Why Does India Lag So Far Behind China?

Indian mainstream media headlines suggest that Pakistan's current troubles are becoming a cause for celebration and smugness across the border. Hindu Nationalists, in particular, are singing the praises of Indian Prime Minister Narendra Modi and some Pakistani analysts have joined this chorus. This display of triumphalism and effusive praise of India beg the following questions: Why are Indians so obsessed with Pakistan? Why do Indians choose to compare themselves with much smaller Pakistan rather than to their peer China? Why does India lag so far behind China when the two countries are equal in terms of population and number of consumers, the main draw for investors worldwide? Obviously, comparison with China does not reflect well on Hindu Nationalists because it deflates their bubble. 

Comparing China and India GDPs. Source: Statistics Times


China was poorer than India until 1990 in terms of per capita income. In 2001, both nations were included in Goldman Sachs' BRICs group of 4 nations seen as most favored destinations for foreign direct investment. Since the end of the Cold War in 1990, the western nations, including the United States and western Europe, have supported India as a counterweight to China. But a comparison of the relative size of their economies reveals that China had a nominal GDP of US$17.7 trillion in 2021, while India’s was US$3.2 trillion. India invests only 30% of its GDP, compared with 50% for China; and 14% of India's economy comes from manufacturing, as opposed to 27% of China, according to the World Bank.
 
A recent SCMP opinion piece by Sameed Basha titled "Is India ready to take China’s place in the global economy? That’s just wishful thinking" has summed it up well: 
 
"Comparing China to India is like comparing apples with oranges, with the only similarity being their billion-plus populations.......China is transforming itself into a technologically driven economy in order to exceed the potential of the US. In contrast, India is attempting to position itself as a market-driven economy utilizing its large population as a manufacturing base to compete with China........In its 2022 Investment Climate Statement on India, the US State Department called the country “a challenging place to do business” and highlighted its protectionist measures, increased tariffs and an inability to adjust from “Indian standards” to international standards". 
Over 1.5 million patent applications were filed in China in 2021, the highest number in the world. By comparison, the patent filings in India were 61,573, according to the World Intellectual Property Organization. China spends 2.4% of its GDP on research and development compared to India's 0.66%, according to the World Bank
Top Patent Filing Nations in 2021. Source: WIPO.Int

With growing Washington-Beijing tensions,  the United States is trying to decouple its economy from China's. The Wall Street Journal has reported that the Biden administration is turning to India for help as the US works to shift critical technology supply chains away from China and other countries that it says use that technology to destabilize global security.
India's Weighting in MSCI EM Index Smaller Than Taiwan's. Source: N...

The US Commerce Department is actively promoting India Inc to become an alternative to China in the West's global supply chain.  US Commerce Secretary Gina Raimondo recently told Jim Cramer on CNBC’s “Mad Money” that she will visit India in March with a handful of U.S. CEOs to discuss an alliance between the two nations on manufacturing semiconductor chips. “It’s a large population. (A) lot of workers, skilled workers, English speakers, a democratic country, rule of law,” she said.

India's unsettled land border with China will most likely continue to be a source of growing tension that could easily escalate into a broader, more intense war, as New Delhi is seen by Beijing as aligning itself with Washington

In a recent Op Ed in Global Times, considered a mouthpiece of the Beijing government, Professor Guo Bingyun  has warned New Delhi that India "will be the biggest victim" of the US proxy war against China. Below is a quote from it: 

"Inducing some countries to become US' proxies has been Washington's tactic to maintain its world hegemony since the end of WWII. It does not care about the gains and losses of these proxies. The Russia-Ukraine conflict is a proxy war instigated by the US. The US ignores Ukraine's ultimate fate, but by doing so, the US can realize the expansion of NATO, further control the EU, erode the strategic advantages of Western European countries in climate politics and safeguard the interests of US energy groups. It is killing four birds with one stone......If another armed conflict between China and India over the border issue breaks out, the US and its allies will be the biggest beneficiaries, while India will be the biggest victim. Since the Cold War, proxies have always been the biggest victims in the end". 

