Many of us in the entrepreneurial community tend to concentrate primarily on our businesses, products, services, and clients. As a result, we may overlook the broader business environment. Looking for the bigger picture may open opportunities and help avoid challenges.
Our company, which interacts with clients and partners across Sweden, the UK, the US, and India, need to understand our markets with a larger perspective. Last week, we engaged as partners in Epical’s Integration Day, a pivotal event that offered valuable insights into the current market dynamics and the technical arena. Hans Werner from Radar Group conducted a particularly enlightening seminar. He shared the group’s evaluation of the current business landscape, including potential threats and opportunities. While the information shared was beneficial, one critical area was not addressed—India’s role on the international stage, its influence, and its effect on various global trends.
Given the considerable time I dedicate to understanding how global dynamics influence our business, I have authored a blog post to share perspectives that spotlight the world’s interdependencies, focusing on India’s central role in shaping these dynamics.
Introduction
India’s position in global geopolitics is complex and multidimensional, influenced by its unique historical, economic, and strategic circumstances. This article discusses India’s relations with the BRICS countries, the West, NATO, and its prominent neighbours, China and Russia, to understand whether it is moving towards or away from the West from different perspectives.
Thanks to tremendous economic growth since the early 1990s, India is now the fifth-largest economy in the world and by far the largest democracy, with roughly 950 million eligible voters. This is due to a combination of demographic dividends, increased industrialisation, deregulation, and increased technology use. India has experienced an average growth rate of 6-7% from 1991 until today and is poised to climb even higher on the global economic ladder.
Many American companies are relocating manufacturing capabilities from China and have identified India as one of the most favourable destinations. At least 200 companies have recognised India as the most favourable destination. Even many European and Japanese companies have identified India as a location to set up balancing manufacturing capabilities to reduce their dependency on China. Mexico has been the short-range winner, but Vietnam, the Philippines, Singapore, and India are strong contenders. During the last 12 years, the number of Swedish companies with a presence in India has increased by more than 60%
Although China has more software developers than India, the prevalence of English among these professionals is comparatively low. Conversely, India, which ranks second, boasts a more robust legal infrastructure. The Indian legal system is based on Common Law and has privacy laws akin to the European Union’s General Data Protection Regulation (GDPR). Additionally, India has a large pool of educated personnel proficient in English. These factors collectively make India an attractive destination for outsourcing software development projects.
Fast Growth
In December 2023, India’s year-to-year growth rate was 8.4%, which means it is presently the fastest-growing economy in the world. Given its sustained high growth rate and progressive economic reforms, analysts believe that India is on track to surpass Germany and Japan and become the world’s third-largest economy before 2030. This climb reflects India’s economic resilience and potential and its increasing influence on the global stage, marking a significant shift in economic power dynamics internationally. For more on investment opportunities in India, see Morgan Stanley’s analysis.
India and BRICS
India is one of the founding members of the BRICS group, which consists of Brazil, Russia, India, China, and South Africa. This coalition is primarily an economic group but also serves as a platform for cooperation on political and security issues, particularly as a counterweight to Western influence.
India has maintained a solid commitment to BRICS, using it to strengthen its economic ties and assert its role in global governance. It also advocates for the “Global South”.
The relationship with China within BRICS is complicated due to bilateral tensions. Still, both countries engage constructively within this forum on shared interests, such as resisting Western hegemony in international finance. India and China have very different agendas within BRICS. China wants to expand BRICS to reduce India’s importance within BRICS. On the other hand, India is not in favour of introducing a common currency for trade within BRICS, which could be seen as an economic challenge to the US and could align the group more closely with Chinese interests against those of the West.
For more insights on this subject, I recommend the following sources:
India and the West
India’s relationship with Western countries, particularly the US and EU countries, has strengthened considerably over the past decades. This relationship is driven by mutual interests in countering China’s rising power, expanding economic engagement, and cooperating in technology and defence. In the past, the US did not consider India strategically important. However, it now sees India as central to its Indo-Pacific strategy. It aims to ensure a balance of power in the region.
