By: Swaraj Parameswaran

Introduction

With India geographically being the seventh-largest nation on earth and reportedly the most populous country, there is great need for it to develop a coherent, successful grand strategy if it wishes to economically and militarily grow in these times of geopolitical uncertainty. This article examines and analyses the various elements of the Indian Grand Strategy before concluding that, while India has a good grand strategy, the success of this strategy depends on it avoiding a few pitfalls.

Grand Strategy and Middle Power Nations

According to Paul Van Hooft, Grand Strategy is ‘the highest level of national statecraft that establishes how states, or other political units, prioritize and mobilize which military, diplomatic, political, economic, and other sources of power to ensure what they perceive as their interests.’        

While it’s widely agreed that superpowers can’t survive without a grand strategy, there’s been debate about its relevance to middle-powers. But a grand strategy, as shall be explained, can be very effective for a middle-power like India to carry out its foreign policy. More than anything, and to summarize its relevance, a grand strategy helps middle-power nations maximize influence with limited resources, helps navigate power dynamics, ensures stability, helps form coalitions, and strengthens their soft power.

Earlier, Indian grand strategy was associated with the principles of ‘Nehruvianism’, which focused on alleviating poverty, taking a non-aligned stance in Cold War politics, and globally spreading morality and peaceful coexistence. While these principles still survive, India has, adapting to externalities such as the end of the Cold War, tweaked existing elements and added a few new ones in its pursuit to be a great-power and create a multipolar world.

Elements of the Indian Grand Strategy

India is an exceptionally diverse nation with a multitude of languages, religions and cultures. Pakistan, through Kashmir, and Khalistani separatists in foreign nations have frequently sought to undermine this unity by instigating grievances among the local population. Its greatest internal task is to maintain its unity in this cultural diversity.

While poverty has drastically reduced since Independence, a huge share of the population still does not have immediate access to healthcare and education. Securing latest medical technology and restricting import duties on essential grains like ricecan help achieve the required health security to serve as a foundation for long-term growth.  

China and Pakistan, collectively, pose an existential threat to India. Securing Asiabecomes crucial in this scenario. Pakistan-sponsored terrorism, and Chinese ‘String of Pearls’ and military land incursions have forced India to strengthen alliances with other nations, particularly the US. Through alliances like the Quad, it attempts to reduce the Chinese domination of Asia, and seeks to balance against it. India also aims to have good relations with South-East Asian nations and Middle-Eastern powers due to their cultural similarities and overlapping histories. This strengthening of ties with Asian nations is a broader expansion of its ‘Neighbourhood First’ policy- where India focuses on strengthening ties with its immediate neighbours like Bhutan, Nepal, Maldives, and Sri Lanka- to augment and further trade and commerce among them.

With a rich culture, history, and diaspora, and having served for centuries as a haven for myriad religious minorities, India has immense soft power. Through its exercise in forums like SAARC, BIMSTEC, and ASEAN, where cultural and diplomatic relations between nations is prioritised, India attempts to increase its likeability in the international community, grow its tourism and education industries, and further the spread of decolonial and moral values.

Multi-Alignment. This is a revamped version of its traditional Non-Alignment policy. The focus is on building relationships without getting into binding alliances, as seen in many of India’s dealings with Western European nations and the USA. This protects its agency while fostering mutually-beneficial ties to ensure its security.

Through its growing economic strength and historical yet universally applicable treasure trove of philosophical knowledge, India also seeks to play a bigger role in international organizations, influencing decisions on issues like climate change and acting as a potential intermediary in global conflicts. Through these institutions, India seeks a greater role in major decisions that have, heretofore, been dominated by superpowers; it seeks more influence on a global stage, in proportion to its share in the global population.

India, ultimately, seeks to create a peaceful, multipolar world where it can pursue its interests and receive the great-power recognition it believes it deserves.

Analysis

While still favouring the diplomatic route, in the face of security threats, India has begun attaching greater importance to hard power, coalitions and realpolitik. This, while not exactly signalling the end of its idealistic approach to world politics, marks a shift towards a more pragmatic India that’s not afraid to flex its strength as a nuclear power and growing economy.

A good grand strategy prioritizes what’s essential and identifies the nation’s core interests. It is also cohesive, dynamic, and has clear-cut interests that it prioritizes when confronted with challenges. For middle-powers like India, it is important to either bandwagon with or balance against superpowers, in light of its significantly lesser might and resources. Middle-powers need to be skilled in diplomacy if they wish to retain their agency and, simultaneously, ensure their security and pursue their individual interests. Else, as has so often happened in the past, they could easily become pawns entangled in superpower politics, risking exploitation of their resources.

India’s grand strategy has got a lot of things right. Its priorities- national unity, security, growth, and global involvement- are clear-cut. It refuses to commit itself into a binding alliance, while still balancing China with the help of the US, and, incredulously, forces the US to get on board with its policies. It has also expanded its multi-aligned stance by relying on forums like the Quad, ensuring it’s not dependent on any single power. In the midst of great-power politics, refusing to explicitly pick sides, it exploits opportunities available to it, such as the import of Russian oil after the breakout out of the Ukraine War. This refusal to commit, while occasionally drawing criticism from some nations, gives India the wiggle room to strategically analyse world politics without being rushed into making harmful choices.

