India: a 3rd Asian superpower?

Investment Analysis Clubs Macro Economic Trends and Risks
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The two Asian continental superpowers are China and Russia (although Russia’s center of gravity is closer to Europe). We tend to discount India even though the population of India recently surpassed China’s. Is there room for a 3rd Asian superpower?

https://www.nytimes.com/2024/04/13/world/asia/india-china-modi.html

China Had a ‘Special Place’ in Modi’s Heart. Now It’s a Thorn in His Side.

As Narendra Modi seeks a third term as prime minister, India’s rupture with China looms over a pillar of his campaign: making his country a major power.
By Mujib Mashal and Sameer Yasir, The New York Times, April 13, 2024

…

In India’s own backyard in South Asia, China has used its vast resources — the fruits of economic reforms introduced decades before India’s — to challenge Indian pre-eminence, courting partners through infrastructure deals and gaining access to strategic ports.

More broadly, China and India are vying to lead the developing nations of the so-called global south. When India hosted the Group of 20 summit last year, using it to showcase its support of poorer countries, Mr. Xi skipped the event. China has also been a major roadblock in India’s campaign to gain a coveted permanent seat on the U.N. Security Council…

India signed a series of deals with the United States last year to strengthen military cooperation. India has also drawn closer to the other two members of the so-called Quad, Australia and Japan, as the group works to counter China’s projection of power…

The Chinese economy is about five times the size of India’s, and China remains India’s second-biggest trade partner (after the United States), exporting about six times as much to India as it imports. China spends more than three times what India does on its military, giving its forces a significant advantage across land, sea and air… India still struggles to cover the basic needs of its 1.4 billion people… [end quote]

The potential conflict between China and India involves territorial incursion as well as trade. In 2020, China invaded Eastern Ladakh in the Kashmir region. India defended and is building a high-altitude tunnel since the area is cut off 4 months a year by snow in the passes. A land war over territory between China and India could potentially make the Israel-Gaza war look like a tempest in a teacup.

India is nowhere near having a large enough economy to qualify as a superpower. Until recently India was considered a third world country. The biggest geopolitical risk today is China challenging the Quad (combined U.S., Japan, India and Australia) militarily. Let’s hope it doesn’t happen.

Wendy

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India’s problem is the self defeating protectionism. Britain had that problem with the Corn Laws when Adam Smith was around. Brazil has the same problem. America is trying it vs. China. They all should read and pay attention to Frédéric Bastiat,

That Which Is Seen, and That Which Is Not Seen

In the department of economy, an act, a habit, an institution, a law, gives birth not only to an effect, but to a series of effects. Of these effects, the first only is immediate; it manifests itself simultaneously with its cause–it is seen. The others unfold in succession–they are not seen: it is well for us if they are foreseen. Between a good and a bad economist this constitutes the whole difference–the one takes account of the visible effect; the other takes account both of the effects which are seen and also of those which it is necessary to foresee. Now this difference is enormous, for it almost always happens that when the immediate consequence is favourable, the ultimate consequences are fatal, and the converse. Hence it follows that the bad economist pursues a small present good, which will be followed by a great evil to come, while the true economist pursues a great good to come, at the risk of a small present evil.

A.K.A. unintended consequences.

The Captain

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This is just one example of the poor reporting in this article from an NYT which seems to be losing its ability to vet its writers’ output

“Indian pre-eminence” in its South Asian backyard is a pipe dream - it has deep rooted and festering issues with each of its neighbours Pakistan, Sri Lanka and Bangladesh

Really? India is focused on the biggest players on the world stage, US and Russia, as it has been for decades - not on developing nations

Ironically, the article quotes India’s Foreign Minister’s own words on the subject which make it crystal clear what India was focused on:
"India’s ambitions as a major power would require a juggling act: “engage America, manage China, cultivate Europe, reassure Russia.”

