By Darren MacKie

Asian Affairs

03/2016.

Darren MacKie takes a look at the statistics behind the rise of two of Asia’s great nations, and wonders which will become the world’s next superpower.

Before deciding who the next global superpower will be, let us first remind ourselves of what constitutes a superpower. The generally accepted view is that a superpower is a nation that can project its influence far beyond its own borders or region and onto the global stage. This is achieved through economic, military, cultural, diplomatic and technological strength. That being the case, there is an argument to be made that both India and China are already superpowers. But - and here is the big but - can either of them currently act on a global scale in all of these areas and if not, who will be the first?

Economically it is easier to show how India and China are both well on the way to superpower status. Both have internal markets that are continental in their size and scale. So vast are these markets that the rest of the ‘developed’ world is now vying for a piece of the pie in terms of exporting to both countries and buying from them. However, this is not the measure by which you can judge if a country is on the way to superpower status economically. Delving deeper into the Chinese and Indian economies to examine GDP growth, manufacturing output, the service sectors and foreign direct investment (FDI) in and out of both countries provides a much greater insight into who is most likely to dominate the future of the global economy, in much the same way the US has dominated for the last 60-70 years.

At first glance, and in many areas China has really stolen a march on India. A longer period of sustained double-digit growth has been achieved and China currently sits higher in the league of nations when it comes to the size of its economy. Though it is not acknowledged, China’s growth has steadily been declining over the last five years whilst India has been gradually increasing its growth, despite a blip in 2012, until finally at the end of 2015, India grew faster than China to become the fastest growing economy of all of the developed nations. A glance at the structure of each country’s economy also shows how slowly but surely this is paying off for India. Recent reports from the IMF and World Bank show that China is still increasingly reliant on its manufacturing and industrial base, which a counts for 44 per cent of its overall economy, and services, making up 46 per cent. Contrast this with India where industry only makes up 24 per cent of the economy with services accounting for 58 per cent. What this illustrates is that India is investing heavily in human capital through education to produce the engineers and scientists that are vital to success in the modern globalised world without the need to follow the traditional path of industrialisation ahead of entering the knowledge economy.

India is also more closely integrated into the global economy than China, Forbes reported just this year. When the two are compared, this comes as no surprise, for although China accounts for 17 per cent of global GDP whereas India accounts for just 7 per cent, Indian exports are worth a much higher percentage of its GDP than China’s. This is also true of FDI. At first glance, it appears that India is again miles behind China; according to the CIA World Factbook, FDI into China runs at US$1.44 trillion—12 times more than into India. But let us not forget that, comparatively speaking, FDI into India accounts for 12.3 per cent of inward investment at US$310 billion but only 10.5 per cent of inward investment to China. Outward FDI is also an interesting story; last year Indian companies completed 70 per cent of their mergers and acquisitions abroad, compared to China’s 50 per cent. Part of the reason for this is that India is a democracy and its companies are largely in the private sector, while China tends to have state-owned companies autocratically controlled from the centre. Faced with a choice, overseas companies tend to opt to sell to India.

There are large hurdles to overcome. But, with the BJP having a majority government that seems determined to remove barriers to trade and make the reforms necessary to attract further inward investment, alongside the Make in India campaign, there is every reason to believe that as long as the government continues to invest in infrastructure at a higher rate and educate the mass of its young population, India will dominate the globe economically more than China in the coming years.

Economic development is not the end of the story of rising to superpower status. Of course a dominant economy underpins all that follows, not least of which is the strong military needed to project power both at home and abroad. Now both India and China do have large militaries: there are over two million men under arms in China and 1.3 million in India. In the last few decades China has made giant strides in expanding its military base by building fifth generation fighter aircraft (the J-20) and increasing the size of its nuclear submarine fleet as well as a small number that can carry nuclear weapons. In contrast, India has only just started the process of modernisation.

India has to accept that today China does have a more advanced and more powerful military. Again, though, this is changing rapidly. India does not need more men, ships or aircraft than China to rise above China, it just needs to be better technologically. In this sphere India is ideally placed to quickly outmatch China. India already produces a lot of the world’s best scientists, designers, engineers, software engineers and, because of its relative openness and willingness to work with other nations, the changes are already coming fast. For example, India is already testing a fifth generation fighter aircraft (FGFA), which is a collaboration between Hindustan Aeronautics Limited and the Russian Sukhoi Corporation, who have been building military aircraft for over 70 years. This is a large multirole aircraft capable of being a fighter and bomber and employing the latest stealth technologies, high levels of manoeuvrability, cruise speeds above Mach-1, active electronically scanned radar systems and advanced firing controls with increased accuracy. All this puts it in the same class as the Chinese-made J-20 and the American F-22. The programme is also being run alongside other military projects to build best-in-class versions of cruise missiles that the FGFA will be capable of carrying. Added to this home-grown, home-built solution that could be exported is the announcement, reported on the BBC on January 25, that France and India have now signed an agreement for India to purchase 36 Rafale Jets from France and it is widely believed that this deal includes the sharing of some technology. But it is India’s design of the FGFA that makes all the difference against China.

