Editor's Note: You can follow the full series here. It includes the briefing notes, and recordings + takeaways from the two sessions as they get published.
In Part 1 of this Masterclass series, we threaded together the primary drivers of complex change facing the world, much of it driven by the incoming Trump Administration’s new agenda: the US - China tensions; Europe’s dilemmas as it is caught between the US and China; the three things that are shaping the emerging global challenges—AI, climate and migration.
In Part 2, Shyam Saran, who has had a distinguished career as a diplomat, unpacks what it all means for India. Saran, the former Foreign Secretary in the Government of India, was instrumental in shepherding the Indo-US nuclear deal in 2008. He’s also worked as a PM Special Envoy for nuclear affairs and climate change, and was ambassador to Indonesia, Myanmar, and Nepal, and high commissioner to Mauritius. He is also the author of two books: ‘How China Sees India and the World’ (2022) and ‘How India Sees the World: Kautilya to the 21st Century’ (2017). (You can read a more detailed Spotlight on him here.)
He was in conversation with Dinesh Narayan, a columnist, author of The Making of the Deep Nation, and a contributor to Founding Fuel.
15 Takeaways
(Read Time: 10 min)
1. The world is facing cross-national polycrisis, but the ability to deal with them through global collaboration is diminishing.
Context: One key perspective from session 1 was that there’s a breakdown of the international order; Sundeep Waslekar said that the big powers are breaking the accords and agreements which they had helped found and build over the years.
- Trump is accelerating the steady diminution of US influence and power.
“The international order is breaking down because the very architects of that order are taking a wrecking ball to it [because they] now find it inconvenient… What Trump is doing is only going to accelerate the steady diminution of US influence and power.” - Saran
- Polycrisis: A number of crises are coming together, with strong feedback loops, mutually reinforcing each other. Example: climate change is a factor behind migration.
“There is perhaps a kind of a technological arrogance—that AI will find solutions for every problem humanity is facing, which is really not the case.” - Saran
2. China's rise is due to globalisation. The breakdown of this order may not be of advantage to China.
“China is doing great work in expanding renewable energy. But it’s a mistake to assume that this insulates China from what is happening around the globe.” - Saran
- China’s rise has taken place in an extraordinarily benign and congenial international environment, both politically and in the economic sphere.
- Challenges, such as climate change, are global in nature. China’s ability to leverage its technological innovations still demands a relatively ordered and benign international environment.
3. US-China rivalry: China's remarkable development strides have shaken up the international order. The US, especially under Trump, is reacting with policies which ultimately undermine the very objective it is trying to achieve.
Context: In session 1, Professor Yang Yao said, the US looks at China through an ideological prism, and will always see China as a rival. And India is probably a counter balance to China. What are India’s strategic choices?
“[To constrain China, if not contain it], the alliance systems are very important. They are an asset for the US. Now Trump is undermining those very assets… If these policies continue, China will be the main beneficiary.” - Saran
- This is not an ideological confrontation.
- At least in the economic sphere, China and the US are still joined at the hip.
- The US played a very important role in China's rise. The sheer investment by the US in Chinese brain power over several years is unprecedented.
- It gave China access to its market and technology. It gave access to a large number of Chinese students to study in America’s top universities.
- The major driver was a common threat perceived from the Soviet Union. The economic and commercial factors became important in the relationship much later.
- China will now have opportunities to further expand its global presence and influence because the US is leaving a black hole.
- Today Europe is once again looking at China as an answer to the pressures they are going to be facing from the US.
- For example, Europe gives priority to climate change issues and many think strengthening cooperation with China may be good.
4. China does not look at India as a peer rival. It looks upon the India-China relationship in a very geopolitical frame, and through the prism of China's relations with the US.
Context: Where does the US-China rivalry leave India? The West sees India is a major counterbalance in Asia. But Saran has written that China looks at India as a “fallen nation”, which is not able to innovate or compete in the modern world.
“China does not look at India as being in the same league. But it looks at India as a threat because it is working with the US. Sometimes when the pressure on China increases, the sense of vulnerability increases, it looks to ameliorate the relationship with India. When that pressure is less, it feels more confident of being able to deal with the US, it does not pay much attention to India's sensitivities.” - Saran
- China’s view of power is very hierarchical. It wants to be at the head of the pile, to replace the US.
- For four years China resisted India’s demand to normalise relations and resume patrolling areas like Demchok and Depsang Plains [in Ladakh]. The fact that they agreed, with certain conditions, is a shift in this.
- That made it possible for the Prime Minister to meet Xi Jinping in Kazan.
- High-level official engagement between the two sides has resumed because there is a sense that if India comes closer to the US, it will be inimical to Chinese interest.
5. To expand its diplomatic space, India must focus on developing its economic and technological capabilities, and political coherence as a society—and reduce the gap with China.
“There is a large gap between India and China in these capabilities. If the world sees that you are reducing that gap, that itself expands your diplomatic space.” - Saran
- When I was Foreign Secretary, India was growing at 8-9% per annum. India and the world saw that India was reducing the gap with China, and saw it as the next China.
