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11 October 2011India’s Critical National ChallengesSergei DeSilva-RanasingheFDI Senior Analyst Key Points:India is seeking to remain a nationally stable and globally competitive power, by: Emphasising rapid and substantial economic development. Aggressively seeking access to new sources of energy to sustain its economic growth. Trying to mitigate a growing food and water security crisis, worsened by climate change. Seeking to stabilise its internal and external security situation, which is sharpened by inter-regional, political, religious, economic and social tensions. SummaryIndia has made solid progress in advancing its economic development and internationalprofile. Yet, it faces a number of major national challenges, such as: rapid, unregulatedurbanisation; providing for a large population; insufficient economic opportunities to satisfythe aspirations of rural Indians; and growing concerns over food and water security. If leftunchecked, these escalating challenges have the potential to seriously impede its politicalstability. AnalysisEnergy Security DilemmaGiven that India is one of the fastest growing economies in the world, the demand forenergy has also grown substantially and will continue to present a major challenge to India’squest to achieve energy security. This factor was confirmed by the Ministry of Power’sSecretary, RV Shahi, who stated in 2006: “To deliver a sustained growth rate of eight percentto nine per cent through the next 25 years till 2031-32 and to meet the life line energy needsof all citizens, India needs, at the very least, to increase its primary energy supply by three tofour times and its electricity generation capacity by about six times. It is further estimatedthat by 2032, our requirement will be of the order of 800,000 MW.” He added, “Coalaccounts for over 50 per cent of India’s commercial energy consumption and about 78 percent of domestic coal production is dedicated to power generation. This dominance of coalin India’s energy mix is not likely to change till 2031-32.”
Since India has seven per cent of the world’s coal reserves and is the third largest coalproducer, it is hardly surprising that it will continue to lean towards coal as a relatively cheapand accessible source of energy to sustain its economic growth. As a source of fuel, coalcurrently generates nearly 80 per cent of India’s electricity. Another major source of energy,according to the World Bank, is India’s investment in hydropower generation, which nowaccounts for 26 per cent of total power generation countrywide, and is also set to expand incapacity in the decades ahead.Presently, in demand for oil India is ranked fourth in the world. Due to the paucity of itsdomestic oil reserves, which are reportedly 0.5 per cent of global reserves, India has littlechoice but to import more than 75 per cent of its oil and 16 percent of gas, much of itoriginating from the Middle East. In fact, according to The Energy and Resources Institute,based in New Delhi, by 2031 India’s rapidly escalating demand for energy will require it toimport 78 per cent of its coal, 67 per cent of its gas and 93 per cent of its oil. Hence, theIndian government is actively encouraging its state-run energy corporations to engage innumerous exploration projects overseas, perhaps best exemplified by ONGC Videsh Ltd,which has 34 projects in 15 countries.Despite these attempts to increase access to supplies, India remains an energy deficientcountry. An estimated 400 million people, and 20 per cent of all villages, have no access toelectricity. Biomass energy is relied upon by two-thirds of households in India. The shortfallin energy has also affected the commercial and industrial sector, where 60 per cent ofbusinesses and a sizeable number of households are often compelled to use electricitygenerators.As part of its strategy to alleviate its energy security vulnerability, India has also embarkedon the construction of strategic crude oil storage facilities. In addition, India is attempting toaugur undertake a process of conversion to being less dependent on oil, by diversifying andincreasingly resorting to liquefied natural gas and nuclear energy. In fact, India has plans toincrease its nuclear energy capacity five-fold; with new power plants to be operational by2020 the sector is expected to generate 20,000 MW.Economic Development, Population GrowthOver the last six years, India’s economy has grown annually at an average rate of eightpercent. In March 2011, the Reserve Bank of India claimed that foreign exchange reservesstood at US$303.51 billion. The benefits of rapid economic growth raised the income andstandard of living of an estimated 350 million people or 30 per cent of the country’spopulation, many of whom live in large cities where economic activity accounts for two-thirds of India’s Gross Domestic Product (GDP).1India’s growth, however, has had the effect of raising food prices, which has put pressure onsalaries that are increasingly inadequate to keep abreast of the rising cost of living. TheWorld Bank estimates that 41.6 per cent of India’s population lives below US$1.25 per dayand 75.6 per cent earn below US$2 per day. “Inflation poses a serious threat to the growthmomentum. Whatever be the cause, the fact remains that inflation is something whichneeds to be tackled with great urgency," stated India’s Prime Minister Dr. Manmohan Singh.In January 2011, The Economist reported that India’s current-account deficit had widened to4.3 per cent of GDP; while in February 2011, BBC News Business also reported that India’s1According to a February 2010 report compiled by Deutsche Bank Research, entitled: “The middle class in India”; citingdifferent sources, the report claimed that the Indian government had no official definition of its middle class and that themiddle class itself could vary in number significantly from 30 to 300 million people. Page 2 of 6
