What’s at stake in the India-U.S. summit

(A differently edited version of this appeared in SocialistWorker.org)

Representatives of the world’s biggest arms proliferator will meet with representatives of the world’s largest arms importer in New York and Washington in the coming days. The third high-level U.S.-India summit in four years comes as India has gone on a military shopping spree, topping the charts in global arms imports for three years in a row and accounting for some 12 percent of global arms purchases in 2008-2012. As a recent report in the Times of India put it, “Having already bagged Indian defence contracts worth over $8 billion in recent years … the U.S. is now headed towards clinching another four major deals worth almost $5 billion.”

In 2005 India and the U.S. signed the nuclear deal known as the “123 Agreement,” and during his visit to India in 2010, Barack Obama signaled a shift in the relationship between the two countries, terming it a “defining partnership of the 21st century.” With an eye towards China, Obama’s “pivot to Asia” involves courting India as one of its key strategic partners in the region, thus building on a process begun under George W. Bush. In the months leading up to the current summit, a number of high-ranking U.S. military officials have visited the country not only to strike arms deals but to further strengthen this “partnership.” The Indian military establishment have of course welcomed this development. Former Indian Army chief General V K Singh recently opined that “[t]here is a great (scope for) cooperation that can be worked out as a joint venture between the two to upgrade capabilities if the US thinks that India is a friend and a focal point for it in Asia.”

Challenges facing the Indian subempire

“Upgrading capabilities” means different things to the two sides. India is in the market primarily for military hardware, from submarines to aircraft to heavy artillery. While it has a sophisticated space program, having just launched its first dedicated military satellite, it lags behind in development, manufacturing and mass production, particularly of heavy artillery, and has imported 75 percent of its weaponry for the last few years. Manmohan Singh’s current shopping list includes C-130J “Super Hercules” aircraft, Chinook heavy-lift helipcopters, Apache attack helicopters and the latest generation of “ultra-light” M177 howitzers. As the Times of India article cited earlier points out, these purchases are in keeping with the government’s plans to expand the army by 80,000 soldiers by creating a new mountain strike corps, two new infantry brigades and two new armored brigades to “plug operational gaps against China.”

On the other side, the U.S. hopes to upgrade its ability to fight in difficult mountainous terrain and its counter-insurgency operations. (These goals, as Ninan Koshy points out, are an indication of U.S. failures in Afghanistan, where it has struggled to both carry out counter-insurgency and wage war in mountainous terrain.) U.S. Army Chief of Staff General Raymond Odierno returned from his visit to India in July gushing with praise for India’s counter-insurgency operations in Jammu and Kashmir. “The US would like to learn from the Indian experience as to how to fight militants in a tough environment and difficult terrain as in Afghanistan,” Odierno said, and according to Koshy, “expressed an interest in conducting U.S.-India joint exercises in Kashmir.”

This partnership is one of a web of relationships that are fueling the growing arms race in (South) Asia.While there is much talk about the U.S. displacing Russia as India’s biggest arms supplier, it remains the case that Russia supplies nearly 80 percent of India’s arms imports. Meanwhile, Pakistan continues to be the biggest buyer of Chinese weaponry, taking in 55 percent of all Chinese arms exports, even as China has displaced the UK to become the fifth-largest arms exporter in the world. Of course, Pakistan also continues to receive some arms from the U.S. According to a Congressional Research Service briefing document

[t]he Pentagon reports total Foreign Military Sales agreements with Pakistan worth about $5.2 billion for FY2002-FY2011…. The U.S. Congress has appropriated more than $3 billion in Foreign Military Financing (FMF) for Pakistan since 2001, more than two-thirds of which has been disbursed. These funds are used to purchase U.S. military equipment for longer-term modernization efforts. Pakistan has also been granted U.S. defense supplies as Excess Defense Articles (EDA).

