The comeback of the Indian Ocean

Innovation is often viewed as a mindset or something that can be stimulated with the right policies. However, it also has a clear geographical component. Many ancient cities were built alongside rivers. Today’s most innovative regions – Silicon Valley, Boston, New York, London, Dubai, Tel Aviv and Singapore – all look out over an ocean.

The proximity of open water stimulates entrepreneurship, lofty ambitions and risky ventures. In this series in the Dutch newspaper Het Financieele Dagblad, our lead researcher Haroon Sheikh looks into the innovative strengths and developments in seven major coastal regions. This week’s edition is about the Indian Ocean. Coming up next week: the waters of Southeast Asia.

Long ago the Indian Ocean was the center of maritime trade, but after the discovery of America the Atlantic Ocean became the most important waterway. With the eastward shift of the economic center of gravity, its importance is once again growing. It is here that China and India are competing for maritime domination.

China is building a trade network in the Indian Ocean as part of the ‘Maritime Silk Road’. It is investing in a network of regional ports, compared by foreign commentators to a ‘string of pearls,’ such as Gwadar in Pakistan, Colombo in Sri Lanka, Chittagong in Bangladesh, and Sittwe in Myanmar.

India and Japan are growing towards each other. They are worried about China and are becoming more active on an international level

The majority of Chinese trade is conducted via the contended South China Sea. By creating land connections with ports in Pakistan and Myanmar, it creates direct access to the Indian Ocean. Because of this strategic importance, China has set up the China-Pakistan Economic Corridor with a value of $62 billion.

Maritime India

In addition to China, a second player is emerging in this maritime region. India is creating an alternative network and hopes to live up to the name of the Indian Ocean in the literal sense.

India is not commonly regarded as a maritime nation. However, despite its connection to the Eurasian plain, the Indian subcontinent is similar to a large island. As a floating continent it collided with Eurasia, creating the Himalayas. That mountain range combined with the immense rain forests practically separate India from Central Asia.

For many centuries, the sea has connected the southern parts of India with the rest of the world. Early on, Indian merchants traded with the Gulf, and even with the Roman Empire. In the east, Indian dynasties and trade routes reached as far as Southeast Asia and the southern Silk Road. Traces of this can still be found in the Hinduism of Bali and the temples of Angkor Wat in Cambodia.

Indian culture is related to other maritime societies. In contrast to China and Russia, India has little centralization of power. Like England and the U.S., comparatively safe island life allowed for multiple authorities and centers of power. Tolerance and acceptance of diversity also characterize India.

The Indian economist Amartya says that the country’s culture could be described as ‘argumentative’. Its culture and society are not characterized by absolute truth, but by dialogue, discussion, and doubt. This partly explains how a poor country like India could become one of the largest democracies in the world.

Despite its historical maritime trade and open-mindedness, India was isolated from the rest of the world in the twentieth century. After decolonization, India was non-aligned during the Cold War. The country’s first leaders, the traditionalist Gandhi and the socialist Nehru, shared a dislike of free trade and their policies were protectionist. This resulted in weak economic growth – the ‘Hindu rate of growth’ – that barely exceeded population growth.

Higher growth

Those days are over. The turning point came in 1991, when a financial crisis prompted the ruling Congress Party to dismantle the rigid Indian administration, the so-called ‘license Raj’. Economic growth increased steeply as a result of the reforms. These reforms are continuing under Narendra Modi of the Hindu nationalist BJP, who has been in power since 2014. In 2015, for the first time, India saw faster growth than China.

A combination of three developments will give the country’s digital economy a huge boost. First of all, the financial reforms. Jan Dhan is a program of financial inclusion that was launched in 2014 and that aims to give every household in India access to a bank account. By now, 300 million bank accounts have been opened under this program.

Last year, India also conducted a sudden demonetization campaign, ending the use of large banknotes as legal tender. Although the realization of the program has been much criticized, the objective is to raise tax income and to stimulate digital payments.

The second pillar is the mobile telephony market. India is now the world’s largest growth market, and a price war has resulted in a steep increase in the use of mobile data.

The third and most amazing pillar is Aadhaar. This is the world’s largest biometric government system. The system, which is linked to many government and business services, contains the iris scans and finger prints of over one billion Indian citizens. It is part of the unified software platform India Stack, one of the world’s most ambitious e-government projects.

A new monsoon wind

India is also opening itself to the world. Under Modi, the country has stepped away from isolationism. In terms of foreign policy, he is the most active Prime Minister the country has ever had.

The most remarkable project was announced a couple of years ago and is explicitly based on India’s former maritime traditions. Project Mausam refers to the monsoon wind that, in the past, enabled a trade network with the Arabian Peninsula, East Africa and Southeast Asia. Its objective is to strengthen the cultural ties between these peoples and it is a strategic response to China’s maritime Silk Road.

Mausam also aligns with other Indian projects. The Think West policy focuses on the Gulf. India is negotiating a $75 billion UAE-India Fund with the Emirates, to be invested in Indian infrastructure over a ten-year period.

Furthermore, India is developing in-depth strategic relations with Iran. For example, India developed the Iranian port Chabahar, which connects Afghanistan by rail with the sea. More recently, there have been plans for a huge underwater project, which transports Iranian natural gas first to Oman, and from there to India.

In the east, India has a Look East Policy that focuses on Southeast Asia. It cooperates with the regional alliance ASEAN and, in recent years, it has developed many maritime projects with countries such as Vietnam, Singapore, and Indonesia.

For its maritime strategy, India invests in its navy and in ports that focus on the Gulf, such as Kandla and Kochi, and on Southeast Asia, such as Haldia and Chennai. In addition, India is heading a railway project that will run along the entire axis of the continent, from east to west, from Bangladesh (and later Myanmar) in the east to Istanbul in the west.

Together, these projects paint a picture of extensive collaboration along the coasts of the Indian Ocean. India is developing a straight horizontal axis in southern Asia to challenge the emergence of China.

India and Japan

Modi’s activism is not without risks. His Hindu nationalism causes friction with the Muslim population. This becomes manifest in, for example, fierce conflicts around Bollywood movies, as happened recently with Padmavati. On an international level, there may be more conflicts with China and with its neighbor Pakistan, an ally of China.

But India has allies, too. Recently, India and Japan set up the Asia Africa Growth Corridor (AAGC). They want to cooperate from East Africa to East Asia. India and Japan are growing closer to each other. Both countries are becoming more internationally active, and both are concerned about China’s growing influence.

India and Japan are in the south and east of the Eurasian Plain. Economically, the countries supplement each other: Japan’s industry and export versus India’s growing market and need for infrastructure. Both countries are also democracies with a soft international profile.

Aside from Japan, the U.S. is also growing closer to India. It is significant that Asia-Pacific has been replaced by Indo-Pacific in American news media. It implies a changing strategic view. India and the Indian Ocean are now given an important role in East Asia. The Indian Ocean is back in the picture. And as far as India is concerned, the name Indian Ocean should reflect the country’s importance in the region.

To read the article in Dutch, click here.

About the author
Haroon Sheikh (37) supervises FreedomLab Thinktank, works as a researcher at the investment company Dasym and is part of the VU’s Centrum Ethos as a philosopher.

He earned his doctoral degree with research into the influence of old traditions on modern societies and published two books: De Opkomst van het Oosten and Embedding Technopolis.
A book about new seaside powers will appear in 2018, based on these features in FD Morgen.