inflation rate had reached 8.4 per cent and food price inflation had risen to 17 per cent.Furthermore, as affirmed by the Asian Correspondent, India’s GDP stands at $2.55 trillionand its national debt is 78% of GDP.As the second most populous country on earth, comprising 1.2 billion people, Indiaconstitutes nearly 17 per cent of the world’s entire population. Given current trends, theUnited Nations Population Division forecasts that India will bypass China’s population shortlyafter 2020. The US Population Reference Bureau claims that India’s population will reach 1.4billion by 2025 and 1.7 billion by 2050.Although the increase in India’s population has abated to a large extent, the base of itspopulation remains very large. There is also substantial variation across Indian states in therate of population growth, both of these facts were highlighted in India’s 2011 census.Attempts to engage in population control have had mixed results, for a variety of reasonsranging from differences between federal-state politics, weak governance and corruption,and overlapping economic, ethnic, social and cultural factors.While India’s average fertility rate has declined from an average of 6 children per woman inthe 1950s, to about 2.6 today, this decline has been registered primarily in the south of thecountry. According to current population growth trends, there is an emerging discrepancybetween the northern states and southern Indian states, such as Kerala and Tamil Nadu,which claim to have stabilised birth rates. The states of Bihar, Chattisgarh, Jharkhand, MadyaPradesh, Orissa, Rajasthan, Uttarakhand and Uttar Pradesh, which happen to also be India’sleast developed states, reportedly accounted for 46 per cent of India’s 2011 population and53 per cent of its population growth.Food and Water SituationCompounding the problem of a large and growing population is the escalating problem offood and water security, which is among India’s most serious crises. The situation is soserious that a recent World Bank study, entitled India’s Water Economy, Bracing for aTurbulent Future, estimated that, based on current consumption trends, demand for waterin India will exceed all sources of supply by 2020. Although India has 15 large, 45 mediumand over 120 minor rivers, most are not perennial, which explains why around 400 millionpeople live in the Brahmaputra, Ganges and Indus river basins, which are fed by the glaciersin the Himalayas.Similarly, as a result of poor infrastructure, growing scarcity in surface water and increasedvariability in weather patterns due to climate change, most people have little choice but torely on groundwater, which provides up to 80 per cent of domestic water supplies and 70per cent of India’s irrigation requirements. In fact, today India reportedly has an estimated20 million tube wells. Nonetheless, the sustainability of India’s aquifers is proving to be acritical long-term problem as a result of excessive extraction of finite groundwaterresources. According to the Water Centre at Columbia University, the ground water tables inthe Punjab, a state considered to be India’s bread basket, have been declining at almost 1metre per year, compelling farmers to extract water from depths up to 20-50 metres belowthe surface. Similarly, in the state of Gujurat, aquifer levels are reportedly declining at a rateof 3-5 metres per year. According to reports, the depletion of aquifer levels appears to be agrowing nationwide problem that will have widespread implications for India.Aside from poor or inadequate infrastructure, another significant factor contributing to thedeclining availability of drinking water is contamination of rivers and subterranean aquifersfrom industrial effluent, fertilisers, pesticides and untreated sewage (the World Bank claims Page 3 of 6
that only 35 per cent of India’s population have access to toilets). Under such circumstancesit is hardly surprising that around 30 per cent of India’s population, primarily in rural areas,do not have proper access to clean drinking water. In fact, only seven out of India’s 35 stateshave sufficient availability of drinking water. A large part of the reason for this is theagricultural sector, which consumes nearly 90 per cent of India’s water resources, butaccounts for only 21 per cent of India’s GDP.Living with water scarcity has become a way of life in many parts of rural India. Ominously,there are indications that scarcity could lead to serious political and social problems, asexemplified in May 2010 in the state of Madya Pradesh, where tensions over water-relatedissues sparked riots and left five people dead. Similarly, the incidence of suicide has shownsigns of increasing among farmers, who have been seriously affected by prolonged droughtand are therefore often unable to repay their debts. In April 2009, The Independent reportedthat in Chattisgarh over 1,500 farmers committed suicide because of a combination ofdrought and debt.Trends also suggest that growing water scarcity across India is forcing increasingly largernumbers of people to head to the cities in search of employment and new opportunities,due to the difficulty in maintaining farming as a