The upsurge in Indian military spending needs to be understood as necessitated by the challenges facing this regional “subempire” in the neoliberal age. Indian subimperialism today faces increasing pressures on its borders with Pakistan and China, along with an irrepressible struggle for liberation in its colonial outpost in Jammu and Kashmir.

The Indian Raj coexists for now with its subimperial rival in the region, Pakistan, in an increasingly hostile standoff that shows little regard for the people of the subcontinent. This rivalry is not merely a policy-driven one, but one that is structurally hardwired into Indian nationhood and into the very constitution of the Indian state. The further militarization of the state thus seems inevitable as these contradictions continue to fester.

The nuclear boom

Another major item on the agenda during this summit is the Indian government’s quest for six 1000MW nuclear reactors that it hopes to purchase from Westinghouse for a whopping $14 billion. The proposed site of the new nuclear plant is in Mithi Virdi, Gujarat, where there is widespread opposition to the plant.

While the fallout from the disaster at Fukushima continues to unfold, India is hurtling ahead with its plans to build several new nuclear power plants at Koodankulam (Tamil Nadu), Jaitapur (Maharashtra), Mithi Virdi (Gujarat), Kovvada (Andhra Pradesh), Gorakhpur (Haryana), Chutka (Madhya Pradesh) and Haripur (West Bengal). To make matters worse, Indian negotiators are reportedly planning to do away with a liability clause that would hold reactor suppliers like Westinghouse responsible for accidents caused by defective or faulty equipment. While the government denies these reports, such “dilution of nuclear liability” would represent a capitulation to nuclear suppliers’ insistence that liability should rest on the plant operator’s shoulders alone.

This is a touchy issue in India, as it should be, where the memory of the Union Carbide disaster in Bhopal is still alive. In 1984, an accident at the plant caused toxic methyl isocyanate gas to be released into the atmosphere, killing over 3800 people and injuring tens of thousands more. But in the decades since, victims of the disaster have seen paltry reparations, if any. Indeed, just last year a New York district court dismissed a lawsuit against Dow Chemicals, holding it not responsible for the aftereffects of the disaster in terms of water and soil pollution.

More recently, in the state of Gujarat where the Mithi Virdi plant is to be built using the six new reactors, there have been reports of “minor accidents” of radiation exposure at the Kakrapar nuclear reactor. The Indian government is going ahead with these nuclear projects in arrogant defiance of the people on whose lands these plants will be built. Protests against the proposed nuclear plant at Kudankulam in coastal Tamil Nadu had been building for years until the dramatic events of 2012 which brought home to TV viewers scenes of protesters creating human chains in the sea. As all eyes turn now to the struggle in Mithi Virdi, a press release by a coalition of activists and communities stated that 777 hectares of fertile land will be given over to the NPCIL if this deal goes through. The people of the surrounding villages have been agitating against the project, with nearly 2000 people protesting recently in pouring rain.

Military carrots and neoliberal sticks

While the military-to-military lovefest continues, it is primarily for investment- and trade-related reasons that U.S.-India relations are said to have “cooled” in recent years. This comes despite the fact that “India ranked fourth in its growth rate of foreign direct investment in the United States from 2006 to 2011.” According to the New York Times, “India’s financial interests in the United States rose 40.8 percent in that period, with a total spending of $9.8 billion.” Since 2000, bilateral trade, which stands at $100 billion today has quintupled and there is optimism on both sides that it may quintuple again.

But behind this bubbly optimism are growing tensions in the trade relations. In 2010, Lee Sustar wrote about the “knives behind the smiles” at the G20 summit in South Korea: “[W]hatever the official outcome of the summit, economic rivalries will intensify, wrapped in nationalism, trade protectionism and, in the U.S., endless China-bashing.” The same can be said about the current India-U.S. summit, complete with opportunistic India-bashing.