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Comment by Riaz Haq on April 27, 2023 at 10:32am

A New Superpower?: India's Economic Rise Holds Promise for the Country and Beyond - DER SPIEGEL

https://www.spiegel.de/international/world/a-new-superpower-india-s...


India is now the world's most populace country and will likely soon become the third largest economy on the globe. For decades, economists have been predicting that India's time would come. Has it finally arrived?

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Modi likes to act as though he alone is responsible for that trend. And as it happens, he embodies the hope that anyone can make it. The 72-year-old is from a lower caste and his father used to serve tea on the train platform of a small-town station in the west of the country. Now, his son has accumulated more power than almost any other prime minister before him. During the election campaign, he bragged about the size of his chest (142 centimeters), but he is also the first premier to have been born after India’s independence. When traveling overseas, he prefers speaking Hindi to English, transmitting an encouraging message to his countrymen – that they should be proud of where they are from.

Many in the country venerate him for precisely that reason, with the result that Modi’s party, the Bharatiya Janata Party (BJP) enjoys an absolute majority in parliament. It is considered highly likely that he will once again emerge victorious in next year’s parliamentary election.

Modi has convinced his country that India can only return to past greatness under his leadership – back to a time before the arrival of the British, who sucked the country dry for 200 years. It is the promise that the ignominy of yesteryear will finally fade into the past for good. And India will command that which it so desires: recognition.

The prime minister, though, is convinced that India must remain true to the values of an ancient Hindu civilization. He is a Hindu nationalist and sees India first and foremost as the homeland of the Hindus. Minorities such as Muslims and Christians have a place in his new India, but only if they conform to the rules of the majority.



Modi is even using his current G-20 presidency to further his narrative of India’s rebirth. Posters bearing his visage are hanging everywhere in the country along with statistics testifying to the country’s success. Not all of the numbers, however, are reflective of reality, and not all of the successes have been the result of his initiatives. He has, however, proven adept at implementing them.

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Still, the rise might not be quite as rapid as the meteoric explosion undergone by China. Economist and author Niranjan Rajadhyaksha believes it realistic to expect the Indian economy to grow by 6.5 percent annually over the next decade – which is certainly strong, but not equal to the double-digit growth China has repeatedly experienced.

Still, India’s rise is good news for the West. Within several years, the country is likely to become the world’s third largest economy behind the U.S. and China, essentially becoming a third economic anchor in a multipolar world. India would have weight and its actions would have consequences.



In recent years, India has grown ever closer to the West, even though it won’t likely ever become a close ally. The country doesn’t necessarily share all of the West’s values, and approaches the world pragmatically – in the search for partners rather than friends. But India also isn’t a country harboring dreams of annexing islands or pushing the U.S. off of its throne. And it shares American and European concerns about Chinese dominance in Asia.

As such, India’s rise could ultimately transform the world in a way that is more amenable to the West’s vision of the future.

Comment by Riaz Haq on April 28, 2023 at 7:58am

#India's now most populous! In 1990 India & #China had about the same per capita annual income of $350. China’s is now 6X as large as India’s: $12,550 to $2,250. On #Modi’s watch India now lags farther. Can India now reap the #demographic dividend? @WSJ https://www.wsj.com/articles/can-india-cash-in-on-its-growing-popul...

For the first time since the mid-18th century, China isn’t the world’s most populous nation. According to United Nations projections, India claims that mantle this month as its population touches 1.425 billion.

Many in the West would like India to catch up economically with China and emerge as a powerful democratic counterweight in Asia. But for this dream to become reality, India must do a better job of educating its people and industrializing its economy.

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Not long ago, educated Indians largely considered the country’s burgeoning population a liability, not an asset. But many now argue that India’s young population gives it an edge over China that will persist for decades. China’s population has already begun to decline. The United Nations projects India’s to peak at 1.7 billion in 2064.