According to the defence magazine The National Interest, the J-20 has been built with no foreign help at all and the FGFA will allow India to match and possibly surpass Chinese advancements in the air.

At sea India is also taking huge strides with help received from Russian engineers to build its first nuclear submarine with a nuclear reactor and capable of launching medium-range nuclear ballistic missiles whilst submerged, making India only the sixth country in the world capable of doing so and bringing it back to parity with China. The submarine will have global range and will extend India’s nuclear reach. Now it must be acknowledged that India is initially building three of these submarines, meaning that only 12 nuclear missiles could be at sea at any time, which is in keeping with the ‘no first strike’ nuclear policy. But all the same, India now has a much better platform to react to a surprise nuclear attack. Along with a new anti-ship missile capable of being fired from land, sea and air and its two-stage design, this means it can be launched from underwater as well. Built in conjunction with Russia, the missile is one of the most advanced in the world today and once in use, the threat could come from anywhere.

Graph-1

Next up are the new Kolkata-Class ships. Two have already been commissioned, the INS-Kolkata and INS-Kochi, with the INS-Chennai undergoing sea trials and tests. These new destroyers pack a punch greater than that in any navy anywhere and have active scanning radar to see threats over land and at sea, which is backed up by Sonar arrays that can detect submarines. True naval power projection of course comes from the building of aircraft carriers and India launched the 37,500-tonne INS-Vikrant in 2013, which is a first-in-class aircraft carrier built in India, with another on the way. The building and launching of this aircraft carrier propelled India into an elite club of only four other countries that are capable of doing so. India is also one of only four countries that has built a ballistic missile defence system.

Graph-2

So whilst China is currently in the lead, India is already well on the way to catching up with Chinese capability based on the technology it is employing in its new generation of aircraft and ships. The fact that India is able to draw on the expertise of other already advanced military designers augurs well for the Indian military at least retaining parity with, if not surpassing, China in the years ahead.

Finally, in technology India still lags slightly behind China. In a report for Industry Week it was noted that India is probably ten years behind China overall in terms of R&D investment and patents registered. This should come as no real surprise, considering the opening of the Indian economy really started with the economic reforms of Manmohan Singh in 1991, whereas China had started some years before. What is surprising is how India is racing to catch up. The same report in Industry Week noted that India has passed China in terms of pharmaceutical industries, steel and automotive technologically, which has been driven by Indian multinationals being able to buy up already developed companies overseas and gain access to their technologies. Think Tata buying Jaguar Landrover and Corus, which China has not been able to match. The life sciences are also booming in India, with year-on-year increases of investment in R&D largely coming from the private sector and not the government. In the areas of R&D the largest increases have come from FDI into India from overseas companies that see India as a place where there is a cost-effective and well-educated workforce for research.

Overseas Indian technology companies are also having a good time. They find it much easier than their Chinese counterparts to access foreign markets because of a good understanding of English and how the Western world works. Kai-Fu Lee, the CEO and founder of China’s Innovation Works, said in an interview with Bloomberg that while growth in the Chinese technology sector is huge, the sector itself is very small and there are not many examples of Chinese companies doing well outside of China or foreign companies doing well in China because of cultural and language difficulties. Contrast that statement with India, whose largest technology companies such as Tata Consultancy Services, Infosys or Oracle Financial Services Software operate in every continent and are truly global in scale. The six largest companies also only account for 36 per cent of total IT services revenue, meaning there is a competitive market for the smaller firms to compete and grow in. As the table above shows, most of the IT service sector exports outside India. It is this ability for Indian companies to operate on a global scale and attract the R&D investment back to India that has allowed the country to develop a technology sector that innovates new technology, new products and services for global consumption, projecting a modern view of India around the world.

In space technology both India and China have successfully put a human in space and returned them to Earth, However, while China has focused on manned space flight, India has sent a satellite to Mars and successfully put it into orbit—only the third country to go to Mars and the first to do so successfully at the first attempt.

So who will be the next global superpower? Whilst for the last 20 years the world has been watching China’s meteoric rise, they have being paying less attention to the more gradual rise of India. But with Indian businesses now spreading out over the world and the economic slowdown that may yet result in China getting a hard landing, India has been able to use its strengths to match and surpass Chinese economic growth whilst slowly but surely modernising its military, skipping an industrial revolution and using its people’s skills in innovation, design and technology to make the things the world needs. Simply put, if China is the workshop that builds what others have designed, then India is quickly catching up as the brain that designs and makes the things the rest of the world didn’t know it needed until India designed it. For India to succeed and attain true superpower status before China, then the government must continue to invest in R&D backed up by private corporations, its home grown military designs must be continued if not quickened to gain parity with China and structural reforms in infrastructure and tax must be implemented sooner rather than later. Another area the government must concentrate is in the general education of the workforce to make sure that the 100 million people who are expected to join the workforce in the next ten years can take advantage of the modern economy.

While there is much to do over the next 20 years, India is ideally placed to step up and take its place alongside the United States as a truly global superpower, making this the Indian Century.

Darren MacKie

Asian Affairs

*  *  *

Vietnamese text, please click here

More on English topic, please click here
Main homepage: www.nuiansongtra.com