The Brookings Institution summarised the problems facing the Indian economy, whose GDP stood at $1.8 trillion in 2012:

After three years of 9 percent growth, India’s economy has sharply slowed. Projections for 2014 range from 4 to 5.5 percent; Paribas bank estimates growth during the April-June 2013 quarter at 3.7 percent. Manufacturing growth, which had done well during the boom years, sank to 3.5 percent in 2011 and barely topped 3 percent in 2012. Perhaps the biggest attention-getter has been the plummeting value of the rupee, down 22 percent between May and September 2013, Rs. 63 to the dollar in mid-September.

The current account deficit hit a record high of $88.2 billion in 2012-2013, and stands at 4.9 percent of GDP, the highest in the world. An impending real estate slump has also exposed potential debt-related vulnerabilities. According to the New York Times, “Publicly traded real estate investment groups in India are heavily in debt, so they struggle to make interest payments and are not in a position to bankroll further projects.” While domestic capital investment “remains high by international standards,” at around 35 percent of GDP, and foreign trade continues to grow (exports increased last month by 13 percent from a year earlier) foreign investment has dried to a trickle in the wake of the slowdown. According to the Wall Street Journal, foreign investors withdrew $1 billion from Indian stocks in just seven trading sessions when the Rupee seemed to be in freefall earlier last month.

The National Association of Manufacturers (NAM), one would think, would break out the champaign for Manmohan Singh’s visit, given his multibillion-dollar shopping list. They instead took out ads in various outlets calling on India to “play fair on trade.” Citing “overwhelming bipartisan opposition to India’s discriminatory trade practices” NAM wants the Indian government to further deregulate its economy by raising limits on FDI in everything from retail to insurance. The Indian government has lifted these limits somewhat, but American capital isn’t buying it. They also want India to crack down on its pharmaceutical industry’s practice of producing cheap generic versions of drugs patented by U.S. firms.

The U.S. views India as a huge untapped market, and with net investment at home at all-time lows, as Doug Henwood has pointed out, American corporations flush with cash are seeking avenues for investment in India, but on their terms. So from NAM’s point of view, the timing of Manmohan Singh’s visit couldn’t have been better, as the slowdown in the Indian economy has dominated the news in recent weeks. They see this as an opportunity to dangle the military-alliance carrot while weilding a neoliberal stick. So do international financial institutions. The World Bank’s Kaushik Basu put it bluntly: “India’s problem … lies in the culture of governance and bureaucracy in the country. This exacerbated the impact of the global crisis on India and this is what we should work to change. We should use the current Indian crisis as an alibi for such an exercise, if need be.” The spate of gloom-and-doom warnings about India’s economy from every corner of the western corporate establishment filling the media in recent weeks is telling in this regard, as they serve to heighten the sense of impending crisis, the better to apply healthy doses of neoliberal “shock doctrine.”

From the other side, we see the economic dilemmas facing Indian subimperialism today. As a rising power, India is behind China (and perhaps Brazil) in its penetration of foreign markets and in its geopolitical positioning. For instance, while Indian overseas investments have risen sharply to $21 billion for the first seven months of this year, they are still behind China’s overseas investments of $60 billion in roughly the same time period. A slowing economy will have an impact not only on trade and capital export but on India’s financial clout, such as it is. If the economy continues to slow down, as seems likely, there will be new doubts about the role India will actually be able to play in the proposed BRICS development bank. India’s military expansionism, which is partly a consequence of its subimperial surrogacy to U.S. strategic interests in the Pacific and Indian Ocean, will likewise face pushback should the economy go south. On the other hand, further deregulation and privatization will make the Indian economy even more vulnerable to crisis and hardship in the future by increasing its exposure to volatile global markets.

But the calls to further liberalize the economy are not coming from U.S. business interests alone. In fact, Indian capital has been leading the charge, attacking recent “populist policies,” licensing requirements and regulatory delays, and threatening capital flight. Indian overseas direct investment shot up by 38 percent year-on-year, as business houses have gone on an international buying spree of their own. In a seemingly desparate effort to curb capital flight and to prop up the rupee, the central bank recently lowered the limit on overseas direct investment for Indian companies from 400 percent of their net worth to 100 percent.

