American Enterprise Institute

June 5, 2008

[Edited transcript from audio tapes]

1:45 p.m.	Registration
2:00	Panelists:	C. Uday Bhaskar
		Stephen P. Cohen, Brookings Institution
		M. R. Sivaraman
	Moderator:	Christopher Griffin, AEI
3:30	Adjournment

Proceedings:

Christopher Griffin:  Ladies and gentlemen, thank you so much for coming out this afternoon.  My name is Chris Griffin, I’m a research fellow here at the American Enterprise Institute in Asian Studies, and I’m delighted to be moderating the panel with such an eminent group of speakers this afternoon discussing a fairly basic question, whether or not India can afford to be a great power and more particular; what are the costs; what are the consequences; what are the tradeoffs as we look at this country; try to take count of its ambitions and see where its going to end up in the near future. 

Before introducing our panel of speakers, I would like to mention just a couple of statistics that come to mind that I just found interesting, and most actually came from the Washington Post article this morning.  So it is always good to know that we have a topic that is relevant, being reported in the Washington Post.  You may have seen that India has raised some prices with regards to petroleum, with regards to diesel, with regards to cooking oil; in that order, 11 percent, 10 percent, and 16 percent.  And you have already seen some people out on the street - not surprisingly - who are not pleased with that development.  And even with those price increases, the government still going to have to take out an approximately $22 billion bond to pay for the amount of subsidies given to petroleum companies, which even with the price increase are still eating up most of the cost of importing this oil and selling it at a subsidized rate. 

There are lots of issues going on with India.  There is a huge set of challenges that the country faces and we have a great set of speakers to address it today.  Introducing from my side, down the table and the order also in which they will be speaking, Mr. M.R. Sivaraman is a former permanent secretary of finance of the government of India.  He had a very long and distinguished career with the Indian Civil Service, including serving in such issues as civil aviation and taxation reform.  He served as an adviser to the United Nations Security Council addressing counterterrorism, and he is currently a fellow at the Aeronautical Society of India, chairman of the board of governors of the Lawrence School, and a member of the board on several companies in India.

Next, we have Commodore Uday Bhaskar, who retired in 2007 after a 37 year career in the Indian Navy.  He currently is responsible for the Indian International Center Study Group working on a variety of issues, and is also involved with the United Service Institute and was previously with the IDSA, the Institute for the Defense Studies and Analysis.  And last is Stephen Cohen with Brookings Institution, who is a senior fellow there and has written several books, most recently, Four Crises and a Peace Process: American Engagement in South Asia.

So, if Mr. Sivaraman is ready -- we are going to begin.  Thank you.

M.R. Sivaraman:  Thank you very much.  Ladies and gentlemen, I consider a privilege to be here.  It is indeed an honor also to me, because I was in a holiday here and I was asked to come and speak on this very, very interesting topic.

Let me tell you first, that I am not a military man like Commodore Uday Bhaskar.  But I had a privilege of working with a large number of air force officials, both in service and out of service.  So before we get on to the serious subject, “Can India Afford to Be a Superpower,” my son considers him as the only superpower that he knows.  He is the only person who combines muscle power as well as political power in himself - probably in the entire world. 

So coming to think of whether there is a superpower, we have to look at the definition.  Now, I try to look at various definitions and probably, “superpower” was used towards the end of the Second World War in one of the books that was published.  And that, of course, did not give a clear cut definition; there are a large number of definitions.  But I think, a superpower could be described rather vaguely as a country with a large or a sizeable homogenous population; rich; a large country with a vast industrial base which can maintain itself and also grow; has a very powerful military that can probably have prolonged conflicts continuing without any serious distress to the economy as such; and a country with a lot of natural resources.  When we look all these qualifications, perhaps, only the Soviet Union and the U.S. fit into this. 

But what does “superpower” really mean?  What I think is that a superpower should be able to enforce its will in any part of the world.  This happened only toward the end of the war when the U.S., the U.K. and the U.S.S.R. were in a position to enforce their will.  Since then, even the continuing superpowers of the U.S.S.R. - now, of course it is dead - and the U.S., they have not been able to enforce their will on any country.  Despite all their military victories, the battles their men have fought, and the victories they might have declared, they have not been able to enforce their will on the country.

So can we say that there is a superpower today?  Yes, in some terms, the United States is a superpower, but yet, it will not be - not in the foreseeable future - able to enforce its will on a people.  It is possible that some of these superpowers including the non-superpower countries which possess nuclear weapons may be in a position to destroy the world many times over, but I do not think that makes them a superpower.

Superpower, in my opinion, should be one country which is able to enforce its will, and I do not think any country will be able to enforce its will whatever may be the size of the country, whatever may be the size of the population because the world has changed attitudes.  The love for freedom, the love for democracy, and various other things which have cropped up have changed the thinking of people.

Now, under these circumstances, in my personal opinion - I served the government of India for almost 39 years in different capacities - my country should not aspire to be the kind of superpower that we knew of or read in the newspapers and in journals and in books.  Presently, India is growing.  It has broken the barrier of low-rate economic growth, from being a country which grew only a 3.5 percent for several decades, it started growing at 5 percent, then 6.5 percent, now, close to 9 percent per annum. 

Today, I brought some statistics; please permit me to refer to it.  In terms of GDP, according to the World Bank Atlas, India is number four in PPP terms - that is Purchasing Power Parity terms - with $2.988 trillion.  Now in my opinion, this could be a little more - maybe 30 percent more - because there is gross underreporting in the Indian economic system.  Per- capita income wise, we still are categorized into the group of low income countries; we are not in the middle income category.

So in terms of gross national product or gross domestic product, we may be probably in the top of the league.  But in terms of per-capita income, we are still at the bottom.  That does not say much about economic prosperity in India.  Even today, even according to a government report which has been released very recently, 70 percent of the population still lives on less than three dollars a day.  So we have a long way to go to pull them out of this kind of poverty; although, we may be economically a very large country. 

The WTO trade data now shows that India does not count much in international trade with only 1.4 percent of global share of exports.  The European Union is at the top of the league with 16.5 percent, China with 11.8 percent, and the U.S. with 11.5 percent.  So we really do not count for much in the international trade even though we are trying our level best to improve our exports to a comfortable extent.  In the last few years, exports have been growing at a level of about 20 percent. 

Literacy levels are still below world standards at 65 percent.  We still have a long way to go, even assuming that 95 percent is almost total literacy.  And according to the rough calculation of $300 to make a person literate, we require roughly about $60-70 billion there.  The health sector requires a certain amount of improvement.  The population-bed ratio and population-doctor ratio is far, far below the requirements; we have to double the number of beds and the number of hospitals.  We require more than $30-40 billion and we direly require it.  The total amount of government expenditure on health hardly accounts for one percent of the GDP; 75 percent of the expenditure on health is borne by the public.

India’s installed capacity for power - taking into account all private captive generation - is only 170,000 megawatts as of today.  Compare this with the million megawatts of the United States and nearly 800,000 megawatts in China.  A recent report of the planning commission says that if India is to grow at a rate which they have projected, about nine percent, it needs to increase its capacity by one percent per annum increase, and this will take India to 800,000 megawatt at the end of 2032 and it costs at current prizes $1 to 1.2 million for one megawatt of installed capacity. 

So you can imagine the amount of resources required to build up this huge power capacity.  Right now, we are running short of power at peak demand - as they call it - to an extent of 14.8 percent.  So we are still seriously short on the power supply.  So we have to spend a lot of money and the government is putting tremendous amount of efforts - including the private sector - to increase its generating capacity. 

India’s food security, we thought was assured, and for two decades, we were all very happy.  In fact, we were exporting food grains.  Now, the food security appears to be under some kind of threat.  Because of rising incomes, there is greater demand for a variety of food, not necessarily for grains, and there has been a projection that as our population matures from being small children into youth stage or into adult stage, the consumption will automatically increase.  Therefore, the food grain production has to increase. 