To ensure the success of this strategy in the long-run, India should decrease but not rid itself of its scepticism of the West, for India will have to increasingly depend on the West due to China’s land border and Indian Ocean aggressions. It must also occasionally be willing to ditch its neutrality, especially if human rights are at stake and its own national interests are not threatened. This will build credibility in the international community, and show that India, rather than being governed by self-interest, stands for humanitarian causes that align with the philosophical wisdom it aims to spread. And, to reduce costs and reliance on foreign defence deals, India must develop its science and defence industries, must strive to be one of the nations at the forefront of space exploration, AI evolution, and microchip development.

Conclusion

India’s grand strategy focuses on national unity, soft power, and the alleviation of poverty, while taking a multi-aligned stance in global politics. By relying on the West, but refusing to commit to a Western alliance, it refuses to lose its agency and be threatened by superpower imperialism. India’s grand strategy not only maintains its ‘middle power’ status, but also provides it with a strong foundation to achieve its ambition of becoming a great-power. This strategy is coherent, self-motivated, and dynamic- more or less suitably crafted for the world we live in.

By: Aishwarya Dutta

The Indo-Pacific region with its ever-expansive dynamism spans 36 countries spread across major continents, 16 time zones, more than half of the world’s biggest and most popular cities, 7 fastest-growing markets, 7 of the 10 largest armies of the world, more than 20,000 islands, and approximately 60 percent of the total world population and is still growing. The region has gained extreme importance in recent times because the trajectory of maritime geopolitics will herald the global politics of the 21st Century. According to a study conducted by experts, it has been predicted that by 2030, the Indo-Pacific will be home to the five largest national economies: the United States, China, India, Indonesia, and Japan. The region has emerged as a highway for important energy transfers to the ‘energy hungry’ nations of the world. However, with a rising trajectory of sea-borne trade, there seems to be an increase in asymmetric threats. In this article I would focus on the three C’s: the China threat, other major challenges in the region including the South China Sea dispute and cooperation in the region which together will give us a lucid and wholesome understanding of the region.

China

The contest for the Indo-Pacific traces deep geopolitical currents while witnessing emerging threats from various quarters especially from China. China’s expansionist policy is at the expense of weakening the neighboring states. China’s “nine-dash line” policy encroaches the sovereignty of other states because China seems to claim its ownership over other countries’ Exclusive Economic Zones (EEZs), a move which has been declared invalid by the Permanent Court of Arbitration (PCA), in the Hague in 2016. Beijing is seeking to convert international waterways and other countries’ EEZs into its own territorial waters. Moreover if China somehow unilaterally captures the South China Sea it would close major parts of the sea to foreign fishing and forbid foreign governments from any kind of resource extraction in the region. Managing strategic competition with China has been a major challenge, most prominently in recent times.

But China’s rise is not without any resistance in the region. Indonesia and Malaysia portray a stronger defense of their maritime interests against China. American and Japanese warships unequivocally sail the South China Sea. China asserts its presence in the Indian Ocean along with Russia, Iran and South Africa for naval exercises. In Australia, the China debate has been sharpened. The scenario in Sri Lanka is very contradictory where China is asked, on the one hand, to hand back the Hambantota port and urges other nations to dilute China’s influence, and on the other hand they are celebrating a Chinese built artificial island off Colombo. Taiwanese Democracy is seeking non-interference from the Chinese Communist Party in its internal matters.

The trouble is that China feels risk and discomfort in the term ‘Indo-Pacific’. It feels it is a strategy of the Quad members (the United States, Japan, India and Australia) to contain its power and exclude as well as sideline it from the major events taking place in the region. In this context, Chinese foreign minister Wang Yi publicly rejected the Indo-Pacific as an ‘attention-grabbing idea’ that ‘will dissipate like ocean foam’. China describes much of the world as simply ‘the Belt and Road’ (China’s own project of connecting the major continents of the world including Asia, Africa and Europe through land and maritime networks) which is very much an opaque term entwined with an inward-looking purpose. The ‘Road is the Indo-Pacific with Chinese characteristics’, a strategy to extend Chinese influence into the Indian Ocean and the South Pacific. Today Asia is divided into two big contests of ideas: China’s Belt and Road versus the Indo-Pacific championed by Japan, India, Australia, Indonesia, France and the United States. The term Indo-Pacific is a message to an ascending China that it cannot expect others to accept its self-image as the center of the region and the world.

Despite the setbacks, China keeps on expanding its economic, military and diplomatic activities in the Indian Ocean where it is trying to establish an Indo-Pacific strategic system, where the actions and interests of China as the most powerful state of the region affect the interests and actions of others. The region’s foremost strategic challenges are thus China-centric. The Chinese navy is expanding rapidly in the sea space and they have two major reasons for deploying force in distant waters: ‘offshore waters defense’ and ‘open-seas protection’. China is combining the ‘soft power’ (persuasion and attraction) with ‘sharp power’ (internal political interference), to neutralize opposition and reconfigure the Indo-Pacific game board, from Australia to Sri Lanka, Pakistan to the Pacific Island states. China has growing interests at stake in the Indian Ocean, some of which are legitimate, some questionable, and it has no intention of recognising this zone as India’s backyard or sphere of influence. The China factor also worsens the India-Pakistan hostility.

