If 2017 saw the rise of the ‘spin’ — any event or news was butchered and battered until it yielded a pre-determined narrative — 2018 will see it multiply.
China will remain India’s biggest adversary. By supporting Pakistan, this USD 11.2 trillion economy will continue to be seen as a nation that encourages terror even while it partakes of India’s markets with its powerful manufacturing. China is also a nation waking up from its humiliation and instead of crafting a path based on mutual respect, its foreign policy currency remains one that humiliates other nations to feel its arrival, forgetting that while the world welcomed it since 1978 and ensured its growth, that welcome has a sell-by date. From backing Pakistan to avenging Doklam, China will keep India on tenterhooks through 2018. China is a bully and the best thing for Prime Minister Narendra Modi to do is to look at multi-designated Xi Jinping — like North Korea’s Kim Jong-un, Xi is President of China, General Secretary of the Communist Party of China, Chairman of the Central Military Commission, is the “Paramount Leader”, and “core leader” — in the eye.
The United States will remain unpredictable. By calling Pakistan’s bluff on terrorism, it seems US President Donald Trump is finally accepting the truth of what Pakistan is: a rogue state that has institutionalised terror as its second pillar of what it pretends to call ‘democracy’ — the first being military. This is good optics for the world that has suffered from this epicentre of terror. As far as India goes, we need to be more circumspect — the good optics may turn into a myopia. The USD 18.6 trillion economy is clear about its foreign policy, which is to manage US interests. For the past several decades, the focus of Indian foreign policy has been to look good, be the “good boy” of international relations. But foreign policy is a field that has no first principles, it stands on shifting stands. That said, the strategic handshake with the US in the rebirth of the decade-old Quadrilateral Security Dialogue between India, US, Japan and Australia is a positive step. Finally, on the economic front, stronger India-US ties make for a deeper friendship.
Japan is strengthening its relationship with India. Perhaps as a recoil from China’s direct aggression and the country’s support to its other friend, North Korea, this island nation is veering towards India. At a global level, it has the support of the US. By strengthening strategic and economic ties with India, this USD 4.8 trillion economy, the world’s third-largest, now gets the added support of a regional power. The India-Japan civil nuclear agreement will see six new nuclear reactors for power generation being built. The Asia-Africa Growth Corridor could also hold potential for building a joint economic infrastructure and through it markets. And despite all criticisms, Modi has put his weight behind the Mumbai-Ahmedabad bullet-train. Clearly, Japan is putting its money where its strategic interests are, and through it building a strong India-Japan bridge. On its part, India is open for business with Japan. India’s economic interests with Japan began with Suzuki. Their consolidation today is looking beyond single-deal mechanisms.
Pakistan and its degeneration into a terror-breeding ground, with all its energies focussed on creating terror, mostly in Kashmir but equally in Afghanistan and other civilised nations, will be the running story in 2018. In 2017, India scored its diplomatic victory by isolating it. Earlier, the surgical strikes sent a military message. Economically, India-Pakistan trade stands at USD 2.2 billion, down from USD 2.7 billion in 2013-14 — if this relationship ends, India will not even notice it. In 2018, expect the global isolation of Pakistan strengthen, with civilised nations from the West and East condemning its policies, resulting in a greater isolation from all but the Islamic states belonging to the Organisation of Islamic Cooperation. Nonetheless, Pakistan will remain undeterred and will keep the Indian security infrastructure on its toes. At home, we will continue to hear both voices — friendship and war. The cries of war will be sedated by ‘nuclear’ options, that of peace will be muted by Pakistan’s infiltrations and assaults. The government will continue to walk the thin line of political and diplomatic engagement but will not shy from attacking. In 2018, Pakistan will feed on rhetoric but the country will become less significant.
Budget 2018 will come with huge expectations but will end with simple business as usual. There are speculations that with the narrower victory in Gujarat behind it, the NDA government may deliver more sops for farmers. That may well happen. But the pressure on the economic pedal will certainly not reduce. This government is serious about economic growth — of which farmers are a part and have been promised a doubling of their income already — and from introducing the goods and services tax (GST) to executing the insolvency and bankruptcy code to raising India’s doing business rankings, the government has done the dirty work of creating the catalysts for growth, which will continue through Budget 2018. But the time of Budget as a media event or a document for making grand policy announcements is behind us. Do not expect income tax rates to change; the only change would be, perhaps, in raising the income slabs on which taxes will be levied. The bigger worry in Budget 2018 will be a rising fiscal deficit, which in all likelihood will exceed targets.