According to various reports published by the government, we are suffering from two different types of crisis: one is an agriculture crisis, and another is an agrarian crisis.  Agriculture crisis is a crisis of production and productivity.  Productivity levels in India are far below the world standards.  As a person working in the field now with one of the non-governmental organizations trying to increase productivity in rice and in certain other crops, I find that there is a tremendous amount of potential, provided there is a lot of investment.  And government is taking very seriously this issue and they want to increase agricultural production by, at least, four percent and they have a mission now to increase productivity of rice and productivity of wheat and lentils.  They have launched a mission in September 2007, so there is an expectation that unless agriculture grows at the rate of four percent per annum, we will not be able to make up the 10 percent growth, which we anticipate at the end of 2012. 

In addition to this, we require a lot of investment going into the development of railways, roads, ports, the social sectors, urban renewal programs, et cetera.  Now, all these have been taken into account while projecting the requirements of the country for the next few years for development to be kept at a level of 9 to 10 percent per annum.  This is the latest that has been produced by the planning commission headed by a former colleague of mine, Montek Singh Ahluwalia.  Now taking into account all these factors, they have arrived by various model building exercises that on an average, the country has to spend 9.47 percent of its GDP, I mean, resources amounting to 9.47 percent of its GDP to maintain a rate of growth of nine percent per annum, leading to 10 percent per annum towards the end of 2012. 

In addition to this - of course the normal expenditure of the government is there - the amount required for investment and this order of investment leaves a gap between the availability of resources and what are really required.  The total savings required for the purpose of this order of investment is about 35.1 percent of GDP; whereas, we are at about little more than 30 to 31 percent.  Even if we assume there will be a larger flow of foreign direct investment, we have to do a lot in regard to improving the savings within the country.

Now, I come to the question -- I am not going to deal with many things which probably Commodore Uday Bhaskar will talk of.  From the point of view of India’s strategic requirements, we have to have a very powerful military: the army, navy, and the air force.  Surrounded by sea in all three sides and very forbidding northern boundary, in addition to the other serious problems that we encounter, on account of drug smuggling across the eastern borders, and always the fear that something might happen in the borders, we must have a military powerful enough to protect our borders. 

As a development economist and as a person who has dealt with the finances and the planning of development in my country, I see the need for a powerful military, not a military of the type which the so-called superpowers are supposed to have, that they are in a position to wage war anywhere in the globe and they are able sustain conflicts for a prolonged period.  I do not think that India requires to be that kind of a power when we can grow economically; we can become a great economic power rather than a very big military power. 

I know that a long time in the past, there was a book written in the United States known as The Valor of Ignorance.  I think some of you may be familiar with that book; at one time I’m told MacArthur wanted to assign it as a compulsory reading for all students at West Point.  May I be permitted to quote from this Homer Lea [the author], “As physical vigor represents strength of man in his struggle for existence, in the same sense, military vigor constitutes the strength of nations.  Ideals, laws, and constitutions are but temporary effulgences, and are existent only so long as this strength remains vital.  As manhood marks the height of physical vigor, or mankind saw the militant successes of a nation marked the zenith of its physical greatness.”  This was written at a time when Homer Lea thought that Japan was rising to be a big power and in competition with the United States, and maybe he thought of many scenarios that it might attack the Californian coast of the United States and occupy it. 

But we are not living in that kind of world today.  We are living in a different kind of world.  We are talking of globalization.  We are talking of interdependence and in the last two decades, the amount of interdependence amongst nations on account of economic intercourse in various fields has become so much that if somebody sneezes or rather as they say, “If somebody sneezes in Shanghai, we may feel the effect in India or probably in Brazil.” 

During the last Southeast Asian crisis, I had the privilege of working as executive director of the International Monetary Fund and we used to see the effect of the crisis in different parts of the world.  So we are now in an interdependent world.  Of course, there are strategic realities.  I’m not saying that there is no potential for war, there is no potential for conflict.  So long as mankind is there, there will always be a potential for quarrel, fights, and war. 

But as we are progressing towards a more prosperous society and we in India, in particular, we want to become economically prosperous; we want to become economically powerful, and that is our priority today.  And I think, having been in government in the policymaking levels for a long time, including having had the privilege of working with the present prime minister for nearly three decades, I think the priority for the country is to grow economically, to become an economically powerful nation, a prosperous nation, a nation that can probably help others to also grow and not to become military powerful - no, sir.  Today, India just cannot afford to become militarily a superpower because it has got several other priorities but that does not mean India should not strengthen its forces to defend its borders, as and when the occasion arises.

 In India’s long history of 5000 years - some of it is recorded, some of it is not recorded - I know of only two or three instances when India had gone out to conquer other parts of the world.  During the time of Chandragupta Maurya - that was in the 3rd century or 4th century B.C. - when Chandragupta Maurya probably had to take revenge on Alexander’s conquest of a portion of India; therefore, he extended the empire beyond the current Pakistan to Afghanistan and other places.  The second time it happened was probably during the Mogul period; they had some portions of Afghanistan. 

And on the third occasion, in the 11th century or 10th century when the southern king, Rajaraja Chola was considered to be the greatest builder in the last two millennium.  He went into Sri Lanka and some other islands.  I do not think there has been any other instance where India coveted the territory of any other country or India wanted to enforce its will excepting when we had to enter Bangladesh to preserve the integrity of our own country at that particular point of time.

 So therefore in my opinion, India at the present stage cannot afford to become a military superpower.  India can certainly afford to become an economic power and it has the wherewithal, it has the facilities, it has the will, it has the determination and it has a plan to grow economically prosperous.  But I would like to reiterate once again that the amount of resources that are available after we provide for this kind of a growth would be just 2.3 percent of our GDP for defense purposes.  Currently, this year’s budget, this year’s annual budget, provides for about little more than two percent of the GDP for Defense.  But the projection that I have been given by the planning commission for the next five years is that Defense would be able to get about 2.3 percent of the GDP if we are able to provide for all the other developmental activities as envisaged for purposes of having a growth rate of 8 to 10 percent; otherwise, from somewhere we are to divert and there maybe some difficulties in the other sectors. 

So given the reality of the financial resources, defense can grow in strength to maintain a strong army, navy and air force for the country, but it will not be in a position to spend billions of dollars for purposes of having a blue-water navy, which I think he will go into it in a much better way.  I understand that one aircraft carrier now costs $4.5 billion to get floated with all its equipments, $100 million for maintenance per year.  One fighter aircraft costs a little more than $100 million.  I know; I had negotiated the purchase of a few military aircraft in the past.  I know the cost of a military aircraft and once it crashes the amount of loss that the country suffers.  Right now we are engaged in rebuilding the air force and I know they set apart huge amount of money for rebuilding a part of the air force.

 So if we have to have India’s presence in different areas of the world to equate ourselves with the so-called superpowers of the world today, we would have to set apart huge amounts of money for purpose of defense, in which case we may have to compromise on our goal of achieving prosperity within the next 10 to 15 years.

 I close with this.  Thank you very much.

 Christopher Griffin:  Thank you.  That was a wonderful opening presentation.  And just to quickly segue from your very last comment on the need to expand international trade between the United States and India and all the other countries through the process of globalization, I was negligent before to give appropriate thanks to the U.S.-India Business Association and Manohar Thyagaraj who introduced us and who was very much co-organizer in pulling this event together - about which I could not be much more excited at this point.  That was wonderful.  Thank you. 

Sir --

 C. Uday Bhaskar:  Good afternoon, ladies and gentlemen.  At the outset, may I thank Chris and the AEI for having me over here this afternoon and for this opportunity to address this subject.  I would also like to recognize a number of people in the audience whom I have had the privilege of knowing for a long time and I’m very happy that you have found the time to be here this afternoon.