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To a large extent, optimism about India hinges on the idea of a “demographic dividend.” The theory, Mr. Eberstadt explains, is that this is a once-in-history chance for a population to move swiftly from short life expectancy and big families to long life expectancy and small families. In India, the labor force is growing more rapidly than the total population, which could translate into higher savings and investment rates and more rapid economic growth. South Korea and Taiwan are examples of Asian countries that swiftly made this transition from poor to rich.

Before India can dream of emulating their success, or China’s, it must acknowledge the size of the challenges it faces. Only about three-fourths of India’s population is literate, a level that China surpassed about 40 years ago. According to Mr. Eberstadt, this makes India the only country in history to have a vast pool of college graduates living amid hundreds of millions of working-age people who have never been to school. Moreover, over the past three decades regional disparities have widened. Kerala in the south has human-development indicators akin to Brazil. Bihar in the north looks worse than Cambodia.

Or take female labor-force participation, another measure of economic development. In China it’s more than 60%—roughly the same as in the U.S. and other wealthy countries. In India it has declined from 28% in 1990 to 23% in 2021. More than two-thirds of Chinese live in cities, which tends to boost productivity. India remains overwhelmingly rural—only about a third of the population lives in cities.

Industrialization also matters. Apart from a few resource-rich countries like Qatar and Saudi Arabia, all rich nations have successfully moved large numbers of people from farms to factories as they developed. Despite Mr. Modi’s calls to “Make in India,” manufacturing as a percentage of Indian gross domestic product declined from 16% in 2011 to 14% in 2021. As a proportion of employment, India’s industrialization peaked in 2002. Almost half of the Indian workforce makes subsistence livings on small family farms, compared with only about 25% of Chinese and 1% of Americans. In 2019, amid persistent protests, Mr. Modi rolled back ambitious agricultural reforms that would have helped modernize farms.


On the upside, India has massive room for improvement. If the country gets everything right it could grow robustly for decades. But to catch up it will need to redress many of its failures. “The critical thing to remember,” Mr. Eberstadt says, “is that demographic dividends don’t always get cashed.”

Comment by Riaz Haq on May 3, 2023 at 7:58pm

#India's Growing #Population A Burden For Struggling #Mothers. #Indian society's preference for #boys pushes mothers to keep having babies until they produce 2 sons. "Giving birth to a boy means respect & pride for the family and the mother" #MothersDay https://www.barrons.com/news/india-s-growing-population-a-burden-fo...

Married off by her parents at 14, Indian mother-of-seven Jaimala Devi kept having children because her husband insisted she could only stop once she had given birth to two sons.

Devi's story is common across Bihar, the poorest state in the world's most populous country and also its fastest-growing: with around 127 million people, it already has roughly as many people as Mexico.

India's overall birthrate has fallen in tandem with its rising economy, but poverty and a deep-rooted bias for male heirs have kept Bihar an engine room of national population growth.

"Having seven kids and managing everything on my own really drives me crazy at times," said Devi, who at 30 has never left her home village.

"I thought we'd be comfortable with one or two kids," she told AFP. "But we had girls first, and because of that we have seven."

Devi, her five daughters and two sons live in a ramshackle one-room hut, unadorned except for a small television, an old fan and some posters of Hindu deities on its unplastered walls.

Bihar has scarce opportunities for well-paid employment and Devi's husband Subhash is gone for most of the year, sending back his meagre earnings as an unskilled storehand in the capital New Delhi.

Many fathers leave the state to find work elsewhere but consider long absences from home and the struggle to feed their children a worthy sacrifice for the chance of future prosperity.

"Having more children is still considered a way to get more earning members for the family," Parimal Chandra, the state head of the non-profit Population Foundation of India (PFI), told AFP.

The insistence by many men on having sons reflects cultural expectations that they will support their parents even after marrying and having their own children.