Many observers assume that China’s rise will continue, largely unabated, into the future: “Through the Belt and Road and its growing military footprint, China’s problems are becoming the world’s problems, and the world’s problems are becoming China’s. China relies on coercion, whether in the form of armed force, geoeconomics or political interference. The vital question for others, then becomes how to manage such coercion without it ending in conflict or capitulation.”

Challenges

There has been an abrupt rise of tensions between China and its neighbors over sovereignty, resources and security. In this context, the South China Sea is of immense importance as it is a zone which is rich in hydrocarbon and protein resources. Chinese strategists believe that the South China Sea, East China Sea, and Yellow Sea collectively represent an area in which they need to develop military control in order to counter external threats and to increase the level of security of China’s coastal region. In order to counter China’s dominant attitude, the Association of Southeast Asian Nations (ASEAN) was formed in 1967 by the Southeast Asian nations. Countries like Vietnam, Malaysia, the Philippines, Brunei, China and Taiwan, all claim their sovereignty in the South China Sea. But China claims sovereignty over the features of all of the island groups that fall within the nine dash-line in the South China Sea. The Chinese government maintains a suspicious ambiguity about the line’s meaning.

Friction is also caused with the United States which relies on freedom of navigation in maritime East Asia. The US tries to ensure its position in East Asia and that is why it tries to maintain the region as an open, maritime system. States like Japan, the Philippines, Malaysia, Brunei, Indonesia, and Singapore all maintain friendly relations and cooperate with the US because they benefit politically and economically from remaining outside China’s control.

Apart from the tensions in the South China Sea, there are several other threats in the region which need to be addressed immediately. The foremost among the rising maritime threats affecting the security and free flow of trade in the region is Piracy. ‘Piracy is the bane of modern seafarers. It is a transnational crime which has made a considerable impact on commercial shipping. There are some major piracy hotspots like the Horn of Africa, the Malacca Straits, the Indonesian waters, and the South China Sea. Modern piracy has emerged in Somalia which has resulted in a complex problem. It has emerged as a lucrative criminal industry with transnational characteristics.

Apart from the threat of piracy, there is a major threat of maritime terrorism. Oceans are being misused as a part of the supply chain dynamics for incidents ashore. There is also a rise in Narco-terrorism. Drug trafficking shares a close linkage to maritime terrorism since it is often used to finance terrorism, insurgencies, and piracy activities directly or indirectly. India lies in the pivot of the Golden triangle and the Golden crescent – the two infamous drug producing areas – and is used as a transit point seaward for both.

Pollution and oil-related environmental disasters at sea are a serious concern for environmentalists. Alongside several cons, they affect the free flow of trade and shipping. Most littoral governments are also concerned about major oil spills or wrecks of oil tankers at narrow approaches to harbors, and choke points affecting the flow of shipping traffic.

The South China Sea (SCS) region has emerged as a global flashpoint and as a major maritime challenge for all the users and stakeholders. The SCS has a geostrategic significance because it functions as the throat of the Western Pacific and Indian Ocean enabling rapid shipment of goods and deployments of armed forces.

Cooperation

Cooperation and collaboration against maritime threats and challenges affecting the region is a common affair. However, this requires sensitivity and a wholesome understanding of the security concerns of other countries – an aspect which becomes difficult to achieve given the vastness of the region. India and the US are considered to be the fundamental maritime states that have a responsibility to help all the other littoral states towards capacity building and the maintenance of “maritime order” in the region. An evolving matrix of cooperation would enhance “maritime bonding” at various levels between the maritime agencies and the navies. A continued cultivation of allies and partners by bigger players such as the United States and sustained investment in international engagement is essential. Countries like India, Australia, Japan and some ASEAN countries are expanding security cooperation with each other in the face of rising assertiveness of China. There is also a prominence of middle power coalitions these days which include cooperation in various fields like security dialogues, intelligence sharing, military capacity building, technology sharing, agenda setting for regional forums and coordinated diplomatic initiatives to influence both US and Chinese strategic calculations or form ‘minilateral’ arrangements that do not include China or the US. All these would reinforce the multipolar quality of the Indo-Pacific order.

Along with strengthening defense ties, the United States is also trying to integrate economically with the Asian economies. It has been launching multinational partnerships with South East Asian and South Asian states in areas of agriculture, food security, connectivity, education, energy security, environment etc. In this respect there are initiatives like the Indo-Pacific Economic Corridor and Lower Mekong Initiative. It is also working on the Trans-Pacific Partnership (TPP) that seeks to bring together economies from across the Pacific into a single trading community. The US has also reached out to the Association of Southeast Asian Nations (ASEAN) to build an Indo-Pacific region.

India, on the other hand, preserves strategic autonomy in the region which allows it to create a web of cooperative relations with all the stakeholders based on mutual interest and benefit. India also plays a vital role in securing and safeguarding the trade routes crossing the Indian Ocean and Western Pacific. Regional initiatives like the Regional Cooperation Agreement on Combating Piracy and Armed Robbery against Ships in Asia (ReCAAP) intends to secure sea lanes and maritime governance.