 But this one question of India and the way Chris has, I think, provided the title for the afternoon’s panel discussion as “Can India Afford to Be a Great Power?”  I thought about this ever since we exchanged mail, and after listening to the presentation by Mr. Sivaraman Krishnan, I thought I will try and change this slightly if I may, and what I talk about, I would address is to really not talk about great power.  I think I have had some problems about this whole semantic of “great power in the 21st century” because historically in a strategic sense it had a certain salience in the late 19th century, early 20th century.  By the time we came to the Cold War, you saw the semantic changing from great power to superpower in the nuclear context.

So my own submission for this afternoon’s exchange of thoughts, is to ask this slightly differently and see whether can India aspire to become a credible/relevant power in the 21st century.  And the first half of the 21st century is a reasonable timeframe.  So I will try and spend a few minutes and address that question.

Second, I thought it would be useful for the AEI and the kind of audience we have this afternoon and the other members here, maybe to spend a few minutes on the nature of the India-U.S. relationship which would derive from whatever answers we are able to agree upon about the relevance or the kind of relevance or credibility that India can aspire towards in the early part of the 21st century.

Now on the face of it, this is a subject that has been discussed many times.  I think some of you on this group are faces that have been to Davos, to Europe, to India, to Shangri-La and this question of India as “great power” seems to be the flavor of the couple of last few years.

Most recently in April, the International Institute of Strategic Studies, the IISS, had its first ever conference in Delhi where they addressed the same thing and they did have a far more, I would say, imposing phrase, “India as an emerging great power.”  And, we had two days of deliberations on that.  My own sort of tack on this is to say that if you look at the Indian elephant from Washington D.C., which I’m sure that most of you are - whatever be the nature of your persuasion, whether you are in business or in government or in academia - we have had a lot of focus on the India-U.S. Nuclear Cooperation Agreement.

It began in July 2005.  Actually I had an anecdote; I must say that this morning there was the groundbreaking ceremony of the U.S. Institute of Peace.  President Bush was there; there were a number of other members from the cabinet and the Capitol Hill and on the sides, we are talking about this, but I will come back to this in a moment.  There was a sense of disappointment.  You know that the India-U.S. agreement has stalled and despite all the investment that had been made in Washington and by the current administration, because of domestic political compulsions in India, the nature of the debate India cannot get its act together, India is indecisive; therefore, the window of opportunity is shrinking and I think most people believe that the deal is more or less stalled, at least as far as the Bush administration is concerned.

So if you extrapolate from this current, shall we say, disappointment, the despondency about India and its inability, as I said, to get its act together, largely because of the nature of coalition governments, and as I said, the way in which they have been pursuing different objectives, one could come up with a rather, shall we say, bleak kind of an assessment to say that India can never get its act together.  It will always be the equivalent of the Myth of Sisyphus, you know, you keep going up but it never seems to reach.

But I would like to argue slightly differently and say that if we were to rephrase this and say that, can India aspire, can India become a relevant or a credible power in the 21st century, my answer is actually, yes, and a reasonably emphatic yes.  And from there, I would suggest that there is a certain, I would say, logic as to why India and the United States should be engaging with each other and not look at the relationship only as being predicated on the civilian nuclear agreement.  So those are the two propositions that I would like to make.

Now if you look at the 21st century and why do I assert that India would aspire, or India has the potential to become more credible and relevant in the 21st century, the following is the logic that I would like to walk you through.  But when you talk, even if one were to admit that you can use the word “great” in a generic sense, to talk about countries, whether you talk about 19th century, 20th and now in the 21st, and, as I said, I’m qualifying that to mean credible and relevant, I would submit for your consideration that we should look at the capacities of nations both in tangible terms and in the intangibles, whether you call it capacity, you call it capability, your potential, pedigree - not a bad word to consider countries and the way they have inherited certain characteristics.

And on that grid, I would say that there are four or five discrete characteristics about India that ought to be noted and which I think all are in a positive way.  One is the nature of India’s political culture.  Again, it is something that has been discussed, I think, a great length, but I just want to make a brief point saying that let’s not ignore the nature of India’s political resilience.  Decisions taken in 1947 - I do not want to get into the details of the Two-Nation Theory on India’s commitment to secularism - but if you look at the constitution of India in a normative sense, I think it is a benchmark.

For many countries that had come out of the colonial experience, yes, there are inadequacies between the constitution and the nature of governance in India.  As he has just pointed out, there are many areas where we could do better and I think there is both a degree of ineptitude and turpitude as far as the last 60 years are concerned.  I accept that.  But yet I think there is the nature of the commitment to certain political values, norms and that India has prevailed.  I’m always a bit hesitant to use the word “succeeded” - you cannot, you know.  If you have 77 percent of your population living on less than 50 cents - as some of you maybe aware - India has just redefined poverty.  We have the Arjun Sengupta Report Committee and it makes for a very bleak reading.  But there is an awareness.

So I often say that it is not a question of India succeeding but India has prevailed in its commitment to these political benchmarks.  And one of the most extraordinary developments about India’s politics, for those of you who are familiar with the country, we had, about eight years ago, a lady called Mayawati, who at that time was the chief minister of the undivided Uttar Pradesh.  She was single.  “Dalit” is a term we use in India to refer to people who are socially below a certain median and she was able to become chief minister of that state because of the politics, the way the politics are now evolving in India.

So I’m just illustrating that when I talk about the nature of political culture, political resilience and the fact that you have about 1.1 billion people who are constantly slashing around and are committed to the democratic principle, and I’m the first to admit that there are gaps between what we would like to achieve and the way in which even politics is practiced.  But that as I said is par for the course in any democracy and I do not have to emphasize that in Washington, D.C.  So that, I think, is something that must be noted; there is a certain political texture to the Indian animal and it has certain relevance in the 21st century.

The second is the economic and trade potential.  I will not belabor that point because I think it has been covered very comprehensively, but all things being equal, whether you take the Goldman Sachs report, you take the BRIC report, you take slightly more cautious reports - all things being equal - I think that is something that I would like to again emphasize - India is on a certain track - 8 percent, 7.5 percent, 9 percent, 10 percent.  But by the time we come to 20, 40, 45, we are talking about India as one of the world’s three or four largest economies depending on how the United States, China and both Japan and EU are going to reposition themselves.  So I want to suggest that this will give India a certain degree of relevance or credibility both at a political level and in terms of economic and trade capabilities.

The third is the military capability.  Again, I think he has addressed this in some detail.  He has given you percentages in the GDP.  At the moment, India’s defense expenditure is actually a little under two percent.  Here are some of the calculations that we have done but if you take the pensions, yes, you go over two percent.  But the interesting part is if you look at the trend lines, we are now roughly about US $24-25 billion, much depends on the dollar-rupee kind of parity as it is evolving now. 

But on the 30-year cycle, if you were to make projections, back-of-the-envelope would suggest that we are talking about India actually allocating closer to $3 trillion for military expenditure out of which maybe about $900 billion will be towards modernization and inventory acquisition.  Now, it seems like it is a huge amount, but again the Indian military has been constrained for a variety of reasons in terms of its own modernization programs, and I think that he has rightly observed.  The Indian Air Force today, I think, has to make some very, very macro decisions.  But my point is that if you talk about credibility and relevance, the military capability is something that would, I think, give India a certain index in that domain.

I want to digress briefly, and this is actually encouraged by the remarks that President Bush made this morning at the USIP, where he spoke about peace, the relevance of peace to the American region and references were made from U.S. presidents going back to President Washington.

But I thought this is something that merits discussion also, that in the 21st century to the extent that there is grave concern in most parts of the world about what has once been described as the failing state, the dysfunctional state, the deviant regime, societies that are not able to govern themselves and various other security anxieties that we have associated with these states or the societies, whether it is terrorism, religious radicalism, the proliferation of weapons of mass destruction; you have various permutations and combinations. 

But I would imagine that the ability to nurture peace with boots on the ground, whether it is UN peacekeeping operation or it is a purely bilateral or a single country effort, I think the ability of states to be able to nurture and stay the course in peace building is something that would have a certain salience.