"Giving birth to a boy means respect and pride for the family and the mother," Chandra said.

Daughters by contrast are commonly seen as burdensome and costly due to the tradition of wedding dowries paid by the parents of brides.

Parents in poorer households often seek to relieve themselves of the responsibility of girls by marrying them off early, as was the case in Devi's wedding as a teenager.

This is especially true in Bihar, where the early departure of girls from school has left only 55 percent of women in the state able to read and write -- India's lowest female literacy rate, according to the National Family Health Survey.

Chandra said this "abysmal" statistic undergirded the state's high birthrate, leaving mothers without access to knowledge on contraception or agency over the size of their families.

Bihar's situation was once replicated across India, a country formerly synonymous with grinding poverty but which in recent decades has seen phenomenal economic growth.

The average woman in India now gives birth to just two children, down from a 1960 peak of six, in concert with better maternal healthcare and rising living standards.

But Bihar has long been an economic laggard and its much higher birthrate -- around three children per mother on average -- reflects some of India's worst rates of malnutrition, child mortality, education and access to medical care.

Raj Kumar Sada, 55, has outlived four of his five children and often tells his only surviving son to have at least four kids of his own.

That way "if something happens to one or two of them, he'd still have someone left," he told AFP.

"You will find people with four, five, six, seven or eight children, and it is very normal here."

Comment by Riaz Haq on May 3, 2023 at 10:00pm

#India's ties with #Russia remain steady. But #Moscow's tighter embrace of #China makes it wary. It appears “this (#Delhi-Moscow) relationship is going down from being a very high-value strategic partnership to a transactional one" #Modi #US #Ukraine https://cnb.cx/3NxQLX7

India’s relationship with Russia remains steadfast as both sides seek to deepen their economic engagements.

But Moscow has also grown close to Beijing since invading Ukraine, and that raises critical national security concerns for New Delhi, say observers.

India’s leaders are “carefully watching” as Russia becomes more isolated and moves closer to “China’s corner,” said Harsh V. Pant, vice president for studies and foreign policy at Observer Research Foundation, a New Delhi-based think tank.

It appears “this relationship is going down from being a very high-value strategic partnership to a transactional one,” said Sreeram Chaulia, dean of the Jindal School of International Affairs, adding Moscow’s “tighter embrace of China” doesn’t bode well for India’s national security needs.


India’s relationship with Russia remains steadfast as both sides seek to deepen their economic ties. But Moscow has also grown close to Beijing since invading Ukraine, and that raises critical national security concerns for New Delhi.

Indian external affairs minister S. Jaishankar recently said the country was ready to restart free trade negotiations with Russia.

“Our partnership today is a subject of attention and comment, not because it has changed, but because it has not,” he said, describing the relationship as “among the steadiest” in the world.

Russia also wants to “intensify” free trade discussions with India, Deputy Prime Minister Denis Manturov said during a visit to Delhi. Manturov is also Moscow’s trade minister.

Despite the display of economic cooperation, India’s leaders are “carefully watching” as Russia becomes more isolated and moves closer to “China’s corner,” said Harsh V. Pant, vice president for studies and foreign policy at Observer Research Foundation, a New Delhi-based think tank.

Russia’s “weak and vulnerable position” and growing reliance on China for economic and strategic reasons, will definitely be worrying for India, he told CNBC.


It’s becoming “more difficult with every passing day because of the closeness that we are witnessing between Beijing and Moscow,” Pant noted. “The pressure on India is increasing, it certainly would not like to see that happen.”

New Delhi will try as much as possible to avoid a potential “Russia-China alliance or axis,” Pant added. “As that will have far reaching consequences and will fundamentally alter India’s foreign policy and strategic calculation.”

There are national interest reasons “why India continues to buy cheap Russian oil and trade with them, this FTA is part of that,” said Sreeram Chaulia, dean of the Jindal School of International Affairs in New Delhi.

