Should India celebrate Obama’s victory?
by Virendra Parekh on 12 Nov 2008 0 Comment

A black man in the White House would have been unthinkable just a few years back. In 1961, when Barack Obama was born, many states in the US had laws that enforced segregation, banned mixed-race marriages, and restricted voting rights. Now America can claim that it has become colour blind, at least politically. Obama’s elevation to the most powerful office in the world is as momentous as, say, Mayawati becoming Prime Minister by winning a majority in the Lok Sabha on her own.

This historic victory has naturally led to great expectations, both on the economic and foreign policy front. People in other countries also have pinned great hopes on Obama. There is no way he can fulfill them all. Rarely has a US President been elected with so much hope amid such intimidating challenges.

For Barack Obama the most important, and disconcerting, discovery will be that this is not the America he set out to conquer. Two years ago, when he launched his campaign, Iraq was the issue with the economy a mere blur in the background. Now, he will have to quickly stimulate the economy that is contracting and could slip into recession, taking the rest of the world along.

He has to shore up the spending directly through increased public expenditure, provide fiscal support to recapitalize banks, and fulfill promises of deep tax cuts. If these measures put money in the pockets of Americans, they will feel vindicated with their Presidential choice, even if the economist is left wondering where the money will come from.

If the US under Obama becomes more protectionist about its own interests, it would be hurting the developing world. Obama currently seems to favour meaningful multilateralism, but much will depend on the domestic US political compulsions that will prevail after 20 January 2009.

If he could disengage gracefully in Iraq, and manage to get Iraqi oil to flow into the global market, that would bring about greater stability in the oil market and some price certainty that would be crucial for oil consumers.

It would not be easy. In fact, foreign policy challenges will be as daunting for Obama as the economy. And while he will have many options and much support on the domestic front, foreign policy will offer him few options, tough choices, and reluctant allies. He has promised, first, that he will withdraw from Iraq; second, that he will focus on Afghanistan; and third, he will oppose Russian expansionism.

Americans will be watching keenly his steps in Iraq. If he were to withdraw US forces completely from Iraq, he would pave the way for Iran to have a pliant government in Iraq. Apart from disappointing the Sunni and Kurdish allies inside Iraq, such a prospect would be unnerving for Saudis and Israelis. Unless he comes to terms with Iran - a hard nut to crack - he cannot afford to withdraw from Iraq.

A major issue with a distinctive south Asian flavour that will come into sharp focus under Obama is Islamic terrorism rooted in religious extremism. The Pakistani military establishment, tacitly encouraged by the US, has adopted a long-term anti-India strategy whose pivot is cross-border terrorism. Terrorism and its linkages with Pakistan’s opaque nuclear narrative will challenge the sagacity of the Obama White House and this will be of direct relevance to India.

It is in this context that Indians and Pakistanis would eagerly watch his actions in Afghanistan. He has rightly said this is the real war. America’s real handicap in Afghanistan is Pakistan’s perfidy. Pakistan has neither the ability nor the willingness to confront Taliban forces in tribal areas, and it would not let Americans do the job either. With allies like Pakistan, the US should forget about winning the war on terror. The current war in Afghanistan is at best a holding operation and cannot be prolonged indefinitely without denting the credibility and prestige of the new administration.

Many Indians were hoping that the US under a new President would call Pakistan’s bluff and show it its place. However, Obama seems to have lost the plot. He wants to ‘settle’ Kashmir so as to enable Pakistan to focus on its western front and cooperate better with US. There are reports that he may appoint Bill Clinton as his special envoy on Kashmir. In effect, he is promising Pakistan greater American activism on Kashmir at India’s expense in return for more sincere cooperation in Afghanistan. India must not lose any time in dissuading him from this foolhardy initiative.

Two factors would make dealing with Pakistan-Afghanistan more complex for Obama. First, European allies on whom he is counting for more troops etc. may disappoint him. They have no stomach or money for a greater role in Afghanistan and are too divided among themselves to be of much help in a decisive fight there or in containing Russia. Secondly, Pakistan does not have a unified centre of power. With the civilian government, army, and mullahs pulling in different directions, Pakistan cannot be of much use as an ally. This is all the more reason for India not to allow US to strike any deal with Pakistan by sacrificing Indian interests.

India needs to be wary of another hobby horse of all American liberals - nuclear non-proliferation. Barack Obama supported the nuclear deal only after inserting a killer amendment: all cooperation will be off if India tested a nuclear device. Having got India by the scruff of the neck through the highly skewed nuclear deal, the US may now be tempted to pressurise India further on CTBT, FMCT etc. 

Then there are some economic areas wherein Obama’s policy preference will be of direct relevance to India. Most important among these is his stance on outsourcing, which has caused jitters in the IT industry. He said during his campaign that he was not in favour of the jobs going out of the US; the US must stop providing tax breaks for companies that ship jobs overseas and give tax breaks to companies that invest in the US.

Another related area of concern for the IT firms is the cap on H1B visa. At present, only 65,000 visas are available under this category, and Indian IT firms have been the biggest beneficiaries. While Senator McCain supported increasing the ceiling, Obama is not expected to be over-enthusiastic about it.

India’s IT industry has put on a brave face on Obama’s victory and congratulated him. It has pointed out that outsourcing does not necessarily mean IT and BPO services, that the largest unemployment in the US is in manufacturing, and that the US is actually short of tech resources. Yet, worries persist.

The economic case for outsourcing rests on the need for American companies to remain competitive not only at home, but also in the world market. India would be watching whether, and to what extent, the new President tries to alter the economic logic of outsourcing for US companies. At a time when car and steel makers are announcing production cuts and plant closures, when banks, airlines, real estate firms, diamond exporters and textile units are shedding jobs and industrial production is barely inching up, policy obstacles to outsourcing is the last thing that India expects from a friendly administration.

Mercifully, the situation is not as one-sided as it appears. If India needs US, the latter also needs India for its markets and its (supposed) ability to resist China’s advance into the Indian Ocean and to counter China’s influence in East Asia. This ought to give India some room for manoeuvre if Mr. Obama trots off at a tangent. It is therefore, quite likely that Obama will have the good sense to see that America has India where it wants and pushing it harder may be counter-productive. In that case, we may see some turbulence that comes in the wake of a big change, but nothing much more than that.

Obama’s victory has understandably generated an enormous amount of hope in the US as well as in other countries, but India’s expectations must be tempered with caution.

Finally, a sobering thought for India and its leaders. Faced with an unprecedented crisis, Americans chose a man of great dignity, superior talents, and high ideals to lead them. They did not allow the national debate to degenerate into race or religion. Their media and leaders debated substantive issues like their place in the world, the war against terror, the dismal state of their economy; they concluded that change was required and boldly elected the man who seemed most qualified to bring it about.

Contrast this with the Indian condition. When industrial growth is faltering, exports are losing steam, the rupee is depreciating, and jihadi terrorists and Maoists are spreading death and destruction at will, we are mired in tussles like Biharis versus Maharashtrians. America has shown that it has the capacity to renew itself. Contemporary India is yet to show it.

The author is Executive Editor, Corporate India, and lives in Mumbai

User Comments Post a Comment
Comments are free. However, comments that include profanity or personal attacks or other inappropriate material will be removed from the site. Readers may report abuse at
Post a Comment

Back to Top