The biggest geopolitical risk is QUAD/AUKUS not challenging China’s increasing belligerence and outright aggression against its Asian neighbors
As a long term strategic partner of both Russia and the US, India has earned its seat at that table

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I do not know about the rest. The US having high tariffs on China was genius. The IRA is the other side of it. We have the factories coming back here for high value added goods. The lower value added goods are being made in Mexico. China has been pushed into a series of internal economic problems.

China will have a problem expanding its military while losing industrial production and wealth. China has a closed financial system. The rest of the world won’t be there to finance their military.

India is quite the opposite in that last regard.

The US tariffs on Chinese goods were after the end of a potential period for a great depression. The Smoot Hawley Tariffs were before the Great Depression. Timing is everything.

The US government economists probably suggested the current tariffs.

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Absolutely - and we’re all paying for it in higher sticker prices and input costs
Genius indeed!

Even more evidence of genius - taking our hard earned tax dollars and donating them to bribe companies who otherwise wouldn’t bother.

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Funny thing, around the time the Colonials were trying to get rid of George, a Scot was writing that the Corn Laws were hurting The People while enriching The Land Owners.

¿Nothing learned?

But there is a difference, Comparative Advantage works well for both sides as long as you are not exporting jobs. Exporting jobs helps the weaker economy more because work is what creates wealth.

Work reduces local entropy.

The Captain

Local decrease of entropy, does it require life?

Universal entropy can decrease only locally at the expense of bigger increase elsewhere.

Can this occur in a lifeless environment or does it necessarily require living organisms to do it?

Can this occur spontaneously or does it have to be an intentionally arranged process, like building a refrigerator?

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You are complaining about supply-side economics which came to a halt more or less in 2020. Remember the factories had been leaving? Tax rates on corporations were falling.

You are not playing for tomorrow.

The genius of factory building here and in Mexico will be the economies of scale with rising tax rates on the wealthy. The Great American Middle Class is seeing a rebirth.

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Hi Leap1 - thanks for your response

The only economics I’m arguing against is that of weak, uncompetitive industries and their equally weak government protectors hiding behind tariffs/ sanctions/ subsidies etc. because they know they can’t otherwise compete

Here’s what tariffs do to those hiding behind them:
’ * The Trump administration imposed nearly $80 billion worth of new taxes on Americans by levying tariffs on thousands of products valued at approximately $380 billion in 2018 and 2019, amounting to one of the largest tax increases in decades.

  • The Biden administration has kept most of the Trump administration tariffs in place, except for a five-year suspension of WTO aircraft dispute tariffs, replacement of certain steel and aluminum tariffs with tariff rate quotas, and the expiration of washing machine tariffs.
  • We estimate the tariffs still in effect will reduce long-run GDP by 0.21 percent, wages by 0.14 percent, and employment by 166,000 full-time equivalent jobs.’
    Trump Tariffs & Trade War: Details & Analysis of Economic Impact

’ A 2019 study by researchers from the Federal Reserve and the University of Chicago found that consumers bore more than 100 percent of the costs of washing machine tariffs, indicating that appliance retailers charged even more than the tariffs had cost them. Some more recent research [PDF] has found that U.S. consumers have “borne the brunt” of the tariffs on Chinese goods through higher prices. Still other studies have pointed to different costs for consumers: with tariffs on their foreign competitors, domestic producers can safely raise their prices. Ultimately, consumers share the burden with importers.’

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Then you are talking primarily of Chinese companies that have flooded our markets for decades.

Mexicans work for about a third of their Chinese counterparts. US workers add more value than Chinese workers. Not always true but often true enough.

Economies of scale are self-fulfilling. Meaning excellent for our nation. This is not solely subsidizing the rich. This is building the country’s wealth. Big difference. A dollar spent by Uncle Sam is worthwhile today.

The older theories on tariffs date back to Smoot Hawley. The abstracts written about tariffs always go back to that global failure. This is a much different timing than Smoot Hawley. The abstract papers on tariffs are behind the times.