But it appears “this relationship is going down from being a very high-value strategic partnership to a transactional one,” he noted, adding Moscow’s “tighter embrace of China” doesn’t bode well for India’s national security needs.

India, which holds the current G-20 presidency, still hasn’t condemned Russia over its invasion of Ukraine.

Comment by Riaz Haq on May 5, 2023 at 9:30pm

US gives a 'free pass' to India as worry over China rivalry deepens

https://www.livemint.com/news/world/us-gives-a-free-pass-to-india-a...

“India is getting this free pass on account of China," said Manoj Joshi, a fellow at the Observer Research Foundation in New Delhi who has advised previous Indian administrations on national security issues. “The only country in Asia, in terms of size and potential, that can balance China is India."

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The Biden administration has decided to remain publicly quiet on India’s democratic backsliding, according to senior US officials, as the US intensifies efforts to keep New Delhi on its side in the rivalry with China.

Indian Prime Minister Narendra Modi’s pressure on religious minorities and the media is troubling, as is his party’s targeting of opposition lawmakers, said the officials, who asked not to be identified discussing internal deliberations. But the decision to largely refrain from criticizing Modi comes as growing concerns about China make India increasingly crucial to US geopolitical and economic goals in the Indo-Pacific.

The decision on handling India is an example of how President Joe Biden’s emphasis on human rights — and his framing of a global conflict between democracies and autocracies — has run up against the strategic realities of a world where rivals such as China and Russia are vying for greater control.

So while New Delhi’s strong defense ties with Russia and its vast purchases of Russian crude have drawn scrutiny from US lawmakers after the invasion of Ukraine, the administration believes it needs India to buy that oil to keep prices low. And rising concerns about China’s growing assertiveness under Xi Jinping have helped drive the US and India even closer together, these people said.

“India is getting this free pass on account of China," said Manoj Joshi, a fellow at the Observer Research Foundation in New Delhi who has advised previous Indian administrations on national security issues. “The only country in Asia, in terms of size and potential, that can balance China is India."

In a sign of the close ties, Biden is set to host Modi for a state dinner in Washington this summer. While Biden might press Modi to take a more explicit stance on Ukraine, one US official said it’s doubtful New Delhi would publicly rebuke Russia, given their close defense ties.

‘Regularly Engage’
Asked whether the administration is reluctant to criticize Modi, John Kirby, spokesman for the National Security Council, said in a statement, “As we do with other nations around the world, we regularly engage with Indian government officials at senior levels on human rights concerns, including freedom of religion or belief."

US officials also have frequently pointed to India’s shipments of humanitarian aid to Ukraine as well as Modi’s comments to Russian President Vladimir Putin that “today’s era is not one for war."

India’s foreign ministry declined to comment. Indian Foreign Minister Subrahmanyam Jaishankar has made no secret of his country’s decision not to pick sides regardless of what others may want, echoing India’s Cold War leadership of what was called the “non-aligned movement."

“Whether it is the United States, Europe, Russia or Japan, we are trying to ensure that all ties, all these ties, advance without seeking exclusivity," Jaishankar said during a visit to the Dominican Republic last month.

As India eclipses China as the world’s most populous country with more than 1.4 billion people, the Biden administration believes it’s impossible to solve pressing global challenges such as climate change without New Delhi, one official said, and the country remains a central part of the US’s Indo-Pacific strategy.

That’s led to the relative silence on issues that the US would normally speak out about publicly, and loudly.

Comment by Riaz Haq on May 5, 2023 at 9:30pm

US gives a 'free pass' to India as worry over China rivalry deepens

https://www.livemint.com/news/world/us-gives-a-free-pass-to-india-a...

Most recently, India’s government banned a critical documentary about Modi released by the BBC and sent federal tax authorities to raid the British news organization’s Delhi office.

Modi’s Hindu nationalist Bharatiya Janata Party also won a defamation case against the main political opposition leader, Rahul Gandhi, that has seen him kicked out of parliament. Modi’s government has also choked local and international nongovernmental organizations of foreign funding.

