Background
Much has been made of the pivot to Asia. President Biden himself stated, [1] “the future of the 21st century economy is going to be largely written in the Indo-Pacific — in our region”. Indeed, statistically, much of the world’s population, GDP, and trade will occur here over the coming decades. As the world’s focus shifts to the Asian Pacific, the region’s second largest country by population, India has been under the microscope for much of 2022, and not without reason. India [2] has continued to buy Russian crude, in part helping fund Russian aggression, the country of Gandhi has yet to condemn the war, and the government has shown tangible signs of [3] democratic backsliding. Yet for all of these (recent) marks against India, they remain an essential security partner for the U.S., a regional democratic counterweight to China, and a center for global capitalism.
For all the geostrategic pros and cons, India remains strategically independent from Russian and American influence and is proving exceedingly adept at toeing the line between these ‘Great Powers,’ benefiting from both sides as a result. While India is primarily viewed as being in the camp of the ‘West,’ they both have a deep historical relationship with Russia and are proving more pragmatic than idealistic as events unfold in 2022. In the coming years, will India be a reliable strategic partner acting in concert with the U.S. and support a rules-based global order, or is it simply an indifferent beneficiary of regional attention?
Analysis
First, we must understand the Indian diplomatic landscape. Immediately following independence from British colonization, India housed passionate anti-imperialist/colonialist (and perceived by proxy as anti-American) sentiment. At the time, the USSR also (falsely) proclaimed to share the same anti-imperialist values but also wanted to establish influence in a former ‘Western’ colony. Quickly the two found themselves to be ‘natural partners.’ Additional Russian diplomatic and military support for older border clashes with Pakistan and China gave enduring vigor to the Indian-Russian relationship. These general guidelines for the relationship largely continued until ~2010-2015. Only recently is a deeper alignment of autocracies (China & Russia) and decades of Indo-American cultural exchange in confluence leading to a sea-change in the Indian-American relationship.
A much deeper alignment between Russia and China has fundamentally changed the way India thinks about the long-term viability of the Indo-Russian partnership. The five-thousand-word pact of a “no limits friendship” between the two autocrats was the impetus for this re-thinking and is currently affecting everything from their arms trade to their geostrategic partnership. Happymon Jacob from Foreign Affairs states, [4] “border clashes in 2020 left India’s government and strategic community viewing China as an existential challenge to Indian national security”. Symptoms of this view are expressed in [5] India’s ban on a plethora of Chinese apps, including WeChat and TikTok. As Russia forges ahead with deeper China ties and increasingly plays the junior partner, inherently, continuing strong ties with Russia poses an existential threat to Indian national security. They know this, and it is where India is proving to be more pragmatic than idealistic. To counter China and an increasingly beholden Russia, [4] “India [is] drifting closer to the West and the U.S. to hedge against China and, in the process, withdrawing from its long partnership with Russia,” as Jacob puts it. India’s recent involvement in the quad grouping and G7 meetings, statements of disapproval for the war in Ukraine, hosting a plethora of [4] Western leaders, and [6] diversification of military supplies all show trends in a hastening strategic pivot away from Russia.
Importantly, India and the U.S. also share much culturally, which makes this strategic transition palatable, and likely desired by their citizens. Famously, India is the second largest English-speaking country behind the U.S., with a staggering [4] “4.2 million people of Indian origin resid[ing] in the United States”. Conversely, there is [4] “little people-to-people contact between India and Russia.” The younger Indian generation coming into leadership roles is much more partial to engaging with the U.S. and the West, whom they see as closer culturally than to Russia.
Conclusion
In Late 2021, these factors culminated in an express statement from Modi during his White House visit where the Prime Minister stated clearly, “India and America are natural partners.” Modi again [7] repeated this mantra in April 2022 in a virtual meeting with Biden. Leaders often put soft language statements together for foreign visits, but we believe Modi is speaking with candor. Overwhelming trends point to India’s growing willingness to be a reliable geostrategic partner to the U.S., as has been America’s aim for years. This isn’t to say India will immediately drop all components of its strategic relations with Russia. Still, as Happymon rightly articulates, [4] “the contours of a future geopolitical framework are clear… and the increasing geopolitical incompatibility between the two sides [India and Russia] are bound to drive a wedge between them”.
Themes
- TMT
- SaaS
- Renewable Technology
- Indian Ventures
We believe that an increasingly warmer Indo-American strategic relationship does two significant things. First, it lowers the risk that India will get hit with any economically crushing U.S. sanctions. If they were going to be targeted for purchases of Russian crude, it would’ve already happened. As the U.S. has been longing for greater strategic alignment with India for years now, there will be reticence toward punishing India in any material way. Second, closer partnership and deeper ties mean more significant volumes and a more effortless flow of capital between the countries (largely from the U.S. to India). The number of Indian tech startups has grown and has increasingly resulted in more IPOs. More U.S. startup funding flowing to the country could open return opportunities for accredited investors and U.S. institutions.
Additionally, India’s richest have lately been enamored with [8] green energy and [9] technology. While much of the world is also pushing toward the energy transition, India represents a unique opportunity, given its sheer size. While the market is underdeveloped (burgeoning middle class and high poverty rate), this could represent the cheapest time to invest as generational changes in both energy and geopolitics favor long term development.
Sources:
[1] https://www.whitehouse.gov/briefing-room/speeches-remarks/2022/05/23/remarks-by-president-biden-at-indo-pacific-economic-framework-for-prosperity-launch-event/
[2] https://www.bloomberg.com/news/articles/2022-10-31/russia-is-mostly-failing-in-race-to-find-new-oil-markets
[3] https://foreignpolicy.com/2021/10/14/india-democratic-backsliding-modi-bjp-farmers-protests/
[4] https://www.foreignaffairs.com/india/russia-losing-india?check_logged_in=1
[5] https://www.reuters.com/article/us-india-china-apps/india-retains-ban-on-59-chinese-apps-including-tiktok-idUSKBN29U2GJ
[6] https://www.reuters.com/world/india/india-worlds-biggest-buyer-russian-arms-looks-diversify-suppliers-2022-05-18/
[7] https://www.axios.com/2022/04/11/modi-biden-meeting-india-russia-ukraine
[9] https://www.electrive.com/2022/01/18/reliance-takes-over-faradion-for-100-million/
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