Again, I do not want to belabor the point about India, peacekeeping in Korea, Congo, you know - that is familiar to the professionals.  My only point is that India has this experience, pedigree is the word I use, and I think India also has demonstrated that it is able to do things in a cost-effective manner, definitely in relation to the United States.

Now this is something I think the professionals on both sides are trying to discuss, but I will flag this as one of the areas where India and the United States could perhaps consider greater engagement when we talk about issues like peace building and nurturing of peace in areas which need it.  And this, as I said, is a much wider spectrum.  I only want to flag it; I will not get into the detail of terrorism and the Islamic issue just now.

But there are constraints.  You know, when I say that can India aspire, my answer is yes.  Will India be able to actually reach those levels that I speak about?  I want to flag these domestic constraints.  I have, in the past, made this case saying that India has a certain reticence and a certain diffidence in its ability to really grapple and come to grips with “macro” power.  I often talk about that in reference to the nuclear issue saying that India has been a very reluctant nuclear power.  We did what we did in 1974.  It took us 24 years to reach 1998 and my standard sort of packaging is that India is the only country that has tried to cross the nuclear chasm in two leaps.

Now, it appears that after the July 2005 agreement and where it has stalled, we are trying to do it in three leaps, but that I think is, as I said, one of the characteristics of India, the diffidence, and the fact that we are not able to do these assertive things.  We tried it once when Rajiv Gandhi was prime minister, as far as the Sri Lanka IPKF experience was concerned.  As I said, we did come back with perhaps not the desired results on that, so this is one of the areas.

We have very serious domestic issues which I think are going to be top priority and could also become constraints in preventing India from perhaps reaching the levels that its potential suggests; this is poverty, it is education, lack of infrastructure and the fact that we have not been able to, I think, address the human security issues.  So I think there I would make a case to say that India has to strive domestically to be an equitable power.

There is not much equity in Indian governance now.  I mean that is one of the big constraints we have.  It is not an equitable form, but I think there is a churning process on how successful - we will be or will not be - will be related to the way in which I think Indian politics and governance shapes up.

That is as far as my case as to why I think India has the potential to be both credible and relevant in the 21st century which, as I see it, would evolve in the form of a hexagon, an asymmetrical hexagon, whether United States, EU and Japan will be the three principal nodes of relevance because of their current economic, technological and trade tangibles.  United States has this overwhelming military capability.  The other two nodes on this particular hexagon which are already there, as I see it, are China and Russia.  Japan is already a part of the Western Alliance; United States, EU and Japan are strategically on one side of the hexagon.  You have Russia and China - Russia because of its nuclear weapons; China because of all the capabilities we associate with China, it is clearly emerging as the major power after the United States in the next 20 to 25 years.

India, I think, has the potential to become relevant in this hexagon.  Maybe 15 years from now, Brazil could also be a candidate, but at the moment I’m suggesting that the 21st century would acquire strategic equipoise if these six centers are able to work out the nature of their contradictions and their convergences, or where they have divergences and where they have convergences.

And above all in these six nodes, I think India has a demographic advantage.  India and China currently have a certain demographic advantage which you do not find.  I think actually that the United States, India and China in that order have a certain demographic advantage which the EU, Japan and Russia do not.

And related to the 21st century, being a knowledge economy, I think India again brings certain affinities.  Not all of India, 10 percent of India, 8 percent of India but on a base of one billion, we are talking about a reasonably, I would say, credible number.  So I think that is the other point that should be flagged and that brings me straight into - if I can take two minutes more, Chris - on the India-U.S. relationship.

We choose to say that, yes; at the moment, it seems as if India-U.S. is not going anywhere.  And those of you who have tracked the India-U.S. relationship, we used to have Mr. Y.B. Chavan, who is a former Defense minister.  He had come here and we talked that we were going to do something militarily, but if you remember, he died and that was the setback to the relationship at that time in the ‘60s which is why I invoked the Myth of Sisyphus.

But at the moment, if you look at India and the United States in the long term - not for this administration, not Mr. Bush in Washington D.C., not Dr. Manmohan Singh in New Delhi - I think there are correspondences and issues that will become very relevant whether it is in a political sense, trade economy, environment, or for that matter, any of the societal or the human security kind of issues that we talked about in which I would like to bring this whole question of societal resilience: how India manages diversity; India and its religious fabric at this point in time, what has been the Indian experience.

But since my focus is more on the strategic and security areas, I would like to bring my standard four-point agenda for India and the United States where I believe that there are convergences or correspondences but not congruencies.  I do not think India and the United States can ever have a congruent position but we have certain large correspondences.

First of all, I would say on this whole question of Asia, the emergence of equipoise or the nurturing of a strategic ecosystem in Asia, in that what is going to be the profile of China, what is going to be the contour of China, what is going to be the contour of India, Japan and all of Asia.  That is a big issue which India and the United States, I believe, have a certain correspondence.

The second is this whole question of deferment now in terms of low intensity conflict, internal security, terrorism.  Islamic extremism - from Saudi Arabia to Indonesia - it can have a certain negative long term impact.  And I think there are challenges and sociopolitical tussles going on even as we speak at this point.

That is something that India and the United States -- and I just do not want to focus this only on GWOT and terrorism and Osama bin Laden.  On a 30-year cycle, which is what my timeframe is, I think this is going to be much larger than Osama bin Laden.  It is about moderation, it is about tolerance, it is about diversity.  And I think India and the United States perhaps could engage on this.

And related to this is what I had qualified as the failing state, the deviant regime, the dysfunctional society, the narco-state, the kind of problems you are seeing in Afghanistan now.  And how are you going to manage this against the backdrop of globalization?  I mean, today if you say that the terrorist is able to use a cell phone and has access to a bank account in Switzerland, it is part of globalization; it is part of how narcotics have permeated state and society.  So these are issues that we would need to bring to the table. 

And the last, of course, is the nuclear issue which, as I said, I have deliberately kept it to the very end.  I mean that is a huge issue.  It has many, as I said, perspectives that you can look at the nuclear issue, whether you are talking about weapons, arms reduction, disarmament, nonproliferation, energy, linkages to the environment.  I do not think we have the answers now.  I do not think our positions are also very clear, but I think India and the United States would benefit by being able to discuss these issues for the long term.

And that is where I talk about the relevance of India to the United States and vice versa.  We in India - there should a reasonable clarity that any aspiration that India has, whether it is nuclear, whether it is on Iran, whether it is on political issues - I think our ability to succeed or prevail will be if we have the support of United States.  That would be the most desirable situation or exigency.  The worst case is that the United States is constantly opposing India, for instance, what happened on the nuclear issue from 1974 to almost 2005.  And the next best is that the United States is neutral.

And I think there will be a number of issues where India and the United States would perhaps benefit by being able to discuss.  And, as I said, my last point is that it seems India cannot get its act together, but do not write off India.  There are resiliencies, there are capacities.  And one very interesting thing is that those of you who are familiar with what is happening between India and the United States, a certain amount happens between governments.  We talk about it in forums like this.

But there is an enormous amount of interaction that is going on beyond governments - private sector, media, and people-to-people.  If you are familiar with India’s current sort of cricket bonanza that we have had - we have had the equivalent of American baseball and basketball practices - the teams were auctioned.  And this was the main thing in India for the last six to seven weeks.  The most interesting part of India-U.S. relationship is that we imported cheerleaders in Indian cricket, you know, which the pundits would be aghast --

Stephen P. Cohen:  From Washington.

C. Uday Bhaskar:  From Washington, you are right.  And then the interesting part is, you know, some constituencies in India felt that it is not done; India’s culture, India’s sort of traditions are being flouted.  So we did a very Indian thing.  We ensured that they put on more demure dresses so we still had cheerleaders but we were able to, in a way, come up with an acceptable Indian kind of solution.

So that is what I mean saying that there is a relevance.  And I do not want to overstate, as I said, the great power index about India, but I would like a strong case for the relevance and credibility that India should be looking for.