livelihood. Although close to 70 per cent ofIndia’s population is rurally based, the rate of urbanisation has increased markedly, due toincreasing economic and environmental difficulties faced by rural communities. The urbanpopulation across India has doubled over the past 30 years, now representing nearly 30 percent of India’s total population. It is forecast, according to some estimates, to reach 50 percent of the total population by 2025. Currently, India has three of the world’s 21 mega cities,Mumbai (19 million), Delhi (22 million) and Kolkata (14 million). The growth of slums has alsobeen widespread. For example, 35 million people presently live in slums, which account for aquarter of all urban housing.Internal and External SecurityAlthough senior Indian officials accuse Bangladesh, Myanmar and Pakistan of eitherharbouring, or not doing enough to intercept, cross-border terrorism, there is growingconsensus among officials of the Indian security forces that internal security is taking greaterimportance in national security calculations. For example, a January 2011 report tabled bythe Institute for Defence Studies and Analyses, entitled: Internal Security and Centre-StateRelations, affirmed that: “Internal threats to national security have assumed centre-stage inthe debates on Indian security. They are arguably more serious than the external threats.”The issue has also resonated strongly with India’s Prime Minister, Dr. Manmohan Singh, whosaid in February 2010: “Internal security is a critical issue which affects the pace of growth ofdevelopment.”India faces complex and varied internal security threats different to those of any othercountry, partly due to its sheer ethnic and religious diversity and its accompanying politicaldynamics. There are reportedly over 100 extremist, terrorist and insurgent groups engagingin subversive activities in India. The fractious province of Jammu and Kashmir has been thescene of major violence for decades, which has forced India to deploy tens of thousands ofsecurity forces personnel. Indian authorities in 2008 officially declared that, since itsinception, the ongoing insurgency had claimed over 47,000 lives, including 7,000 Indianpolice and 20,000 insurgents.India’s national security apparatus has been overhauled over the last decade by the KargilWar and the Mumbai 26/11 terrorist attacks. Nevertheless, its restive eastern hinterland,often referred to as the ‘Red Corridor’, has been seriously affected by militant activity by so Page 4 of 6
called ‘Naxalites’, ‘Maoists’ or ‘Left-wing extremists’, a loose definition frequently used byIndian government officials. According to India’s Ministry of Home Affairs, by mid-2009insurgent activity severely affected 182 districts and 10 states, equating to some 92,000square kilometers. However, the situation appears to be showing signs of escalation in aconflict that has already accounted for over 6,000 lives over the last two decades, with 1,180reported deaths in 2010 alone. Latterly, in 2011, the New Delhi-based Institute of ConflictManagement made the following assessment: “310 of the country’s 636 Districts arecurrently afflicted by varying intensities of chronic activity, including subversion, byinsurgent and terrorist groupings. 223 Districts across 20 States register Maoist activity;another 20 Districts in Jammu and Kashmir are affected by Pakistan-backed Islamistseparatist terrorism; and 67 Districts in six States in the Northeast are affected by numerousethnicity-based terrorist and insurgent movements.”Although there are evident social and economic undertones to the so called Naxalitemovement, it could hardly be referred to as a homogenous entity. The movement is moreakin to a disparate set of sub-groups, organised more along the lines of region, ethnicity,religion, language, caste and class. Although the Indian central government has attemptedto address the underlying issues, especially the skewed focus of economic developmentbetween western and eastern India, these measures have not shown the desired results.As it is each state’s responsibility to maintain security, for political reasons the Indian centralgovernment deploys military forces for internal security operations when it is requested bythe state in question. On only three occasions has the Indian central government unilaterallydeployed forces on internal security operations, without the consent of state governments.Due to the nature of forming a central government and the complications of coalitionpolitics, effective action has been hindered by a lack of political will. In addition, mostpolitical parties in India are heavily reliant on rural votes to win elections, making theproblem more difficult to resolve.While there is no doubt that India is experiencing rapid economic growth, it also facesformidable and escalating challenges. The serious challenge posed by food and waterinsecurity has the potential to erode political stability, particularly along ethnic, religious,caste and class lines. This is particularly the case between Hindus and Muslims. There is alsothe potential for a surge in either Maoist or secessionist violence in regions where economicdevelopment has had a limited impact. Whether India can tackle these monumentalchallenges by itself is debatable, but it is likely to require significantly greater internationalcooperation and assistance, financial, technical and otherwise, to successfully confront anddiffuse what may otherwise become seriously destabilising forces. Page 5 of 6
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