India's Compounding Strategic Challenges
The terror attack in Pahalgam together with India's uncomfortable dependence on Chinese imports, highlight India's growing strategic challenges. EPISODE #224
Dear Reader,
A very happy Monday to you
Last week, terrorists sponsored by Pakistan, assisted by local operatives, massacred 28 innocent Indian tourists vacationing in Pahalgam, Kashmir. Across the nation and the world, the outrage against this terror strike is palpable. The steely resolve to root out this cancer is more than apparent.
At the same time, this horrific incident is a rude reminder about India’s hostile neighbourhood and the threat this poses to the country’s audacious economic ambitions.
Coincidentally, this tragedy unfolded in the very week that India’s commerce ministry revealed that the country’s trade deficit with China, another hostile neighbour and an ally of Pakistan, had ballooned to a lifetime high of nearly $100 billion. This week’s episode on StratNewsGlobal.Tech puts the spotlight on this and the fact that India’s uncomfortable dependence on intermediate goods imports from China.
Together they add to India’s compounding strategic challenges—the theme of this week’s newsletter. This episode is dedicated to the 28 people murdered by terrorists.
The cover picture, epitomising a combination of innocence, resolve and unshakable faith in India, is taken by Sikandar Ali and sourced from Unsplash.
Happy reading.
22/4
Just as India has established its global prowess as an Information Technology power, Pakistan has emerged as the terror factory of the world and home to some of the most high profile terrorists, including Osama Bin Laden who had orchestrated the audacious 9/11 attacks on the United States and was later taken out by a team of US Navy Seals.
The world and India received another grim reminder bolstering Pakistan’s dubious claim to fame, when terrorists sponsored by Pakistan, who according to some analysts are former soldiers, massacred 28 Indian civilians in Pahalgam, Kashmir on 22 April. Since then there have been tonnes of commentary on the subject, which often leaves us more confused than informed.
I am no expert on military and strategic affairs and will therefore avoid unpacking the motivations behind the attack.
Instead, I would direct you to a terrific conversation between a popular YouTuber and Nitin Gokhale, one of the best strategic affairs experts in the country. (Full disclosure: I host a weekly show on StratNewsGlobal.Tech, a channel set up by Nitin.)
What stood out to me was Nitin’s objectivity, clarity of thought and answers to the many obvious questions that arose in our minds. He sets the context by arguing that this is a desperate action by Pakistan, which is besieged with internal problems, including blowback from the terror cells it propagated. Nitin, then goes on to add that the precision of the attack suggested that these were no normal terrorists. Instead, they are former soldiers trained in the Pakistan army and employed to carry out such brutal terror attacks.
Be warned that this is a long conversation. But, it is totally worth it. Sharing the YouTube link below.
At the same time this incident puts the spotlight on India’s strategic challenge: Steering the Indian economy towards its audacious economic goals in a hostile neighbourhood, while flanked by hostile countries like Pakistan.
The strike by terrorists comes at a crucial time for India. And, hence I wouldn’t rule out that it is part of a larger and sinister plan. India was just about recovering its poise after dealing with a series of devastating setbacks beginning with the covid-19 pandemic and seeking to position itself as an investment alternative to China—at one time the factory of the world and now treated as a pariah by the Western Block of nations led by the United States.
The attack by terrorist from across the border has brought the two countries, Pakistan and India, to the brink of another confrontation. The manner in which India has calibrated and escalated its response to the terror attack—just stopping short of a conventional war—suggests sustained hostilities in the neighbourhood. This could potentially impact global investor sentiment and thereby plans to relocate operations to India.
The China Dilemma
It is some coincidence that the terrorists struck in the very week, when new government data showed that India’s dependency on China, despite diplomatic frictions, has grown. The country’s trade deficit (exports, less imports) fell just short of $100 billion—a lifetime high.
The above graphic sourced from GTRI, reveals the worrying extent of India’s import dependency—it is over 40% for electronics, telecom and electrical products. This is a strategic dependency that India can ill afford.
Especially, if China decides to weaponise its trade, like it is doing with the United States by banning the export of green minerals (90% of global processing capacity of green minerals is controlled by China). India’s Eastern neighbour has already begun to slow down the movement of personnel for projects in India.
I have written about the China threat previously. So, will not repeat myself. Sharing the link below, in case you wish to re-read it.
In the final analysis it is apparent that India’s strategic challenges have worsened. It is no coincidence that this is happening even as it ascends the global high table rankings. The sad truth is that neither foe nor friend wants this to happen. The logic is simple. Democratising the high table alters status quo and dilutes the power of those on it at present.
The regime change in Bangladesh is a good example. It is now amply clear that this was inspired by the American deep state. And, this despite the bonhomie between the two countries. Pursuing its strategy of the “String of Pearls”, China has for long been invested in destabilising India’s neighbourhood and has found a willing partner in Pakistan. Add, to this the gigantic disruptions underway at the global level as the US gradually abandon’s its role as the anchor of the world.
The upside is that despite the kitchen sink being thrown at India, the country is still standing. Actually, it is thriving—especially in making notable social gains, like the near elimination of abject poverty, which at the turn of this Millennium was as high as 50%.
To survive against such odds is a feat no doubt. At the same time, it also makes the country that much stronger and resilient. In short, India’s cup is half-full and not half-empty.
Recommended Viewing
Sharing the latest episode of Capital Calculus. (Please note that Capital Calculus has moved to a new home (stratnewsglobal.tech) within StratNews Global. This relocation will take a bit of getting used to—bear with me.
Little over a week ago, the government released the latest trade numbers. Among other things it revealed that India’s trade deficit with China had ballooned to just short of $100 billion. This lifetime high was a combination of surging imports and slowing exports.
A closer examination of the numbers reveals India’s disturbing dependency on China for intermediate products. The obvious fear is whether this compromises India’s economic sovereignty?
To answer this I spoke to Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI) and a former insider in the Ministry of Commerce.
In an extremely informative and candid conversation, he laid out the challenges and argued that India has no option but to rollout and accelerate long overdue economic reforms to fend off the Chinese challenge. Sharing a teaser:
“The first thing is that we as a country, we are a high cost of production country. So fundamental reforms are needed in power, capital and land sectors. Then we need sectoral reforms. Until we do that, we cannot do deep manufacturing (in India).”
Do watch. Sharing the link below.
Till we meet again next week, stay safe.
Thank You!
Finally, a big shoutout to Premasundaran and everyone else for their informed response, kind appreciation and amplification of last week’s column. Once again, grateful for the conversation initiated by all readers. Gratitude to all those who responded on Twitter (X) and Linkedin.
Unfortunately, Twitter has disabled amplification of Substack links—perils of social media monopolies operating in a walled garden framework. I will be grateful therefore if you could spread the word. Nothing to beat the word of mouth.
Reader participation and amplification is key to growing this newsletter community. And, many thanks to readers who hit the like button😊.
In the present circumstances, China needs India to keep importing from them. The call for a neutral probe is a voice of support for Pakistan but any tangible support will not happen, I feel. The incident although tragic, has given the Indian forces, legitimate teeth to instill fear amongst the local militants; while the people who were benefitted from the flow of tourists, will realize that the have been deprived of an opportunity to become prosperous. The decision to curtail the flow of river water into Pakistan is a good move, as even a few weeks of stoppage will hurt them, where it really hurts. Even Bangladesh will realize that the same thing could happen to them, if they don't start behaving themselves. If the Chinese start anything, then India could also change their stance on Taiwan and Tibet. So at this point China has it's own set of problems. As the saying goes "great good follows great evil".