Russian Arms
Other Indian moves also run against a greater strategic alignment with Washington: In recent months, India pledged closer defense ties with Russia. Although India has sought to scale back purchases of some Russian weapons, its military has more than 250 Russian-designed fighter jets, seven Russian submarines and hundreds of Russian tanks. It has also received Russian S-400 missile defense systems despite US efforts to keep those purchases from going forward.

“President Biden would be remiss if he doesn’t raise the Russia issue and restate the importance of supporting Ukrainian sovereignty and explain why that is important for the Indo-Pacific region," said Lisa Curtis, who was the National Security Council senior director for South and Central Asia under former President Donald Trump.

“It’s no use pretending we don’t have serious differences on such a crucial issue," said Curtis, who directs the Indo-Pacific Security Program at the Center for a New American Security.

Oil Politics
The US has also moved on from concerns about India’s vast purchases of Russian crude oil even as the country rejects a Group of Seven initiative to put a cap on the price for which it’s sold.

At one meeting in Delhi between US and Indian officials following the invasion of Ukraine, a US diplomat told a senior Indian official that if their refiners weren’t buying Russian crude and putting it back on global markets, oil prices might have soared to about $180 a barrel, according to a person familiar with the meeting.

Indian officials always viewed Western criticism of their oil purchases as hypocritical, given that Indian refiners do simply put the product on global markets — in many cases for US and European buyers.

Jaishankar, the foreign minister, has often invoked broader sentiment in the so-called Global South as he defended his country’s position on Ukraine amid soaring food and energy prices that have put immense pressure on poor countries. He has waved off US concerns about India’s human rights record, saying “people are entitled to have views about us."

The US’s positioning on India reflects a calculation it’s had to make several times in the past, most prominently with Saudi Arabia. After declaring during his presidential campaign that he would declare Saudi Arabia a “pariah," Biden has had to backtrack as he seeks the kingdom’s help countering Iran and keeping oil prices low.

“I can understand governments’ reluctance" to take on Modi," said Shashi Tharoor, a senior lawmaker in the opposition Congress Party. “There’s an overriding strategic interest on the part of the West, and other countries in Southeast Asia, in staying on the right side of India."

Comment by Riaz Haq on May 5, 2023 at 9:31pm

US gives a 'free pass' to India as worry over China rivalry deepens

https://www.livemint.com/news/world/us-gives-a-free-pass-to-india-a...

Most recently, India’s government banned a critical documentary about Modi released by the BBC and sent federal tax authorities to raid the British news organization’s Delhi office.

Modi’s Hindu nationalist Bharatiya Janata Party also won a defamation case against the main political opposition leader, Rahul Gandhi, that has seen him kicked out of parliament. Modi’s government has also choked local and international nongovernmental organizations of foreign funding.

Russian Arms
Other Indian moves also run against a greater strategic alignment with Washington: In recent months, India pledged closer defense ties with Russia. Although India has sought to scale back purchases of some Russian weapons, its military has more than 250 Russian-designed fighter jets, seven Russian submarines and hundreds of Russian tanks. It has also received Russian S-400 missile defense systems despite US efforts to keep those purchases from going forward.

“President Biden would be remiss if he doesn’t raise the Russia issue and restate the importance of supporting Ukrainian sovereignty and explain why that is important for the Indo-Pacific region," said Lisa Curtis, who was the National Security Council senior director for South and Central Asia under former President Donald Trump.

“It’s no use pretending we don’t have serious differences on such a crucial issue," said Curtis, who directs the Indo-Pacific Security Program at the Center for a New American Security.

Oil Politics
The US has also moved on from concerns about India’s vast purchases of Russian crude oil even as the country rejects a Group of Seven initiative to put a cap on the price for which it’s sold.

At one meeting in Delhi between US and Indian officials following the invasion of Ukraine, a US diplomat told a senior Indian official that if their refiners weren’t buying Russian crude and putting it back on global markets, oil prices might have soared to about $180 a barrel, according to a person familiar with the meeting.