The Indian Navy is cooperating with navies of the region to tackle disasters, narcotic smuggling, gun running, etc. The Indian Ocean Naval Symposium (IONS) is an initiative in this direction. India also contributes to the African Union Mission in Somalia and has begun bilateral and trilateral naval coordination and patrolling with China, Japan, Kenya, Madagascar and the Seychelles in Africa. Efforts have also been made for strengthening organizations like Indian Ocean Rim-Association for Regional Cooperation (IOR-ARC). India is also working with Bangladesh, Myanmar, Sri Lanka, Thailand and Nepal for closer trade through the Bay of Bengal Initiative for Multi Sectoral Technical and Economic Cooperation (BIMSTEC). The Mekong-Ganga initiative, launched in 2000 involving India, Thailand, Myanmar, Cambodia, Laos and Vietnam has recently expanded its ambit to include trade, investment, energy, food, health and highway connectivity. India has also associated itself with triangular strategic partnership between India-Russia-China and in the areas of trade, technology transfer and resource sharing. In the Pacific, New Delhi is conducting naval partnership with Hanoi and pursuing oil exploration with Vietnam. Even India and China participate in multilateral cooperation processes such as the free trade schemes in South-east Asia.

Conclusion

The strategic importance of the Indo-Pacific is testimony to the fact that it will remain a disputed zone even in the future. China as the major power of the region keeps it embroiled in conflicts even though it promised to make its rise ‘peaceful’. Other players try to maintain the region as a zone of cooperation and mutual benefit for trade and various other purposes while also trying to resist Chinese dominance.

By: Anjali Mahto, Research Analyst, GSDN

China’s economic achievements over the past thirty years have been spectacular. In 2022, its Gross Domestic Product (GDP) reached US$ 18.3 tn, which is 73% of the United States’ GDP, and its per capita income was about US$ 13,000. With 35% of the rise in global nominal GDP, China has been the main driver of global economic expansion. China’s enormous government spending during the 2008–2009 recession contributed to the global economy’s survival and rebound. However, as the world is on the edge of a global recession, a repeat of China’s 2008–2009 economic rebound is less likely due to Russia’s war in Ukraine and the COVID-19 pandemic lockdown. Moreover, others contend that domestic vulnerabilities including a weak institutional framework and an ineffective banking system made China’s economic collapse inevitable.

According to the National Bureau of Statistics, China’s economy grew by only 3% in 2022 and 5.2% in 2023, recovering from three years of severe “zero Covid” control measures. However, the optimistic recovery scenario does not project a return to the country’s high growth rates since 1978, when annual GDP growth averaged about 10%. China’s private-sector restrictions and stringent lockdowns have disrupted supply chains and harmed investor confidence since the outbreak began. Furthermore, the population reduction in January 2022 raises concerns about the future workforce.

Despite surpassing the government’s 5% growth target last year, the Chinese economy faces obstacles such as low private investment, poor consumer confidence, and high youth unemployment, all of which point to potential future issues.

Why the economic decline?

Economists and analysts believe that China’s era of double-digit growth is probably ended because the country’s previous economic model has reached its end and the future is unpredictable. Due to high inflation and an extended period of deflation, China faced difficult economic conditions outside when it reopened in January 2023 following the relaxation of severe “zero-COVID” regulations. Rising inflation discouraged people from purchasing Chinese goods, and discouraged domestic buyers from resuming their purchases. The real estate crisis persisted in November 2023, with prices falling by 0.5% annually—the biggest decline in three years—and home sales falling to half their December 2020 levels. Developers were in danger of defaulting.

China’s massive labour pools, which have fueled its low-cost industrial foundation, are diminishing due to an aging population, slowing birth rates, and debt-laden real estate and infrastructure projects. Since 2008, total factor productivity has fallen from 2.8% to 0.7% per year, demonstrating that real estate and infrastructure expenditures are yielding lower returns.

China’s economy has been largely dependent on the expansion of its investments, which have been supported by an ineffective banking system. This dependence grew following the global financial crisis of 2008. By lowering growth that is heavily reliant on investments and emphasizing household spending as the primary driver of GDP growth, the government hopes to rebalance the economy. To enhance employment growth, this involves shifting away from physical capital-intensive growth and producing more growth from the services sector than from low-skill, low-wage manufacturing.

China’s heavily reliant real estate sector, which accounts for 30% of GDP and 70% of household wealth, poses significant economic challenges with 60-80 million empty apartments and 20 million unfinished ones. If the sector declines by one-third, 10% of production would need to be replaced. Despite Beijing’s avoidance of a major Western-style bailout, 50 developers have been placed on a list for government support. Efforts to reduce property reliance have had mixed results, with electric vehicle and green energy industries making strides and semiconductors struggling. In 2019, Beijing poured US$ 29 bn into its semiconductor industry, but corruption and inefficiency were reported. The country faces significant local government debt amounting to US$ 12.6 tn or 76% of economic output in 2022 according to the International Monetary Fund (IMF) and a downgraded credit rating from stable to negative by Moody’s citing the real estate crisis and shrinking population.

China’s President Xi Jinping has prioritized political control over the economy, blurring the lines between the state and the ruling Communist Party. This has led to a regulatory crackdown on tech, financial services, and private education industries. In 2023, the National Financial Regulatory Administration was established to regulate the financial industry. However, other changes including anti-espionage law have raised concerns about the legality of foreign consulting and business intelligence work as China has investigated consulting firms Bain & Company and the Mintz Group, fining the latter US$ 1.5 mn in August 2023. This has resulted in a stronger state-led approach in deciding China’s industries. Moreover, US sanctions on Russia due to its invasion of Ukraine have increased the cautiousness of geopolitical risks among Western investors as sanctions mean that you need to pull up quickly as there would be a lot of money.