Chris, thank you very much.

Stephen P. Cohen:  Uday has said everything I wanted to say so we could just go to questions.  But before that, let me thank Chris and AEI for inviting me over here.  I had made a long march from Brookings to AEI a number of times.  In fact, there are several Brookings-AEI projects and we have actually had AEI people at Brookings so -- Fred Kagan was there yesterday; I had lunch with him the other day. 

We are often stereotyped as a leftwing think tank but in fact, several of us were in the Republican, in various Republican administrations and you are stereotyped - I wonder what your stereotype - pro-business or whatever it is which is okay.

I just came back from Singapore a few weeks ago and so I’m glad to be here and meet some old friends.  Manohar, we have been e-pen-palling by email and so we have been in continuous contact for a long time.  I’m pleased that you are sponsoring or helping to sponsor this event.

I do not have much to add except maybe some 30,000 feet things but before I forget, let me point out that one of the attributes of India is that it is a cultural superpower.  It may not be an economic major power, yet, and may never be an economic major power, may not be a military power, but it is a cultural superpower.  And the Indian talent is to take cultural artifacts from abroad, Indianize them and then export them.

And the cheerleader thing is a great example.  I met somebody the other day who had been in remote Central Africa and this television set has two channels.  One was an image of the water hole where the animals came down to drink; the other was Indian cricket league - that was it.  And what he saw was the American cheerleader style, Indianized, and then exported.  So India’s great quality and strength as a society and culture is it welcomes diversity, welcomes complexity and makes it Indian, then it exports it.

In terms of the criterion scales of being a power, that cultural power is - I will not say it unsurpassed but it is right up there at the superpower league, no question about it, in some ways even more than China.

Your question, Chris: Can India afford to be a great power? - raises a whole bunch of questions and I hope to address a lot of them in the next book I’m writing, not the book I’m writing now which is about Indian military power but the book after that or the project after that.  I think that it raises two questions, which we’ve dealt with a little bit, that is: “What is power?” and “How do you measure it?”

And clearly, I’ve always felt that power is a very complex thing; it is the ability to influence others one way or the other.  Military power has all kinds of manifestations.  There is cultural power, economic power, and economic capability, and also I think important, the ability to pull these together as an instrument of the state.  The project we are going to work on at Brookings, if the foundation agrees, will be in fact to quantify and measure these which has never been done and also measure U.S.-India relationship with quantifiable and qualitative means.

Now, can India afford to be a great power?  Yes, it could afford it.  Is it worth trying to become a great power in the military sense?  Maybe, maybe not - that is for Indians to decide.  Will it?  I don’t know.  You get a lot of “I do not knows” in this panel. 

But clearly there are some assets and there are some obstacles.  And let me just go through a few of them.  But bear in mind, the caution - I think it is very important - that one of the most difficult things to do in politics or in any field is to get a correct exact estimate of a country’s status, whether it is military power or economic power.  A lot of this is relational - that as you can have 50 tanks and think you are great power but at the other side, there are 250 and knows how to use them, you are in deep trouble.  Or if you have 50 tanks and the other side has 20 tanks but they know how to use them better than you do, you are still in deep trouble.  So power is often a relational aspect, especially military power.  And it is very hard to measure this.  You cannot measure the military capabilities between two countries unless there is a war.  And obviously, nuclear war - there is nobody left to count who won or who lost.

Most power is relational and powerful compared with what, especially, military power.  So it is very hard to measure and there is a long history - which I have just written a lot on this - of underestimating Indian capabilities across the board and overestimating them also.

Usually it is underestimation.  I think historically for a lot of reasons, we underestimated Indian capabilities which, of course, irritated the Indians to no end.  And then, at times, we have overestimated them and overestimated Indian potential.  It is very hard to get an exact, precise, reasonably accurate measurement of capabilities no matter what dimension it is because a lot of this is subjective and you have, “I said; he said” and so forth.  That is why in this project, we are going to try and get qualitative and quantitative measures along four dimensions - cultural, economic, military and strategic.

Now, let me turn to some of the obstacles or the problems in terms of not measuring but in terms of actual India becoming a great power.  Uday has touched upon several of them and Adm. Bhaskar, actually, I will give you a field promotion right now.

C. Uday Bhaskar:  Make me feel good. 

Stephen P. Cohen:  Yeah.  I think that, as you pointed out - and actually I’m going to quote some of your writings in the book that I’m doing right now - India lacks a strategic perspective.  That is, its strategic community - politicians, journalists, military - really have not been used to thinking these ways.  The Indian preference is to avoid engagement and avoid encounter - just not get involved.  And the notion that India will be a vibrant member of the UN Security Council is bizarre.

Indians will appreciate that for about 10 seconds and then they will be subject to all kinds of requests from other countries to vote this way or that way.  They do not want it.  In fact, some Indian diplomats I know are not happy with the notion of India becoming a member of the Security Council.  It will make a lot of people feel good but India has yet to make a lot of these tough decisions that would be required of if it were a member of UN Security Council.  It would have to vote one way or the other.

So I think there is still growing, I would say, weak strategic community that does not quite know what it wants India to be, it has not thought of India as a great power until very recently.  India has not had the economic capability - you can imagine this - and that is something that is growing.  You see it now in the private sector, outside the government, but in the government, frankly, I think you could count on the fingers of half a hand, a number of politicians who really understand military power and the use of force in international politics -- hardly any, frankly, just two or three.  The rest are okay but they do not want to get engaged, they are not comfortable with the notion of military power for a lot historical and cultural reasons.

Secondly, India has a huge surplus of threats and it has a huge range - every country around India is either weak or threatening.  And the weak countries are also threatening because of their weakness.  India has a hostile relationship with Pakistan; they would wound up in war several times and a major war with China.  Indian strategists now talk about China being the big strategic competitor.

Bangladesh is seen as a problem; Sri Lanka is seen as a problem - it is a problem.  Every neighbor of India has an ethnic overlap with India which means that that country’s domestic policy, politics is India’s foreign policy and vice versa.

So it has a plethora of threats.  It does not have the ability or the capability, I think, yet to sort out which threats are most important, which threats can be dealt with by which means, and what strategy to deal with those threats.  So far, Pakistan, I think, is the most astonishing case.  India really should have accommodated Pakistan a little bit to get Pakistan off its back.

It could have done this a long time ago or could have started the process of doing this but instead India seems to be unwilling and unable to accommodate Pakistan, to remove Pakistan from the list of threats and turn Pakistan from an enemy into, at least, a neutral state.  I mean if India is really serious about China, it has to neutralize the Pakistanis - Pakistan is one of Chinese’s major ways of balancing India.

So I think that, as a surplus of threats, it does not have a mechanism to sort out which threat is the number one threat, which threat number two, and what to do - which resources to throw at that threat.

Thirdly, I guess, there is as Uday pointed out, the real security threat to India does not come from outside the borders; it comes from within.  It is something that Americans are oblivious to, I think, but India has the largest number of insurrections of any operating country in the world.  No question about it.  There are about 14 or 15 of them at the moment.  And very few of them are Islamists.  In Kashmir, you could say that is linked to the Islamic threat, but most of these are indigenous homegrown Maoist or pseudo-leftist revolutionary movements that simply cover the whole eastern side of India.

And they are not linked together yet, but my deep concern is that if the Nepali communists decide that they want to launch a revolution in India from a Nepali base, then this is going to get much worse before it gets any better.  There is no question about it.  India faces a long haul in terms of its purely domestic insurrections.  Some of these want out of India, some of them want greater autonomy with India but it is a very serious problem that the Indian government has absolutely no answer to at all, except development and growth which is why you are arguing, I think, that we have to grow to get more secure.

So I think that these are reasons why the recent - I have been part of the process - glorification of India as great power; it is a rising power.  I do not think India is quite ready for the kind of strategic relationship that the Bush administration had in mind for it.  It is beset with domestic military and security problems.  It is unsure about which of its external threats it has to deal with.  It is certainly unsure about whether it wants to work with United States.