- The Indo-US nuclear deal, that agreement would not have been possible if not for that political context.
- After the global financial crisis, while China bounced back to a much higher rate of growth of 6-7% per annum, India’s rate of growth slowed down, and the gap started increasing.
- Secondly, in the geopolitical context, the gap between the US and China is decreasing. China has a sense that it is now moving towards the centre of the geopolitical space, and can have greater agency in shaping the world.
6. Despite Trump’s unpredictability, the US is the most significant power that India can ally with.
- [As India tries to reduce the gap with China], in the meantime, there is no alternative but to do external balancing. Which other countries share our concerns and are ready to work together with India to create a more balanced regional order?
- Judging from the initial developments, the US continues to be interested in working closely with India.
- India’s Prime Minister is perhaps one of the first heads of state to be visit Washington after the inauguration of Trump as President.
- Immediately after the inauguration, there was a meeting with the new Secretary of State, a meeting of the QUAD foreign ministers, and a commitment to strengthen the QUAD.
- QUAD’s next summit will take place in India.
7. India is looking at the liability provisions [in the Civil Liability for Nuclear Damages Act]. But the civil nuclear liability was responding to a concern which was not valid.
- The international civil liability convention, which is under the IAEA, was a response to the Chernobyl disaster. It had nothing to do with the Indo-US nuclear deal.
- The international convention sought to create an international fund that various countries with nuclear plants can draw upon in case of an accident. But to access the fund, they needed enabling domestic legislation.
- Such legislation would make the operator functionally responsible for distributing assistance immediately after an accident.
- The legislation should say what is the extent to which the domestic fund will be determined.
- So, if India would have, say $500 million, the operator would have to take insurance to be able to meet that liability. To meet that insurance premium, you would have to raise your tariff. So, economic viability determines the limit in your domestic legislation.
- But a domestic law also entitles you to draw upon the international fund.
- In India, because of the controversy over the Indo-US nuclear deal, it somehow got linked into a political [debate], which had nothing to do with the liability.
- That liability is already part of every nuclear contract—for example India’s past contracts with Russia.
- The US is no longer making any nuclear reactors. While there may be some components in the technology which will come from the US, essentially it is opening up the international commerce in nuclear energy, which was one of the objectives of the nuclear deal.
8. For energy security, India must have an accelerated transition away from fossil fuels towards economic growth fuelled by renewable, cleaner energy.
“Even if there was no climate change imperative, the energy security imperative pushes you in that direction. And there is a collateral benefit on climate change as well.” - Saran
- Don't expect a penny of climate change financing from the affluent Western partners.
- That has been the case since the Copenhagen Climate Summit. Hardly any of the $100 billion promised per year, was actually disbursed. They merely repurposed funds already being made available for developmental purposes.
- [At COP29 in Baku], the demand for $1 trillion per year was reduced to $300 billion, and you don't know how exactly it is [going to work].
- India is heavily dependent on fuel imports
- For oil, 95-96% dependence.
- Domestic gas supplies are not able to expand fast enough to meet the expanding demand.
- Most of the new ultra super critical coal-based thermal power plants need high-quality coal with low ash content. So, India is also importing coal.
- India must also deal with the issue of pollution, which is linked to climate change.
“Today, I’m much more pessimistic. We have already crossed that 1.5 degree centigrade level. And by 2045 we are already going to cross 2 degrees centigrade… There is a collective blindness. And a technological arrogance that AI will find a solution. No, I don't think so. The world will probably fry before AI is able to find any kind of solution.” - Saran
9. India will need to balance economic interest and security in its negotiations with China and the US.
Context: Indian industry has a growing dependence on China, and a Trump-led US is transactional with India and relatively tough on China. How do we balance that? - Vivek Kelkar
- China has shown itself very willing to use economic and commercial relations as political leverage.
- India gave visas for Chinese technicians to come for the Apple units in India, but China is not giving them exit permits.
- India has been importing some equipment from China, and suddenly China is imposing restrictions.
- India should be prepared to pay the price for safeguarding its security. In that context, even with a more transactional USA, India seems to have some confidence that having dealt with Trump in his first term, it can do so again.
- India’s economic and technological collaboration with the US has become very dense, very broad ranging. That will continue to be very important for India.
10. The US under Trump will turn more and more protectionist. But rather than the end of globalisation, it is leading to a restructuring of supply chains—through regional trading agreements—so that there is minimal exposure to the US links in those supply chains.
- The CPTPP [Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a free trade agreement between 11 countries in the Indo-Pacific region]
- RCEP [Regional Comprehensive Economic Partnership, a free trade agreement between 15 countries in the Asia-Pacific region]
- Mercosur [Southern Common Market, a trade bloc in South America]
- Now the European Union is looking at how it can work together with Mercosur.