Economic ties with the EU are also strong, with negotiations on trade agreements and investment as critical components. Overall, India’s rapprochement with the West has been pronounced regarding strategic and defence cooperation. India is also open for business. Over the last 30 years, the deregulations have made India a much better destination for international companies.
India and NATO
Although India is not a member of NATO and traditionally maintains a posture of strategic autonomy, its interactions with NATO members have deepened. This is particularly evident in increased military cooperation with the US, joint military exercises, and defence procurement. However, India maintains its non-aligned position and often refrains from open political commitments too close to NATO’s strategic objectives, reflecting a balanced approach.
Enhanced bilateral relations are highlighted through initiatives such as the UK and India Prime Ministers Announce Enhanced Defence Cooperation and collaborations in new domains like the India-Australia Partnership in Space – DEFSAT 2024.
India versus China and Russia
India’s relationship with China is characterised by cautious engagement amidst rivalry. Border disputes and China’s strategic partnership with Pakistan, among other issues, have increased tensions. Nevertheless, both countries are significant trading partners and engage in dialogues through platforms such as BRICS and the Shanghai Cooperation Organisation.
In contrast, India’s relationship with Russia remains relatively strong, rooted in longstanding defence and energy ties. Russia has historically been a major supplier of defence equipment to India and has often supported India in international forums. However, India has to balance this relationship with its increasing proximity to the West, which sometimes creates friction, especially given the divergent views on issues such as Ukraine. The US has willingly allowed India to buy oil at discounted prices from Russia to stabilise the price of oil on the world market. India’s oil purchases should thus not be seen as support for Russia’s aggression in Ukraine. India has recently reduced its purchase of Russian Oil. On the contrary, by historical standards, India has been unusually harsh towards Russia in its comments on the Ukraine war.
For further details, see:
- S&P Global on India’s oil market stabilisation efforts and
- War on the Rocks on the future of Indian-Russian relations.
Environmental considerations
Significant challenges and transformative initiatives have marked India’s environmental journey. Once grappling with severe pollution and unsustainable practices, the nation invests substantially in sustainable energy. Driven by necessity and innovation, India is rapidly transitioning towards renewable sources such as solar, wind, green hydrogen, and hydroelectric power. This shift aims to reduce the country’s carbon footprint and mitigate the pollution affecting its major cities. The government, alongside private enterprises, is fostering a greener economy through ambitious policies and projects, highlighting India’s commitment to achieving environmental sustainability and improving the quality of life for its citizens. India has one of the largest carbon dioxide footprints in absolute terms. However, per capita, it is still better than most developed countries. India is challenged to lift its poorer population, which requires more energy and reduces its environmental footprint. Indian businesses are becoming more and more aware of sustainability issues.
Gislen Software’s headquarters is in Tamil Nadu, the Indian state with the most renewable energy in its electricity mix. Solar panels, lithium batteries, and offsetting carbon dioxide ensure that we are one of India’s greenest IT service companies.
Towards or away from the West?
India’s foreign policy suggests a nuanced shift towards the West, driven primarily by strategic and defence considerations, especially in the face of China’s rise. However, India continues to engage vigorously with Russia and China, which aligns with its interests. This strategy reflects multiple alliances rather than a definitive shift in any single direction. This strategy allows India to utilise its position to secure its interests best and maintain strategic autonomy.
In summary, India’s strategy can best be described as pragmatic. It utilises relationships with Eastern and Western blocs to navigate global politics, strengthening its position and influence without becoming overly dependent on any bloc. This balance is critical to India’s goal of becoming a leading power while addressing complex regional and global challenges. It also opens plenty of opportunities for businesses in the West and India to explore new dynamics and succeed in their interactions.
Contact us to discuss business, outsourcing, India or any other matter where we can collaborate!