Indian officials always viewed Western criticism of their oil purchases as hypocritical, given that Indian refiners do simply put the product on global markets — in many cases for US and European buyers.

Jaishankar, the foreign minister, has often invoked broader sentiment in the so-called Global South as he defended his country’s position on Ukraine amid soaring food and energy prices that have put immense pressure on poor countries. He has waved off US concerns about India’s human rights record, saying “people are entitled to have views about us."

The US’s positioning on India reflects a calculation it’s had to make several times in the past, most prominently with Saudi Arabia. After declaring during his presidential campaign that he would declare Saudi Arabia a “pariah," Biden has had to backtrack as he seeks the kingdom’s help countering Iran and keeping oil prices low.

“I can understand governments’ reluctance" to take on Modi," said Shashi Tharoor, a senior lawmaker in the opposition Congress Party. “There’s an overriding strategic interest on the part of the West, and other countries in Southeast Asia, in staying on the right side of India."

Comment by Riaz Haq on May 5, 2023 at 10:01pm

Russia Says It Has Billions of #Indian #Rupees That It Can’t Use. Unlike #China, #India doesn't make products/services Russia can buy in #INR. Lavrov says #Russia needs rupees changed into another currency (#Yuan) . #trade #makeinindia #Modi #BJP https://www.bloomberg.com/news/articles/2023-05-05/russia-says-it-h...

Russia has accumulated billions of rupees that are sitting in Indian banks.

But Moscow acknowledged that it's a problem and is looking to convert the rupees to another currency.

Russia has a trade imbalance with India, which has been a top buyer of Russian energy.

Russia has billions of rupees sitting in Indian banks but acknowledged there's a problem as it looks for ways to convert that currency.

Foreign Minister Sergei Lavrov noted the widening trade deficit with India, which has been a top buyer of Russian oil since Moscow launched its war on Ukraine last year.

"As for rupees, this is a problem because there are billions of rupees accumulated in accounts at Indian banks and we need to use this money," Lavrov told reporters in India on Friday. "For this, rupees should be converted into other currencies. This is being discussed."

The comments come a day after Reuters reported that Russia and India have suspended negotiations over using rupees for trade between the two countries.

Russia prefers to be paid in Chinese yuan, which has become the most-used foreign currency in Russia. Meanwhile, Moscow has reportedly been hesitant about using the rupee due to exchange-rate volatility.

After Russia invaded Ukraine and was essentially ousted from the global financial system, Russia initially encouraged the use of national currencies instead of the US dollar, which is the primary currency for commodities and trade.

Some Indian importers of Russian oil have tried using the UAE's dirhams and rubles to facilitate transactions.

Still, Russia and India remain deadlocked in a currency dispute that has also frozen weapons sales between the two countries.

India won't pay Russia in US dollars over concerns that it may face secondary sanctions and won't pay in rubles because of worries about obtaining Russia's currency on global markets at a fair rate, sources told Bloomberg last month.

Meanwhile, Russia won't take Indian rupees because of exchange-rate volatility, the report added. Moscow has also rejected an idea from New Delhi for the Kremlin to invest rupees from arms payments back into Indian capital markets so the currency doesn't pile up.

Currency concerns with Russia's currency have also plagued its other trade relations. Recently, it agreed to use the yuan to for payments on a nuclear-power plant deal with Bangladesh, after previously insisting on using its ruble.

Comment by Riaz Haq on May 5, 2023 at 10:02pm

Russia and India reportedly halt talks over using rupees for trade, with Moscow preferring to be paid in Chinese yuan

https://ca.sports.yahoo.com/news/russia-india-reportedly-halt-talks...

Russia and India have suspended negotiations over using rupees for trade, Reuters reported.

Moscow, with a high trade gap in its favor, believes accumulating rupee is "not desirable."

