the number of foreign troops and foreign assistance dwindles. At that point (some time after 2016-2017) a devastating fight for power could break out, leading to a Taliban resurgence and the fragmentation (and even disintegration) of the country.
This worst-case scenario would threaten security and stability across Central Asia. It would inevitably cause an uptick in support for pro-Islamic forces, deepen the involvement of regional countries in Afghan affairs and possibly exacerbate the differences between them. The problems of drug trafficking and related corruption and other criminal activities will worsen. We cannot exclude the potential that refugees will flee Afghanistan, creating a belt of instability in the border areas.
A worsening situation in South Asia and its potentially destabilizing effect in Central Asia pose a serious danger for Russia. Russia will seek to mitigate this instability, countering the military and political threats that arise, terrorism and religious extremism, and using bilateral mechanisms of cooperation and interaction in international structures such as the SCO and CSTО (Collective Security Treaty Organization).
Russia’s potential opportunities and risks broadly balance each other out. The importance of the South Asian vector for Russian foreign policy seems set to rise by 2020, due to links with India, Afghanistan and Pakistan and broader security strategy in continental Asia.
1. A strategic global forecast 2030 /IMEMO RAS; edited by A.A.Dynkin. M.: Magister, 2011. p. 472.
2. India’s International Trade. A Tech Segregated Perspective: http://cc.iift.ac.in/Ezine/2011/12.pdf; India clocks US 69.7 billion IT exports during FY 2011–12.: http://4malayalees.com/en/index.php?page=newsDetail&id=1396.
3. A strategic global forecast 2030 /IMEMO RAS; edited by A.A.Dynkin. M.: Magister, 2011. 2011. С. 407.
5. Training: The secret of India’s high-tech success. http://articles.economictimes.indiatimes.com/2010-04-25/news/27589058_1_quality-engineers-indian-companiesrecruitmentengineers-indian-companiesrecruitment
Vyacheslav Belokrenitskiy, “South Asia 2013–2020: Russia’s Opportunities and Risks,” Russian International Affairs Council, 07 June 2013, http://russiancouncil.ru/en/inner/?id_4=1944
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