China requires fundamental reforms, and economic challenges have highlighted President Xi Jinping’s leadership. He has shifted from a “growth at all costs” to a “high-quality growth” strategy, emphasizing resilience to external pressure, equal wealth distribution, and less reliance on export-driven growth to build an economy fueled by domestic consumption and pursue cutting-edge technologies such as advanced semiconductors and quantum computing. This move recognizes China’s new reality and the necessity for new narratives to retain the legitimacy of the ruling Chinese Communist Party (CCP). After all, the communist government is not raising corporate tax rates.

Major challenges for 2024

The IMF anticipates 5.4% growth in China’s GDP, but economists expect a decline in 2024 due to structural challenges such as high debt and low birth rates. According to Goldman Sachs, China’s foreign investment deficit reached US$ 11.8 bn in September 2023, while capital outflows hit US$ 75 bn, the largest level in seven years.

The consumer price index dropped in November 2023 by the most in three years, indicating that China’s deflationary forces have gotten harsher. Due to low domestic demand, producer price inflation has been negative for more than a year. This has resulted in a decline in production, a rise in unemployment, a decline in wages, and an increase in real borrowing costs since 2016.

China’s government implemented stimulus measures in 2023 in response to weak aggregate demand and decreasing prices. The People’s Bank of China reduced policy interest rates, probably due to poor loan demand and a weaker currency and the Central Economic Work Conference proposed relaxing monetary policy but no large-scale stimulus.

Chinese consumer confidence is at a historic low, with households storing savings in liquid assets like bank deposits which earlier they would have spent on real estate, reaching a record level of Renminbi (RMB) 135 tn. The long COVID pandemic has been a major cause, and support measures in the housing sector by the government have not restored confidence or increased sales. The state-owned banks are being asked to provide more loans to property developers to support developer financing.

China’s economy is facing low investor confidence due to rapid Foreign Direct Investment (FDI) exit, with foreign firms not only reluctant to make new investments but also selling assets and remitting earnings. Geopolitics and other factors contribute to the collapse, making it uncertain if foreign investors will return in 2024.

The World Bank has reduced its forecast for Chinese GDP growth for 2024 from 4.8% to 4.4% due to the country’s property sector weakness and potential overdraft on future growth. The University of Wisconsin-Madison’s Yi Fuxian argues that China’s economic growth over the past decade has been an overdraft on future growth that may never materialize. However, Northwestern University’s Nancy Qian Nancy Qian argues that China’s economic performance is less concerning than Organisation for Economic Co-operation and Development (OECD) countries like Spain, Italy, and Sweden, and Yu Yongding, a former member of the People’s Bank of China argues that China can achieve higher growth rates than most developed economies in the future.

Is there really an economic downturn in China?

The State Administration of Foreign Exchange revealed data in 2022 that showed that half of China’s US$ 6 tn in foreign exchange reserves are “hidden.” China’s export surplus has likely increased, and a large amount of China’s foreign exchange reserves are not included in the People’s Bank of China’s official records. Rather, these reserves also referred to as “shadow reserves,” are kept by organizations like policy banks and state commercial lenders. According to Brad Setser, a former US Treasury and trade official, this poses a new risk to the global economy given China’s size and centrality in it.  Setser emphasized the lack of transparency regarding China’s reserves as a concern, as any actions taken by China will have an enormous impact on the rest of the world. China’s reserves have been instrumental in funding the Belt and Road Initiative, aiming to develop global infrastructure, was originated from China’s efforts to diversify its foreign exchange holdings after the 2008-09 financial crisis. Despite domestic debt issues, China remains a massive global creditor, and the weight of its foreign exchange accumulation continues to be felt worldwide.

Conclusion

In conclusion, China’s economy has performed remarkably well over the last thirty years, but there are still a lot of challenges and uncertainties ahead. With structural problems like high debt, low birth rates, and a reliance on investment growth posing significant challenges, the era of double-digit growth appears to have ended. The problem is made worse by the collapse in the real estate market, low investor confidence, and geopolitical tensions.  Despite a slowdown in growth, China remains a global economic powerhouse with significant foreign exchange reserves, yet the lack of transparency about these reserves creates new risks to the global economy. China’s US$ 3.1 tn shadow reserve raises questions if it is purposefully keeping it secret, and whether it intends to have a substantial negative influence on the world economy. China has suffered significant economic losses, but with such a large reserve, it may resume its role as a major driver in global economic growth, opposite to what economists predict. China’s transition towards a “high-quality growth” strategy under President Xi Jinping reflects a shift in priorities towards resilience and domestic consumption. However, the extent to which China can navigate these challenges and maintain its economic trajectory remains uncertain.

By: Harshit Tokas, Research Analyst, GSDN

For the past 80 years, the United States dollar has reigned supreme as the world’s principal reserve currency. However, a consortium of developing nations, growing weary of Western hegemony in global finance, is determined to reshape the landscape of international monetary transactions. Spearheaded by the BRICS nations—Brazil, Russia, India, China, and South Africa—a movement towards de-dollarization is gaining momentum, signaling a seismic shift in the global financial order.