Economic growth will return from the third quarter of the current financial year to 31 March 2018 and continue well over the next few quarters. The main reason will be the introduction of the GST from 1 July 2017. After the initial blips that took into account the technical glitches, the excessive compliance burden on small and medium entrepreneurs, and the political wrangling around rates between State finance ministers and the Centre, the GST will now be a steady ship with high sails. The next financial year will see a sharp rise in indirect taxes collections, the fruits of which will be reaped by both the Centre and the States. Insolvencies and their resolution will also grab the headline throughout 2018 — managing business failures is as important to economic growth as building businesses. The Financial Resolution and Deposit Insurance Bill will get passed and failure of financial firms will finally have a system in place. Riding these would be the stock markets, which will grow through 2018.
State elections will be a running story through 2018 as five states will go for elections. Although Karnataka is the only large state with 223 seats that will have its assembly elections in April-May 2018, there will be four smaller states going in for elections in 2018. Soon after Budget 2018, the three states of Meghalaya, Nagaland and Tripura will go first in February-March 2018. Although these are smaller states with 60 seats each, they will set the political debate for Karnataka, which with 223 seats will go for elections in April-May 2018. The end of the year will see elections in another small state, Mizoram, in October-November 2018 for 40 seats. But the political discourse will not end with these states. In 2019, India will have elections in 11 states — in addition to general elections — and the results of these five states in 2018 will see analysts throwing projections on not only Modi and Rahul Gandhi, but also on Rajasthan, Chhattisgarh, Madhya Pradesh, Sikkim, Arunachal Pradesh, Telangana, Odisha, Andhra Pradesh, Haryana, Maharashtra and Jharkhand. The return of Rahul Gandhi and the Congress will be a running motif through 2018.
Three companies — Air India, Jio and Apple — will stay in the headlines throughout 2018. Air India because of the potential disinvestment and/or strategic sale. The noise will be created by incumbent employees, particularly its highly-paid pilots, who will get political support from the Left and the Congress. Much of this support would be part of their Opposition-dharma than on a principles-based stance. Reliance Jio, with its high-quality data service and affordable pricing, will continue to roll on. Consumers have embraced it and today India is the world’s largest data consumer. Jio and the changes it has brought to the entire industry will transform the way the Indian economy and its economic agents function. (Disclosure: the author was a Vice President at Reliance Industries Ltd till December 2016.) Finally, Apple will remain under pressure, legally and on the consumer front, as its slowing down iPhones face lawsuits (nine on last count) and the company’s reputation takes a hit. It’s going to be a tough year for the world’s most valued company and one that was heading towards becoming the world’s first trillion-dollar corporation.
Artificial intelligence (AI) and robotics news has been largely confined to the inside pages in India, lagging the world. This will change in 2018. Already, the US, China and Russia are building AI capacities and hubs to be leaders of the world. For all three, AI is strategic weapon. Sadly, the discourse in India hasn’t even begun. In 2018, India will need to get its AI facilities going. It will begin through businesses but will find their way into the government as well. For this, India needs to create an ecosystem that nourishes talent and innovation, which despite all good intentions is missing. This change, however, will not happen without a pushback, as the wider discourse holds forth on AI replacing jobs. Already, robots have entered manufacturing plants. They will grow in 2018. Time is the key here: if we don’t get it right, we will end up importing the same technologies from the US and Russia, as we do our defence equipment. The political impact of AI and robots will need to be supported by smart policies around these disruptive technologies. But on this front, India will not be alone: this is a global problem. That said, both AI and robotics will make headlines in India during 2018.
Clash of cultures will widen in 2018. Social media will harden positions between communities, religions, economic theories, political stances, social options. If 2017 saw the rise of the ‘spin’ — any event or news was butchered and battered until it yielded a pre-determined narrative — 2018 will see it multiply. Due to looming general elections, this clash and its feeder pipelines will spill over into 2019 as well. So, expect more insensitive behaviour, particularly and ironically from the educated, on social media. But when this misbehaviour crosses the boundaries of discourse and enters physical domains with violence, it hits the national consciousness. State governments need to be extra vigilant and merciless in executing the rule of law. Every assault would show a weak State capacity, every unpunished example of violence will exhibit weak intent to resolve it. All of which will ensure it stays in the headlines.
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Gautam Chikermane is a Vice President at ORF. His areas of research are economics, politics and foreign policy. A Jefferson Fellow (Fall 2001) at the East-West ...Read More +
Guillermina French Fundacin Ambiente y Recursos Naturales (FARN)Read More +