Historically, we have supported the irredentist and radicalized Sunni country - Saudi Arabia.  The Indians have supported the irredentist and radicalizing Shia country - Iran.  And I do not see that changing soon at all.  The Iranians are close to the Indians, we are close to the Saudis, and both of these countries had caused a lot of problems to the rest of the world in different ways, through their propagation of radical Islam.

This is an area, I say, where we cannot cooperate at all.  And that is one reason the U.S.-India nuclear deal is going to break down because we want the Indians to be tough around Tehran; they are not going to do it for a lot of domestic political reasons as well as oil and gas and simply they want to accommodate Iran.  And they believe that the Iranian situation will be dealt with by waiting and talking; others have different point of view.

So I think that in terms of a U.S.-India strategic relationship, if you look around at the areas where we can collaborate and cooperate, there are a few and the book that I’m writing now will discuss them.  One of them, obviously, is things that happen at sea.  The Indian navy does first rate job with second rate equipment - marvelous navy.  I’m not saying this because Uday is here, but it is true.  It is a really great navy and so I think there are a lot of areas - disaster management, intervention in the case of failing regimes – where they are politically willing to do it.  It is keeping the sea lines communication reasonably, open piracy -- a whole list of small things that could be done between the U.S. and India at sea.  And politically it is easier for the Indians to do it because it is away from India; it is out at sea.

So there are areas like that.  We can and we hopefully will cooperate with New Delhi.  But I do not see many other areas.  We should be talking about Pakistan, about what to do in case of a truly failed Pakistan.  Instead some Indians would like to use us to help bring Pakistan down.  Other Indians understand that will be catastrophe for India, so we still have no strategic coherence on that.

Indians are part of the Russia-China-India linked alliance, presumably against the American hegemony which is okay, that is fine.  But if you play all sides against the middle, you wind up playing no side.  So I do not think there is much opportunity for U.S.-India strategic cooperation except for a few specific spots and one of them might be Nepal where things really go bad.

So the phrase I’m using in the book, although, my coauthor has not approved it yet, is “look before you hop.”  In other words, no leaps but sort of a hop with India and then another hop and so forth, so stage-by-stage, step-by-step cooperation in a sense we grow confidence in each other as we move forward.

That would be my major policy recommendation.  I agree with Uday that there may be a tendency now to underestimate India.  I think that will be as bad as overestimating India and we have been through that cycle where India can do no wrong and anybody criticizes India, it should be banished.  I think both sides have a better and more realistic understanding of the limits of the other for cooperation.  But I do think there are opportunities and this leaves aside all of the other reasons for U.S.-India partnership: two great democracies, et cetera, et cetera, et cetera.

Indians know how to run election much better than we know how to run elections, so we can learn a lot from New Delhi about how to do that - in fact, the Indian Election Commission is going to be in town next week - and a lot of other areas especially cultural power.  We want to export more of our cheerleaders to India and we are importing very quickly, a lot of Indian cultural artifacts.

At the bottom of all of this, the bottom line is that 10 years ago, the Council on Foreign Relations did a study of U.S.-India relations and we said that there has to be a greater economic tie between the two countries to serve as the “ballast” of the relationship, and we used the term ballast - that has occurred.  Microsoft, GE and Boeing are now big time operators in India.  They really are lobbying heavily for the nuclear deal.

But I heard yesterday, I do not know if it is true or not, but I heard it at another conference; it must be true.  I saw it on TV so it must be true; there was more Indian investment in the United States than American investment in India - over $2 billion.  So the Indian multinationals who call themselves “multinationals based in India” are heavily investing in America.  They are buying up our steel plants.  Tata Services is deeply involved in software all around the United States, so I think that economic relationship is such that it is going to grow.  There seems to be no limit to it except Indian trade restrictions on investment.  I think that will provide the ballast in the long term for U.S.-India relationship, so I do not foresee that the tie is dropping to the bad old days of the 1970s.

On the other hand, if you look for strategic cooperation, I just do not see that emerging quickly; unless, there is something going on that I do not know about.  When I did my study of the U.S.-India nuclear deal, the subtitle was: “A Deal Too Far?”  And really, I think the deal was more than the relationship could bear.  And domestic politics in both countries interrupted it.  But I agree with you that once we get over this, we may jump the chasm in three leaps.  But I doubt it frankly.  I think that deal is dead.

The Democrats want to renegotiate it; the communists would probably block to renegotiate the deal completely.  We will see what happens but unless they can push it through in the next week or so, literally, I just see that as a big disappointment.  And it was to be George Bush’s signature foreign policy success, and I’m not sure how he is going to react to this but I think that in terms of U.S.-India relations, it will be a setback but it will not mean that the relationship will plummet to the bad old days of the 1970s. 

Thank you.

Christopher Griffin:  Thank you, all three, all excellent presentations.  We will begin Q&A in just a second.  We will have microphones going around.  Please wait to receive a microphone and then please state your name and then, of course, please ask a question.

If I may quickly abuse the prerogative of the moderator, just one point and I think that Dr. Cohen phrased it quite succinctly, that presentations were really discussing what is power and how do you measure it.  And the point that power is apparently relational, it depends on how you look relative to another country.  And it seems that, also, it is a question of perspective and from the United States’ perspective especially looking in that India is a cultural a power, a political power, economic power, military power, but all those things combined seem to come from the American perspective, India is or should be or we wanted it to be a balancing power.  That India from the American perspective is very often defined, very much in terms of its relationship to China either as a balancer to China, as an alternative sphere of influence to China, that relationship relative to China. 

And, particularly, do you see disappointment coming out of that from the American side?  Do you see more shrugging in turning back to China?  Where do you see this going looking at a new U.S. administration and possibly, in the future, as Indian elections come in, a new Indian government?  And feel free to pick who wants that?  And feel free to speak as to the American misperceptions.

Stephen P. Cohen:  I will just a say a word or two.  I spent five months in Southeast Asia.  They want India there.  They probably also exaggerate Indian capabilities because they see India not as the same as China but, at least, part of the puzzle which would help balance a maligned China.  And many Indians see the U.S. relationship in these terms also.  If China were to turn hostile, who would become the China that grew horns and started gobbling up its neighbors; then, the countries on its borders would either accommodate China and quickly rush to it, or else try and back away and balance it.

And I do not think India has made that kind of decision yet nor had most of the other countries but the Southeast Asian countries because they have large Chinese minorities are very wary about a huge, dominant China.  They would like to see India there.  But they understand - although the Indians do not always seem to understand it themselves - that India cannot quite balance China but it could be part of a larger arrangement where, if necessary, essentially a containment strategy will develop.  This would include Japan, might include Vietnam; certainly, it might be the U.S. as an off-shore balancer plus willing and cooperative Southeast Asian countries but some of them will actually rush towards China. 

That will be my comment.

C. Uday Bhaskar:  I think, Chris, you raised a very important issue - this whole question of China and how both Delhi and D.C. are looking at it.  I will give you my personal sort of view on this which is, as I said, not the GOI view.  There are many views in India as far as China is concerned.

But what I would submit is that there is one thing India does not want to become or pursue and that is the word that Chris used when he talked about - will India “balance” China as far as the United States and its overall grand strategies are concerned.

I think there it is reasonably definitive.  Yes, India has complex problems with China.  Every so often you will see the Indian media getting into a complete sort of tizzy about Arunachal Pradesh and the incursions and this remains unresolved.  We have a number of issues that we have not been able to, as I said, satisfactorily negotiate with the Chinese.  It has been going on since 1962.

But specific to India-U.S., I think there is reasonable clarity that we are not seeking to “balance.”  But what India, I think, is able to bring to the table is what I am characterizing as the existential dimension of India’s credibility.  Whether it is political, military, economic, it is existential.  It is by its very, shall we say, nature of the beast.  That is what I think would lead to the strategic equipoise, the ecosystem of Asia, whatever kind of description you want to give to it.  And I believe there are views in Washington also which would like to see the emergence of something like this saying that the current century should not replicate the Cold War.