At the last BRICS summit held in Johannesburg in August 2023, Russian President Vladimir Putin emphasized the irreversibility and accelerating pace of de-dollarization. The BRICS leaders echoed concerns about the overwhelming dominance of the dollar, which is estimated to facilitate over 80% of international trade. Their aspirations for a more equitable global financial architecture stem from a desire to reduce dependency on Western-controlled mechanisms and mitigate the risks associated with unilateral economic sanctions, as evidenced by the sanctions imposed on Russia following its invasion of Ukraine and restrictions placed on China’s access to semiconductor technology.

Brazilian President Luiz Inacio Lula da Silva’s questioning of the necessity for all nations to conduct trade in dollars underscores the growing sentiment among emerging economies. The BRICS nations are exploring various avenues to diversify away from dollar hegemony, including the establishment of alternative currencies or payment systems. However, the path forward is riddled with complexities and challenges.

One proposed solution is the creation of a separate BRICS currency, potentially backed by a basket of currencies or even cryptocurrencies. While this idea may appear attractive on the surface, experts’ express skepticism due to the inherent difficulties in aligning the diverse economic interests and institutional frameworks of the member states. The notion of a unified BRICS currency raises questions about governance, stability, and the dominance of China within the grouping.

Professor Danny Bradlow of the University of Pretoria doubts the feasibility of reverting to the gold standard or adopting cryptocurrencies, citing their inherent risks and limitations in facilitating international trade. Furthermore, the idea of a BRICS currency is met with considerable skepticism, with analysts highlighting the disparities in economic size and power dynamics among the member states.

Despite the challenges, BRICS nations are exploring alternatives to the dollar, including the increased use of local currencies in bilateral trade agreements. Already, significant portions of trade between Russia, China, and India are settled in their respective currencies, signaling a gradual shift away from dollar reliance. However, achieving widespread convertibility and liquidity remains a formidable task, particularly in countries like India with stringent capital controls.

The quest for alternatives to the dollar reflects broader aspirations for a multipolar world order, characterized by greater diversity and inclusivity in financial transactions. South Africa’s BRICS ambassador, Anil Sooklal, emphasized the need for a multipolar financial system that offers choices beyond the traditional Western-dominated framework. Initiatives such as the Pan-African payment and settlement system exemplify regional efforts to reduce reliance on global banking networks like SWIFT and foster intra-continental trade.

Despite these efforts, analysts caution that the dollar’s dominance is likely to persist for the foreseeable future. Even if the BRICS were to establish a common currency, it would likely coexist alongside the dollar rather than supplanting it entirely. The dollar’s entrenched position as the benchmark currency for commodities like oil underscores its enduring relevance in global trade and finance.

In conclusion, while the push for de-dollarization represents a significant challenge to the existing financial order, the road ahead is fraught with complexities and uncertainties. The BRICS nations face formidable obstacles in their quest for alternatives, including divergent economic interests, institutional constraints, and the enduring supremacy of the dollar. Nonetheless, their collective efforts underscore a broader shift towards a more multipolar and inclusive global financial system, albeit one that will likely coexist with the dollar for the foreseeable future.

By: Seetal Patra, Research Analyst, GSDN

“There is nothing that prevents Guyana from exercising its rights to its internationally recognized land and marine space”, said Robert Persaud, Guyana’s Foreign Secretary. This statement further amplified and fanned the statement of “We are not going anywhere”, made by Alistair Routledge, President of ExxonMobil.

These are of primary importance to the regional politics and diplomacy of Latin America, as the region of Essequibo has yet again been brought to limelight by Venezuela in December, 2023, which continues to remain in news owing to regular developments. On December 4, 2023 Venezuelan voters were reported to have approved a referendum to annex Essequibo. And on December 5, 2023 Venezuelan President Nicolas Maduro ordered his government to “immediately” explore and exploit the oil, gas, mines in the disputed region.

But the history of this dispute goes back to 1814, when Great Britain assumed control of the future British Guyana (including Essequibo) via a treaty with the Dutch. With the discovery of gold, the claims of Britain and newly independent Venezuela started becoming aggressive, ultimately both the parties agreeing to submit to an international tribunal, with the USA representing Venezuela. January 2024 saw the statement given by Maduro as, “Our [Essequibo] has been de facto occupied by the British Empire and its heirs and they have destroyed the area”, with the criticism pointed towards the 1899 tribunal. Upon the independence of Guyana in 1966 and the prescription under the 1966 Geneva Agreement, recognized Venezuela’s position, as to the 1899 tribunal as null and void, but the territorial dispute remained status quo.

Essequibo has remained an issue like that of a dormant volcano. It erupts as and when the contentions of resources and its utilization comes to the fore. In the mid-2010s discovery of a massive offshore oil deposits in Guyanese waters again got Venezuela interested, instructing the state oil company PDVSA to begin planning and extraction of oil in Essequibo. It went an extra mile to directing the legislature to nullify offshore oil contracts granted by Guyana, and increasing its military presence along the disputed border.

The issue of Essequibo is nothing new. Neither for the Venezuelans, nor for the Guyanese. Because the specter of Essequibo looms large in Venezuela. The region continues to remain marked in red in the school textbooks as the “zone in reclamation” and this claim resonates with maximum population in Venezuela as well. The fact of the matter is Venezuela in all probability is set to go to polls in 2024, and Maduro is flattering its options to get rid of the anti-sentiment against him in the country.