China prefers to be paid in Chinese yuan or other currencies.

Russia and India have suspended negotiations over using rupees for trade between the two countries, with Moscow reluctant to keep the Indian currency on hand, Reuters reported Thursday.

The halt in talks deals a blow to Indian importers of cheap Russian oil and coal who were looking forward to a permanent rupee payment mechanism that would help bring down costs for currency conversion.

Russia, with a high trade gap in its favor, believed it would have an annual rupee surplus of more than $40 billion if a mechanism were enacted. Moscow felt that accumulating rupee is "not desirable," the report said, citing an unnamed official with the Indian government.

India's finance ministry, the Reserve Bank of India and Russian authorities did not immediately respond to requests from Reuters for comment.

Russia wants to be paid in Chinese yuan or other currencies, a second Indian government official involved in the discussions told Reuters. Moscow has increasingly turned to the yuan to move away from the US dollar after Russia was hit with Western sanctions for invading Ukraine in February 2022.

India began exploring a rupee settlement mechanism with Russia soon after Moscow launched war against the former Soviet state. No reported deals have been conducted using rupees, Reuters reported.

A currency dispute between Russia and India left deliveries of Russian weapons to India on hold, Bloomberg reported last month. The stalemate froze more than $2 billion in payments from India.

One factor that contributes to some countries not needing to hold rupees is India's share of global exports of goods, which runs at about 2%, the Reuters report said.

Comment by Riaz Haq on May 15, 2023 at 8:00am

India just passed China in population. That’s good news for America.

By Max Boot


https://www.washingtonpost.com/opinions/2023/05/15/india-population...


Smith argues that, thanks to recent investments in infrastructure, “India has most of the raw ingredients necessary to industrialize.” India should receive a major boost from Western firms eager to move supply chains out of China amid U.S.-China tensions. “In 2021,” Smith notes, “only 1% of iPhones were made in India; two years later, it’s approaching 7%, with a planned increase to 40-45%.” Already more than 750 million Indians use the internet — more than twice the total U.S. population — and those numbers will only continue to grow. “When a country has 1.4 billion people, a booming economy, and an open society,” Smith concludes, “there’s really very little limit to its potential influence.”

Not so fast, counters Sadanand Dhume of the American Enterprise Institute. During an interview with me (and in an op-ed in the Wall Street Journal), he points out that India faces major obstacles to realize its potential.

India’s education system, Dhume notes, lags far behind China’s. Only about three-quarters of Indians are literate, compared with nearly all Chinese. India does even worse at utilizing women in the workforce: At just 19 percent, its female labor-force participation rate is one of the lowest in the world — and far behind China’s 61 percent. Manufacturing’s share of India’s economy actually declined between 2000 and 2021. Dhume writes: “Almost half of the Indian workforce makes subsistence livings on small family farms, compared with only about 25% of Chinese and 1% of Americans.”

To his credit, Narendra Modi is the most pro-business prime minister India has ever had. He has been building infrastructure at a breakneck pace and trying to simplify the mind-boggling regulations known as the “license raj” that impede the private sector — and fuel corruption. But, as a Hindu nationalist, Modi has favored domestic firms (“national champions”) and boosted tariffs as part of his “Make in India” campaign. That makes India less attractive as a destination for multinational companies that want to assemble high-tech goods with parts from all over the world.


Modi is also undermining Indian democracy — his party just expelled the opposition leader from Parliament — and turning India’s 200 million Muslims into second-class citizens. No country can afford to sideline so much potential talent, especially given the discrimination already suffered by 200 million low-caste Hindus (the Dalits or “untouchables”).

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Tellis told me that “India’s population ‘achievement’ suggests that it still remains the only Asian power with the natural capacity to balance China, if — and it is a big if — it can get its act together.” But, he added, “Although the U.S. should continue to partner with India to balance China in the Indo-Pacific, it will inevitably have to bear a disproportionate responsibility for successfully maintaining an Asian balance of power.”

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