Once again the western countries are at loggerheads with Russia. This time over Ukraine. Once again, India is placed in a tight spot–in having to choose between new opportunities and old allies.
In the fifties, when India had to take a position in the Cold War period, its political leaders managed to stay ‘non-aligned’ and help state-run businesses benefit from the US-Soviet Union stand-off. Competing business houses used their political connections on either side to gain an advantage over each other. Despite the hard circumstances, Indian political and business leaders scored big wins, according to Mircea Raianu.
This time, there are other factors muddying the waters.
In an interview with Moneycontrol, the historian of modern South Asia and author of Tata: The Global Corporation that Built Indian Capitalism, spoke about India’s history with non-alignment and why that political stand may not work as well this time.
India’s continuing economic and military links with Russia can be directly traced back to the first decade after independence. As the Cold War split the world into competing power blocs, Prime Minister Jawaharlal Nehru adopted a posture of non-alignment alongside many other ex-colonial nations such as Egypt, Indonesia, and Ghana (but also European socialist countries like Yugoslavia that broke with Stalin). This was done for both pragmatic and ideological reasons, in order to benefit materially by attracting capital and expertise from both West and East (for example in the construction of state-owned steel plants), and due to Nehru’s orientation toward socialism in a democratic political context. Military aid from the Soviet Union eventually became more important, particularly after the 1971 war for Bangladeshi independence and growing US ties with Pakistan.
What have been the benefits India has got from this relationship over the years, and what has it given in return?
I’ll speak more about the economic aspects since I am not an expert on the military side. At first, the Indian state benefited considerably from Soviet aid for projects such as the steel plants at Bhilai and Bokaro. These were very successful in increasing steel output and technical training at low cost, while avoiding dependence on foreign exchange (in short supply in the late 1950s and early 60s). The technology was older but free of the patent protections insisted on by German and British private partners. Meanwhile, the US mainly directed aid toward agriculture rather than heavy industry. Seeking assistance from both sides (and in different sectors) created a vital space of maneuver for the Indian state to implement its desired industrial policy. In return, the Soviets obtained additional markets for export of grain and other commodities. As Oscar Sanchez-Sibony has pointed out in the excellent book Red Globalization, they were far from a dominant partner, merely using India to widen their participation in the global economy beyond the Iron Curtain. It was a win-win scenario but not for long.
With the thawing of the Cold War, did Russia's interest in India weaken and therefore its investments in India reduce?
The shift to primarily military aid in the 1970s accompanied both détente (thawing) in the Cold War and stagnation in the Soviet economy. India, too, was undergoing a period of economic instability in the aftermath of the oil crisis of 1973. Under those conditions the relationship weakened. With limited liberalisation by Indira and Rajiv Gandhi in the 1980s, a more pronounced shift toward the US occurred (especially in the technology sector). But during this time India faced another balance of payments crisis (just as in the late 50s) and took advantage of oil purchases in rupees pegged to the ruble. The spike in oil prices due to the Gulf War and the collapse of the Soviet Union in 1991 together led to the well-known liberalising reforms under Prime Minister Narasimha Rao and Finance Minister Manmohan Singh.
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Which are the old business houses that thrived thanks to India's friendship with the Soviet Union?
As I discuss in my book, Tata: The Global Corporation That Built Indian Capitalism, Indian business houses were in conflict with each other and with the Nehruvian state after independence. American and Soviet connections were leveraged to fight those battles. Tata had long been associated with the US, from the early days of building the Tata Iron and Steel Company (TISCO) and the hydro-electric power plants in Western India. Chairman J.R.D. Tata was planning to expand production at TISCO with American help in the 1950s in order to counterbalance Nehru’s insistence on steel as a reserved sector for the state. When news of the Soviet offer for the plant at Bhilai broke, Tata feared the loss of an essential “open door” to the American steel industry. But President Einsenhower and his advisers were even more alarmed about the threat of Communism and pushed through a much-needed World Bank loan to fund TISCO’s expansion. Meanwhile, the Birlas and Lalbhais represented India in negotiations to purchase Soviet equipment for the oil and aluminium industries. This was in keeping with their calculated proximity to Nehru and the Congress. The benefits of trade with the Soviets went mostly to the Indian state, specifically to certain ministries like the Production Ministry (rather than Commerce and Industry). Without Cold War competition, India would not have had such a significant and long-lasting public sector.
How did the dissolution of the Soviet Union affect this bilateral relationship and trade?
After the fall of the Soviet Union, Russia experienced a lost decade of economic decline (culminating in the financial crisis of 1998). India was comparatively on the rise and private business looked to the West. The relationship weakened further but did not break, remaining important in the military and energy sectors (both oil and nuclear).
What industries and big business houses are still dependent on this bilateral relationship?
Very few private businesses in India today are oriented toward Russia. This is in keeping with historical precedent and is not likely to change.
What challenges do you see to the Indian trade reducing its dependence on Russia?
India is in a precarious position, again not unlike the 1950s. Given the continuing dominance of the dollar as a global reserve currency, deepening supply chain integration (recall the signals to move manufacturing from China to India during the first year of the pandemic), and strategic partnerships to contain China (the Quad), it will be difficult to withstand Western pressure on sanctions. At the same time, breaking with Russia completely will put a dent in India’s military capabilities and freedom to assert its own foreign policy as an aspirational regional and global power.
In the Nehru and Indira Gandhi years, non-alignment made sense politically, economically, and ideologically (a dimension that is largely absent in a post-Cold War world). Today that is not so clear. One big unknown is the resilience of the Russian economy after sanctions, which will also test the prospects for self-reliance under duress. In the short term, Russia will have very little to offer for India’s broader developmental needs, which can only be achieved by continued participation in the US-centred global economic system. But in the long run, if Russia regains some degree of stability and influence, India may decide to keep that door open. Whatever happens, it will become necessary for Indian and other Global South leaders to begin articulating a more coherent vision for where they stand and what they stand for – as Nehru once did.