We are not talking about this, you know, balancing and the military alliances which, I think, is actually contradictory.  If you look at the nature of the strategic environment or the systemic U.S. jargon, I think the suggestion that you can have, you know, balancing is really not a valid proposition because the real challenge in the 21st century is going to be the management of both convergences and contradictions simultaneously.

I’m writing a paper which is likely complex because it borrows from mathematics and physics, but the equivalent of quantum computing - those of you who are familiar with it, all those of you who are into mathematics about nonlinear - the Lorentzian equation, that is the challenge of the 21st century for both the private sector and for governments.  The management of contradictions and convergences simultaneously is a temporal element.

And it is in that sense, I would say, that India is not going to be a balancer because in India the debate is very complex.  I mean we have the left in India which is quite clear; we do not want a closer relationship with the United States, as far as they are concerned.  But yes, they would like India to have a much closer relationship with China and there is talk about India-China-Russia, you know, I’m sure you heard all this.

So there are many views in India on China.  The other is, of course, on extreme anti-China kind of position which is also exerted by some constituencies and every time you see the Indian debate, you will see the Indian political spectrum sort of going back to 1962.  So I think at this point, I know what is not going to be.  It will not be balancing in the traditional Cold War kind of context and I think this is where again, India and the United States need to talk about.  But if I can take a minute, I just want to add one point about India.  When we talk about writing of India or saying India is very, shall we say, capable of doing A, B and C, there is a very strange pattern about how India responds.

I mean the two historical points in recent years that I would like to flag - and I often talk to my own students about this in the military - is after 1962, was clearly a low point in India’s own self-esteem.  As most of you know Pandit Nehru, the first prime minister died soon after that.  In those years from October 1962 to Pandit’s death in May 1964, no one would ever imagine that India could have got its act together for 1971.  It was barely seven years down the road.

So this is what I mean by the nonlinear and Indian’s ability to really come up with innovative responses that was the great military defeat.  Similarly, when Mr. Narasimha Rao became prime minister and we had the BOP crisis - the so-called balance of payment - India was at its more vulnerable in economic and fiscal terms.  We actually lifted gold and brought it to U.K.  In 1991, no one could learn - and I think he knows all about it, he was in the government at that time - that in less than a decade, India would be notching up growth rates that would come up in Davos for discussion by the time you come to the late ‘90s.  So what I’m saying is that the linear, shall we say, extrapolation sometimes may not be the most valid filter to arrive at any certitude about India.  I mean that is my brief point.  I do not know the answers but I thought I should bring this in.

M.R. Sivaraman:  Just to say a few words on this.  Both of them talked about India-China balance in a strategic sense.  Being a part of a few companies in India, I’m looking at it from economic sense, both the countries are racing ahead to reach the stage of developed economies and in that sense, India is competing with China.

And there is a will, there is a determination, and a great desire to exceed Chinese rates of growth.  We do not know about the Chinese rates of growth though I read a lot of articles written by experts in the International Monetary Fund, whether they are really growing a 12 percent or a 9 percent or 10 percent - we do not want to go into that issue.  China is definitely growing faster than India at the present moment.

And the desire is to equate China in all respects as far as the economy is concerned.  And today, taking into account the amount of unreported income which we call the black economy or black money in India, we are not very far away from China’s GNP.  If we assume 40 percent of our GNP is still unreported for which I have reasons also why it is 40 percent, maybe even more; then, we are not very far away.  We are probably about Japan as far as GDP is concerned.  We may be in purchasing power parity terms; we may be over $3.5 trillion.  And you know, in PPP terms, we may be close to $4 trillion which means that India may not be in the long term future but maybe within 2025 or so, may be very close to China as far as economic prosperity is concerned.

And are we looking at India and China in a military sense?  Or are we looking at India and China in economic sense?  Is India going to be a big economic power?  India has a lot of resources, still unexploited resources.  So India with its youth - the youth is flowering.  Why is India growing faster?  It is not because of government bureaucrats like us or because of government policy.  Yes, government policy is a chain but because the youth wants to move fast and the youth is flowering today.

So it is very likely, not in the distant future, India is going to catch up with China.  Once it catches up with China, the balance is maintained as far as economies are concerned.  And thereafter, it is only a question of how India and China are going to view each other as far as the influence is concerned in that particular region whether they want to look at each of them in a military sense of the term or work together to achieve economic prosperity.

I do not think we should make too much about India or China striking a balance as far as military strategies or strategy positions are concerned.  We should look at who is going to win the race or whether India is going to catch up with China in the near future as far as economic growth is concerned. 

Thank you.

Christopher Griffin:  Any questions -- actually Monahar.

Monahar Thyagaraj:  First of all, I would like to thank Chris and AEI for hosting this event.  We are proud to be able to support it. 

I’m going to segue from the last few comments.  And especially Mr. Sivaraman, since you are in the education sector now, the word “demographic dividend” has been used on this panel and in other panels I have been in to describe one of India’s core strengths going forward - demographic dividend.

However, all of us, many of us that follow policy developments have heard frequent laments from people in India also, that the education sector is underperforming and is not able to adequately serve India’s demographic dividend going forward.  Many bodies have called for regulatory changes in education to enable streamlining of the education sector.

So I would like some commentary on the ability of the education sector today and envision, going forward, to serve the demographic dividend in order to contribute to India’s economic growth that has just been described.

M.R. Sivaraman:  As far as the education sector is concerned, you are absolutely right that we have a long way to go.  But resources, they are not acting as a constraint as far as the requirements of education are concerned.  Government has been augmenting resources to the education sector, and the private sector has also been liberally allowed to open up educational institutions.  Yes, we have run into a problem in regard to the reservations issue, but even that is getting solved because that is not going to be a major constraint as far as the higher education institutions are concerned. 

Now, coming to the question of the literacy levels, that is where we have run into problem because literacy levels are not moving at that speed as anyone would like to have it.  Although we have a constitutional amendment in place which says that every child has got a right to elementary education.  They have not yet enforced this in the form of a law because there are certain problems with the state governments.  But nevertheless, huge amounts are being diverted for purposes of widening the infrastructure available to the educational sector.  So it is going to take some time and a start has been made, not only to improve elementary education, but also to the retention of children up to class 10 and beyond even.  So I see that the future is quite bright as far as the education sector is concerned.

C. Uday Bhaskar:  I would like to just sort of add a few words.  I really wish I could share his optimism that the future of Indian education is bright because I have a completely different take on this.  I think and I would like to say this, perhaps as briefly as I can, that one of the great shames of India - and I think the Indian state - has been the fact that we have allowed education to reach the kind of very, very deplorable state that it now presents.

And in a strategic sense - I’m a security analyst, I would like to look at things in sort of related strategic perspective - I think this has been one of the inadequacies in the nature of the evolution of Indian politics.  If you look at Indian education, those of you who are familiar with the 1950s and the 1960s, we had faculty in Indian universities who had - most of them had come from Britain but they were reasonably well regarded at the, shall we say, international peer review level.  Please correct me if I’m wrong, Steve.  If you look at the last 20 or 30 years, there has been a steady decline of the entire -- sort of from the primary school to the university, particularly the higher education.

And this is my personal view, that it has been largely driven by what I would call as very, very sectarian and self-serving interests which have been, as I said, I do not want to pin the blame on any one constituency but it has been part of the Indian make.  So I want to agree with what you said that India has a certain demographic advantage.  But I’m afraid we have not realized it the way we could have and what we are getting is a very low return which is why it is often said, the Amartya Sens have to leave Delhi University or even Dr. Manmohan Singh, to be able to really realize their own academic potential.