Fascism and the discontents of “India Inc”

While railing against the “populism” of the Congress Party, the corporate media and business press having been pointing to a recent decision by the ruling coalition to increase the miserly food subsidy for the poor. In a country where 30-70 percent of the people live below the poverty line (figures vary widely because of different benchmarks), food (and fuel) subsidies are essential for survival.

Yet, as recently as 2010, the Economic Times reported that the Indian government refused to comply with a Supreme Court order to distribute food for free instead of allowing it to rot in storage. At the time, India had nearly 60 million tonnes of foodgrain in storage compared to the buffer norm of about 30 million tonnes. “The foodgrains are rotting. You can look after your own people. As a part of short-term measure, distribute it to the hungry for free,” the court had observed, according to the Economic Times. But the government refused, saying it could not implement the order for want of–you guessed it–storage facilities!

Then, earlier this year, with an eye towards next year’s elections and in reponse to the fact that rampant inflation has sent food prices soaring, the government passed a “Food Security Bill” that increased food subsidies modestly. No points for guessing how the financial world responded: International credit rating agency Moody’s has declared that the increase in food subsidies would have a negative affect on India’s credit rating.

Similarly, the regulatory delays that some investors are complaining about include, among other things, recently enacted modest reforms to the infamous Land Acquisitions Act. This nasty piece of legislation, dating back to the British colonial era, ought to be scrapped given the massive ongoing land grabs by mining companies. The new reforms call for increased compensation and wider consent in any land acquisitions, but as The Hindu pointed out, these are half measures designed to maintain a fairly liberal use of “eminent domain lite”: “Instead of insisting that companies take responsibility for acquiring the land they need for their projects — at whatever price the market demands — just as they do other factors of production, the government will continue to wield its power of eminent domain on their behalf.” As the Congress passes weak reforms to appease lands-rights protestors while attracting investors, the emboldened capitalist class is demanding even more.

“India Inc”‘s displeasure at what they call the populism of the ruling Congress-led coalition has been amply expressed in their virtual anointing of the fascistic Narendra Modi as the next prime minister. Indeed, in keeping with the jackbooted tactics he has perfected in Gujarat, Modi’s campaign seems to be in full swing in Muzzaffarnagar and its neighboring villages, where Hindu-fascist mobs forced tens of thousands of Muslims to flee from their homes in an act of ethnic (or communal) cleansing earlier this month. A fact-finding report recently offered a damning indictment not only of the right-wing political forces behind this fresh spate of communal violence but of the complete inaction of the ruling Samajwadi Party and the state institutions. But the upper classes and their media mouthpieces have contributed enthusiastically to the cultivation of a cult of personality around Narendra Modi and his hard-nosed, tight-fisted, and and iron-gloved blend of corporate liberalism and Hindu nationalism. That “India Inc” favors Brand Modi, while Congress’ milky populism does little to really address poverty, oppression and inequality, is as clear as day.

Meanwhile, India’s wealthy elite are flush with cash. A report in The Hindu tells us that the number of super-rich individuals, with a net worth of $30 million or more, has recorded the largest increase among the BRICS over the last year. There are now 7850 so-called “Ultra-High Net Worth” (UHNW) individuals in India, whose collective wealth is just over $950 billion, which is approximately half of the country’s annual GDP. Sales of luxury cars, private jets and helicopters have gone up, as conspicuous consumption rules supreme in public life and in mainstream public culture. The unholy nexus between corporate money and politics has been exposed by a series of corruption scandals in recent years revealing this structure for the kleptocracy that it is.

So pay no heed to all the hot air you’ll hear at this summit about the “world’s greatest democracy” and the “world’s largest democracy.” When the kleptocrats and the plutocrats meet, its all about the guns and money.