Venezuela and Guyana are perhaps the most diametrically opposite economies who are neighbors to each other. Guyana’s economy has expanded by 62% (as per 2022 data), making it the highest real GDP growth in the world in 2022. While the right next-door neighbor, Venezuela is suffering from ballooning inflation to around 360 percent in 2023, and also the highest in the world. The fueling of the current escalation by the Venezuelan President, is seen to have felt a limited success in diverting the attention away from the domestic political Opposition and the upcoming elections. The Venezuelans are more concerned about the domestic issues like violent crime, and spiraling inflation.

Despite the reemergence of this issue, we have good reasons to believe that a full-scale invasion is not knocking the doors. This reasoning can be attributed to the fact that, the referendum was announced prior to the opposition primary. Even though the opposition in Venezuela is divided as to the occurrence of referendum, but their views with respect to Essequibo aligns overwhelmingly. With general elections ahead in 2024, the possible reasons for bringing this up by an unpopular Maduro sitting on a heap of precarious economic conditions, was to rally the nationalists around his platform, and brand the opposition as the puppets of foreign interests. Maduro might not want to jeopardize as to what appears as an improved reputational standing in the region. Many see Washington’s ‘maximum pressure’ regime change campaign as a failure experiment, as governments are more willing to engage with Venezuela. Colombian President Gustavo Petro hosted negotiations to resolve the Venezuelan political crisis and partnered with Maduro to achieve ceasefires with Colombia’s armed groups. Even the United States forged an agreement with Venezuela to lift some oil sanctions in return for political concessions, and Washington is permitting Chevron to again pump Venezuelan oil. Venezuela is no longer the outcast it was, and Maduro has survived several overlapping challenges to his rule.

Brazil has been showing interest and has also been the one to be the mediator and find out a resolution to this issue. This interest stems out of the fact of being an active partner in regional integration, and the demand to be considered for UNSC permanent seat. Such a stance goes for the Caribbean Community (CARICOM) as well. They have shown support for Guyana despite the fact of receiving energy subsidies from Venezuela for years. Next comes in line is China. China cannot afford to be an ally to this dispute flaring up to a conflict. It has to take a neutral stance considering it has strong relations with both these countries, and at the same time has a vested interest in ensuring the prevention of war. It has a 25 percent stake in the Exxon-Mobil led consortium controlling the Stabroek oil fields, located offshore Essequibo region.

The story does not end only with the regional disparity and the vested interests of other players. The fact of the matter is, if this runs into a full-fledged conflict (war), then the military capability comes into question. The ratio of military strength of Venezuela to that of Guyana stands as 100:1. Not overlooking the fact, Venezuela’s military contingency suffers from absolute corruption and lack of proper maintenance, which has grounded majority of the air force. On the other hand, Guyana with Washington’s clear vested interests in place, shall come to the rescue of its Latino brother. Although the bigger question that looms is, is this a war that Washington should poke its nose in? Wisdom says, Washington should not. This should percolate well within the capitalist lobbyists in the USA, and the fanning of the event should be checked at any cost. That part of the world which has not seen war in the last 150 years, should avoid this uncalled for resource war. The world is already reeling under two precarious resource wars at two ends of the world.

All said and done. But what matters to us as Indians/Bharatiyas; as Dr. S Jaishankar has recently said in Munich Security Conference, ‘We cannot be castigated or called out because we keep our options open. Rather this is being smart.’ Smart negotiations can only align India/ Bharat as a Vishwa Guru and not get boxed as non-aligned, non-west, and anti-west. Whether this conflict fizzles out or no, New Delhi needs to keep itself on toes. The primary reason being, Venezuela was one of the primary exporters of oil to India, amounting to somewhere around, 12% some years back before Venezuela was embroiled in economic mayhem. Guyana has not yet been listed among the exporters for oil in India, but soon that day shall come. Then India must be ready for a diplomatic balancing act. Apart from the oil business between India and Guyana, the relations run deeper, with the largest ethnic group in Guyana being the Indo-Guyanese. It is this global south which has the potential to churn up a balancing act as and when the global north faulters.

By: Mahima Sharma, Research Analyst, GSDN

The Arab League, officially known as the League of Arab States, is a regional organization that brings together 22 member countries in the Arab world. Established on March 1945, the Arab League aims to promote economic, cultural, and political cooperation among its member states. Over the years, the organization has played a significant role in addressing regional challenges and fostering unity among Arab nations. This article will provide an analysis of the Arab League, examining its historical background, achievements, challenges, and the path forward with reforms.

Historical Background:

The Arab League was founded on March 22, 1945 in Cairo, Egypt, with the signing of the Arab League Charter by seven Arab countries. The original signatories included Egypt, Iraq, Jordan, Lebanon, Saudi Arabia, Syria, and Yemen. The League’s establishment was driven by a desire to promote collective security, coordinate economic policies, and enhance cultural ties among Arab nations. Since its inception, the organization has expanded to include a total of 22 member states. The Arab League’s primary objectives, as outlined in its Charter, include promoting economic cooperation, coordinating political efforts, safeguarding the independence and sovereignty of member states, and fostering cultural ties. The organization seeks to address common challenges faced by Arab nations, including political conflicts, economic disparities, and social issues. The Arab League also aims to strengthen the collective voice of its member states on the international stage. Furthermore, the League highlighted the importance of the Palestinian cause in 1964 with the establishment of the Palestinian Liberation Order (PLO), whose charter states that “the liberation of Palestine, from an Arab viewpoint, is a national duty.” Following another significant defeat by the Israelis in 1967, the league issued the Khartoum Resolution, often remembered for its three “nos”: “no peace with Israel, no recognition of Israel, no negotiations with it.”