And I blame the Indian state in no small measure saying that they have, in a way, thwarted or prevented the kind of entrepreneurship that we have seen in other areas where it is flowering.  When he says that we have a number of private universities, I’m sorry to say that most of them are linked to the regional political “power brokers” or the equivalent of warlords and it is a very messy system.  I’m sorry I’m saying this so candidly but I think we need to address that if we want to arrive at the levels of credibility.

The state does spend money, there is no doubt; he is right there.  But it does not get spent the right way.  There is huge seepage and I think we need to address that.

Stephen P. Cohen:  Yeah, I agree with both comments.  I think that the demographic dividend could be a demographic disaster because as the schools turn half educated or badly educated young men and women especially in parts of India - eastern India - they cannot get jobs and the people that recruit them are the Naxalites and the revolutionaries and the terrorists.  They are not Islamists but that is a similar phenomenon with what is going on in some Muslim countries.

So the demographic dividend may turn out to be a nightmare.  Uday, I think also the Indian left has a lot of responsibility for this.  They set the model for, in a sense, the destruction of Indian universities.  You are absolutely right.  When I first went to India - 1963 - there were a number of Indian faculty who have been trained, some in India, mostly abroad, who were marvelous, they were world class people.  Now the world class people you find in Oxford, Illinois, Cambridge, here.  They leave India except for a very few.

One other point I would like to make, which we have not touched upon but it is kind of interesting; that is, India and China are rising.  They are going to face each other strategically.  There are a number of issues about which they could, in a sense, have a conflict.  It will be a major test to see whether nuclear weapons change the behavior of major, rising states.

Between India and Pakistan, they went through three or four crises, most of which were nuclear related but in each crisis, two of them at least, they looked ahead and they saw a nuclear mushroom cloud and they said, “No, we are not going to go down that road.”  So the crises all ended short of a major war.

I think India and China are likely to go through the same experience.  There are enough grounds for conflict between them - irritation, ambition, ethnic minorities, Tibetans - you name it, that I think you probably see a series of India and China crises, then the question we will then find out whether nuclear weapons do have this dampening effect on international relations as Ken Waltz has argued; Waltz has been in favor of some of kind of proliferation.  He says if countries get nuclear weapons they are less likely to go to war.  I think we may see an empirical test of this in the next 10 years or so between India and China.

Christopher Griffin:  And Mr. Preeg --

Ernest Preeg:  Ernie Preeg, Manufacturers’ Alliance. I should say, for publicity, I did just complete a book entitled India and China: An Advanced Technology Race and How United States Should Respond. 

I wanted a follow up question, perhaps to Commodore Bhaskar, about the Indian response to the rapid military modernization in China and as a former naval person myself, particularly, in the naval area because I think that is moving fastest.  And we are moving toward three blue water fleets in the Pacific: U.S., China and India. 

In fact just the last couple of weeks, there was this new revelation about a large deep water secret naval base in China, and I read quite a statement by a recently retired Indian admiral, a great concern about this which you are probably aware of that.  And China is having its long-range destroyers, submarines and missile capability likely to get into the aircraft carrier some time next year.  But it is longer term through the Straits of Malacca, Bay of Bengal, Indian Ocean and there are the port facilities and as you know, Myanmar and Pakistan, maybe even Bangladesh. 

So my question really is -- this is rather immediate change, what is the Indian naval strategy in response to the Chinese blue water fleet going through the Straits of Malacca and the Bay of Bengal and to what extent will this lead to greater interaction, cooperation, if you will, with the U.S. Navy.  There were some, as you know, joint exercises last couple of years between our two navies which China was very unhappy about.  So where is the Indian navy strategy going particularly vis-à-vis China?

C. Uday Bhaskar:  Thank you, sir.  Always happy to meet a former sailor so I’m glad you asked this question. 

But, you know, I was trying to actually allude to the saying that this is going to be an area where in India and the United States really need to engage - about how do we actually engage with China.  I do not want to suggest to use the word “deal” with China as if China is some kind of a delinquent, you know, that the international system has to “deal.”

I think the nature of the challenge, how do we engage with China, and this is what I meant when I spoke about the simultaneity of contradictions and convergences or areas where we cooperate.  And my own personal assessment of this is that first of all, the story about the Chinese submarines and the so called underwater caves -- it is rather dramatic the way the media had reported it: it was not a secret, you know, this has been around for a fair amount of time, perhaps the way in which the pictures have now been released in the public domain - that is dramatic.

But otherwise, for the professionals and those who have been looking at this for some time, I think, it was not such a big revelation.  But what is of interest is that if you look at the current maritime development at a strategic, global level and you talk about global maritime pattern for the last 500 odd years, traditionally, any big power has tried in great earnest to ensure that it was able to straddle two oceans.

And more often than not, you know, this was the Indian Ocean, colonial Atlantic-Pacific in the last 100 years.  And I think China has now become very aware that the global maritime focus from the Cold War to now has shifted from Atlantic-Pacific to Pacific-Indian, now it is Indian-Indian in the sense that because of energy, because of all the other issues that we associate that China needs to have its presence in the Indian Ocean.  That is going to be the big maritime shift; it will be almost tectonic.

I’m only talking with a maritime perspective; I’m not talking about the big issues.  But for a maritime person or for the sailors of the world, it could be tectonic when China is able to establish credible presence in the Indian Ocean.  Everyone will have to come to some consensus: How do you engage with this China?  I mean you look at Gwadar and China will give you very compelling logic about energy, their insecurity, the sea lines, et cetera.

So for us in India at the moment, when we say, what is the Indian navy doing about it?  I would say that the Indian navy is monitoring it reasonably, shall we say, carefully to the extent that we can but the analogy I have in mind is, if you recall China was trying to wreck the international nuclear system particularly after the NPT was brought in.  You know, famous Chinese phrases about imperial powers and what they would do to the NPT; it is not worth the paper it has signed on, et cetera, et cetera.

Gradually, in about 20 odd years, whatever China did, I do not want to make this into a nuclear discussion but the international system tried to bring China in.  It took Dessert Storm, rather Dessert Shield and then Dessert Storm to bring the Chinese and the French on board to sign the NPT.  So like that, I think to the extent that the nuclear weapon and missile are representative of a certain kind of transborder military capability, now China’s investment not just maritime, even space, is all linked.

And I think we would have to really engage whether it is Japan, India, China, the so-called four countries that engaged in this quadrilateral exercise and get the Chinese on board to conform to certain broadly agreed so that we do not convert this into a competitive mode.  That would be my most desirable way of dealing with it. 

I do not know if that is an adequate answer but the United States and India, I know, are engaged in this because my Newport conference was about this very subject.

Stephen P. Cohen:  I will just say thatould be selling India more ships.  We sold the second largest ship now in the Indian navy, the Jalashwa, the Trenton.

Ernest Preeg:  Five years ago, that would be almost unthinkable.

Stephen P. Cohen:  Yeah, and we should also invite India to come into the Persian Gulf and join the Gulf Protection Force.  Now the Pakistanis are there but that will be a good test to whether India and Pakistan are willing to work in an area where they have a shared interest. 

The third point is what is critical for the Indian navy is that it does not know exactly what it wants to be when it grows up.  Does it want to have SSBN which is going to cost billions of dollars, soak up the whole navy budget plus missiles, plus nuclear -- does it want to sail nuclear submarines in the sea of China?  I came across an Indian Corvette crew in Ha Long Bay near Hai Phong.  They had gone up there to work I guess with the Vietnamese navy.  Impressive group of people.  Does the Indian navy want to spend all of its money on one or two SSBNs, or does it want to spend money on some carriers, or what does it want to do?  It has to make those choices itself.  We could help them with the carriers, maybe, but the Kitty Hawk is apparently not going to go.

And the Indian navy has to figure out whether it wants to lose its carrier operation capability because it will lose it if it does not replace the present carrier with another carrier.  That is a very difficult skill to acquire.  They have got it now.  Is it in our interest; is it in the Indian interest to actually continue that?  The Russians, well, Uday, would know more about that.

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