11. The lesson for India is, you better become part of such arrangements. Otherwise, you are going to be marginalised.
“I have been a great champion of India becoming a part of the RCEP and even the CPTPP. The argument that this will become like a free trade with China—so the counter argument is, if you were a part of the RCEP, there will be a constraint on China, not on a bilateral basis, but you would be working together with many other partners who also want to put a constraint on China.” - Saran
- China has preferential market access to those countries, and India’s access to those markets becomes, then, less preferential.
- Today India is on the margins of the Asian economy—the most dynamic economic area in the world.
- India thinks it is a major economic presence, because it is going to be the third largest global economy. But are you the third largest trading economy?
- Indian industry is lobbying the government to block such participation. It seems that the lessons of 1991-92 are forgotten.
- The big companies at that time were strenuously opposed to economic liberalisation. And yet, they took the maximum benefit.
12. China scored over India in bringing technology from outside, but also ensuring there’s an ecosystem where that technology is assimilated, is learned from.
“The Indian Space Research Organisation, the atomic establishment, remain islands of excellence surrounded by a sea of mediocrity. They have to become the pathbreakers for many others.” - Saran
Context: Indian scientists and industrialists, with the exception of ISRO and a few others, have looked at science and technology in terms of how to reduce the cost of something developed in the West. If we are not original inventors, how is India going to be strategically relevant in the global economic and political game? – Sundeep Waslekar
- China was modest enough to realize that they had a lot of gaps. They sent huge numbers of Chinese students to American University at Chinese cost. India did not always develop that kind of ecosystem.
- India brought in MiG aircraft from Russia under license. When the MiG got upgraded to say MIG21 or MIG27, India made another licensing arrangement with Russia.
Context: The US is going through the DeepSeek moment [where the Chinese startup knocked a trillion dollars off the NASDAQ with an AI technology it developed for less than $6 million]. Some have compared it to Chandrayaan 3, where India was able to replicate a $4 billion US project for less than $100 million. Is there an efficient innovation dynamic here? – David Judson
- DeepSeek points to the fact that we are living in an age of rapid technological diffusion. That a cutting-edge technology will be confined to the originator, is simply not possible any longer.
- The Chandrayaan experiment shows that India is able to do this in certain domains because there has been a heavy investment by the state. But we have not been successful in generalising that across the economy.
- India has a ‘mission approach’. We want a world class metro system, so the government puts resources in that. But that does not mean it has revolutionised the whole public transportation system in India, which is what you really need.
13. Israel - Palestine issue: [India's relationship with the Middle East has been one of the success stories in the past 10 years. But now because of the Palestinian issue] the popular sentiment in the Arab countries, the goodwill they had for India, is getting undermined.
- This may have longer term consequences, even though there is no issue in the state-to-state relationship.
- In the IMEEC [India - Middle East - Europe Economic Corridor] project, the section from India to the Gulf countries is making progress. But the problem is in the western segment because Israel is an important part.
- India's position on the Gulf countries was also based on the assumption that Saudi Arabia and Israel will normalize their relations.
- The I2U2 [an intergovernmental economic cooperation forum between India, Israel, the UAE, and the US] was based on the assumption that we no longer had to choose between Israel and the Arab countries. Now that is in question.
14. India has a complicated relationship with each of its neighbours. But the government has been fairly prompt and agile in reacting to it. The one exception is Pakistan.
Bangladesh: much of the linkages established during Sheikh Hasina’s period in office continue to survive.
- During Sheik Hasina’s period in office, India made major advances in its relations with Bangladesh.
- India now has transit through Bangladesh territory to the northeastern states.
- India revived inland water transportation, the lifeline of this region, thanks to cooperation with Bangladesh.
- India became a major supplier of power to Bangladesh, which is instrumental in the emergence of Bangladesh as a major textile power.
- After the change of government, a three-way MOU was signed in Kathmandu, for supplying power from Nepal, through the Indian grid system, to Bangladesh.
- There is also a realisation in Bangladesh that there are big advantages from such cross-border linkages.
Maldives: The government came to power on the basis of an ‘India out’ campaign, and several hostile actions were taken. Now there’s a realisation that the relationship with India is critical for the Maldives.
- Maldives has resumed using a Dornier aircraft and two helicopters gifted by India for medical evacuations.
- The general population has easy access to essential goods from India at cheap rates, to curb inflation.
- India also did not react too sharply to the hostile statements.
Sri Lanka: The perception about India has changed after India’s prompt actions during the severe crisis.
- Through a swap arrangement, India made available foreign exchange, fuel, rice and other essential commodities.
Pakistan: There is a good case for re-engaging Pakistan. The country is under huge pressure, and there are possibilities for at least managing the adversarial relationship and benefitting from some cross-border linkages.
15. War means a failure of diplomacy. Even in tense confrontational situations, the diplomat’s role is to try and lower the temperature.
- Ultimately, diplomacy is the relations between human beings. You need not always be very friendly, but you should be credible.
- Diplomacy today is perhaps even more relevant.