Achievements

The Arab League has undeniably achieved several significant milestones throughout its history, reflecting its commitment to fostering independence, regional cooperation, and cultural unity among its member states. Foremost among its achievements is the pivotal role it played in supporting the quest for Arab independence, contributing to the establishment of numerous sovereign Arab nations. Additionally, the Arab League’s initiative in creating regional organizations, such as the Arab Monetary Fund and the Greater Arab Free Trade Area, has played a crucial role in enhancing economic collaboration, fostering a sense of unity among member states. In the realm of conflict resolution, the organization has engaged in diplomatic efforts, exemplified by the Arab Peace Initiative, demonstrating its commitment to finding lasting solutions to regional disputes, notably the Israeli-Palestinian conflict. Beyond political endeavours, the Arab League has actively supported cultural and social initiatives through organizations like ALECSO and the Arab Women’s Organization, contributing to the promotion of cultural exchange and cooperation among member states. These achievements collectively underscore the Arab League’s multifaceted impact on the Arab world, addressing both political and socio-economic aspects in its pursuit of regional unity and progress.

Challenges and Limitations

The Arab League, an organization established to enhance the political, economic, and social interests of its member states, has faced numerous challenges and limitations that have hindered its effectiveness. The organization’s lack of cohesion and effectiveness has been a subject of criticism and debate, with individualism stymieing collectivism and unity, weakening the Arab League and calling its existence into question. The League’s original weakness stemmed from its charter, which stipulates that only countries approving its resolutions are bound by them, leading to disunity and limiting its ability to represent the interests of over 400 million Arabs regionally. The Arab League has also exhibited an inability to address active civil wars and simmering disputes among its members, such as those in Yemen, Syria, Libya, and the Gulf Cooperation Council Crisis of 2017. Furthermore, the organization has faced challenges in implementing comprehensive reforms, with no finite schedule for their implementation, and has struggled to address the demands for more political openness, respect for civil and human rights, and acceptance of democratic development from the Arab street. In addition to this, nations of Arab League have failed to uphold their “No Israel” policy as many Arabic nations like Saudi Arabia and UAE have flourishing trade relations with Israel. The League’s lack of commitment to common action and its failure to honour long-term commitments, such as in the case of Palestine, have further contributed to its ineffectiveness. Additionally, the Arab League has been criticized for its inability to be a decisive actor in addressing various regional challenges, including the war in Yemen, the Syrian civil war, and the fight against ISIL. These limitations have led to calls for internal reforms within the organization to strengthen its institutional capabilities and enhance its diplomatic impact, particularly in areas such as the Israeli-Palestinian peace process and the fight against terrorism.

Need for Reforms

To improve the effectiveness of the Arab League, several reforms and suggestions have been proposed. One of the most significant reforms is to strengthen the League’s decision-making mechanisms by adopting a majority-based decision-making process, rather than the current requirement of unanimity, to enable more efficient and timely responses to regional challenges. Another important reform is to enhance enforcement mechanisms by establishing a mechanism to compel member states to comply with its resolutions, which would help to ensure that decisions are implemented and that the organization’s authority is respected.

The Arab League should also promote intra-Arab cooperation in areas such as trade, cultural exchange, and regional security, which would help to strengthen the organization’s role in the region. Additionally, the League should formalize its commitment to human rights and the protection of civilians, which would help to improve its image and credibility. Other reforms that have been suggested include establishing an Arab consultation council or parliament, creating a court to help resolve disputes among member states, and establishing a council or forum for issues of regional security. The League should also work to create a more integrated Arab economy, which would help to promote economic growth and development in the region.

To support these reforms, the Arab League should provide greater support to civil society organizations, which would help to promote democracy and human rights in the region. The League should also work to address sectarian divisions, which would help to promote greater unity and cooperation among member states. However, it is important to note that the Arab League’s effectiveness will ultimately depend on the willingness of its member states to cooperate and support these initiatives. The League should also address its lack of commitment to common action and its failure to honour long-term commitments, such as in the case of Palestine, which has further contributed to its ineffectiveness.

Conclusion

In conclusion, the Arab League has played a vital role in shaping the collective destiny of Arab nations, addressing challenges, and fostering collaboration across a diverse and complex region. Its achievements in promoting independence, establishing regional organizations, and engaging in diplomatic initiatives underscore its commitment to unity and progress. Despite facing internal divisions and scepticism about its effectiveness, the Arab League remains a crucial forum for dialogue and cooperation. As the organization continues to evolve, addressing internal rifts, enhancing enforcement mechanisms, and maintaining a focus on economic development and conflict resolution will be essential for ensuring its relevance and effectiveness in the dynamic landscape of the Arab world. If reformed in time, the Arab League can serve as an important alternate centre of power in multipolar world and a backbone of Islamic strength. The Arab League’s journey reflects the ongoing pursuit of solidarity, peace, and prosperity among its member states.