Global Policy Watch #1: Aimless WarGlobal issues and their impact on India—RSJWe are now in the middle of another war that’s going to last weeks, if not months, contrary to the initial expectations of the Trump administration. And with that, all bets are off about 2026. The US foreign policy is now based on a combination of fantasy and hubris with nothing to restrain it in the near horizon. The possibility of mid-term election loss is no longer in any calculus. We just have to get used to one spectacle after another every month for the remainder of Trump’s term. However, even by Trump’s standard, this war with Iran, with Israel getting the US to do its bidding, is both daft and amoral, and will have long-term consequences. It is difficult to figure out the proximate cause of launching these attacks last week because there’s no single, cogent reason offered by the Trump administration. My sense is that it is a combination of a few things. It is likely Iran was accumulating or manufacturing ballistic missiles at a rate that could tilt the balance in its favour over the number of interceptors stockpiled by Israel and American forces in the Middle East. The other claim offered about Iran being weeks away from using weapons-grade Uranium to build a nuclear weapon seems like a complete fabrication at this moment. The “success” of the so-called ‘Venezuelan model’ where you decapitate the head of the state and then deal with the next thug seems to have pleasantly surprised Trump. Much of the mobilisation of the American forces in the Middle East started right after it. The idea was to perhaps knock off an array of frontline leaders of the Islamic state in the first wave of attack and then wait for someone to emerge who signs on the surrender documents and then lets Trump and his friends begin their wheeling-dealing with the new regime. They are still hoping for this scenario to emerge, and they will continue to bomb Iran into a medieval ruin (like Gaza) till it happens. The other option is to wait for Iran to plunge into a civil war, which is acceptable so long as the US and Israel, or its cronies, control the oil fields and the straits of Hormuz. Or perhaps, the US realised that after the initial strikes it did on Iran last June and the ruthlessness with which the Islamic state massacred thousands of its own people thereafter, it couldn’t just hope for a regime change by the Iranian people themselves. Any of these or a combination of them could be the cause to launch the strikes. None of them is legal or justifies the civilian deaths and destruction. Back during the days of searching for weapons of mass destruction and launching into the Iraq war, at least there was an elaborate charade of a report, NATO consensus and some UN discussions to justify invading another country. Whatever the reason, it is clear now that there is no plan for the “day after’. Nobody cares anymore about what targets are being bombed in Iran. Civilian casualties are merely a number, and after another few weeks of bombing, all you will have is rubble across most large cities in Iran. The global leadership at this moment is so bereft of a spine that no one, barring Spain and a feeble France, is talking about the sheer lack of logic to this war. Or, the complete disregard of any norms as seen in a US submarine torpedoing an Iranian ship on its way back from India and then not rescuing the survivors at sea. The military resolution will perhaps happen in a few weeks. Iran just can’t last more than that. Its intelligence is compromised, its airspace is not under its control, and soon it will run out of munitions. And, China or Russia isn’t coming to its aid. But the political solution or the lack of it, will keep the Middle East and the rest of Asia on a boil for some time to come. Unless there is a planned political solution put in place, expect a refugee crisis, terrorist threats around the world from Iranian proxies and whatever rump of IRGC that remains committed to the old regime and disruptions in oil supply chains. Trump couldn’t care less, I guess, but it matters to all of us, especially in the Indian subcontinent. The risk for India in all of this is two-fold. First, energy prices will continue to remain elevated for the foreseeable future. The Strait of Hormuz accounts for about a quarter of total global oil flows, and despite Trump’s assurances, there is going to be both an increase in insurance costs for anyone handling this and a rise in shipping costs in case of re-routing of these containers. About 40 per cent of India’s and 10 per cent of China’s oil imports are routed through these straits. Qatar, which accounts for over 25 per cent of global LNG exports, has shut down its primary facility, and it is unlikely that LNG supplies will be restored to full capacity anytime soon. In any case, the straits are a choke point for this, too. Conservative estimates suggest Brent crude will go over $100 per barrel, and it is possible that we will be seeing a prolonged oil shock if we even take a realistic scenario about this war. India has barely a month of oil inventory and a limited storage capacity (of about two months) to manage any disruption, unlike, say China, which built its strategic reserve capacity in the past 4 years and has inventory to last about six months. India didn’t learn any lessons from the first phase of COVID-19 lockdown about increasing its crude storage capacity. A back-of-the-envelope estimate of crude at $110 for much of the year (a plausible scenario) suggests about a 60 bps reduction in GDP growth (to 6.5 per cent), an almost 100 bps increase in current account deficit (CAD) and inflation going up to 4.6 per cent. This is just taking into account the first-order consequences. Things could get worse when the dominoes start falling. Second, GCC countries are significant trade partners of India, and it is likely they will take some time to recover from this war when it ends. India receives about 40 per cent of its inward remittances (about $55 bn) from these countries, and an economic slowdown because of the rise in risk profile of the region or an increase in oil prices because of supply chain disruption will impact the remittances. These countries also account for 16-17 per cent of India’s imports and exports, and also act as intermediaries for India’s exports to the US. This substantial trade activity is supported by the exposure of the Indian financial system to these markets, which could also become cautious going forward in reducing its exposure. Keeping in mind the search for a safe haven in the US dollar, which has meant FPIs pulling out money from India so far this year, the reduction in remittances from GCC and the likely increase in CAD, the RBI will have to continue defending the rupee and intervening meaningfully in the forex market through the year. That will continue to keep pressure on liquidity, which has become the single biggest factor in impacting growth. Lastly, I’m intrigued by China’s silence through all of this. In displacing Maduro and eliminating Khamenei, the US has flexed its military might and taken out two of China’s allies (or client states) with barely a whimper from it. If Iran has been getting military hardware support from China, then their performance so far, compared to the might of America and Israel, has been dismal. The closing of the straits of Hormuz and an increase in energy prices are as much a worry for China as they are for India, yet it has shown no desire to act in managing these risks. And then you have the 15th five-year plan document that it released this week which acknowledges the challenges it faces in restructuring its economy and its willingness to opt for slower growth (4.5 - 5.0 percent) but “high quality development’ target (more R&D spend and investment in AI and tech), restraint on fiscal stimulus to spur growth, finding ways to boost domestic demand and fostering “new quality productive forces” (continue to focus on higher value-added manufacturing sectors). All quite sober and realistic aspirations. My sense is there’s some kind of retreat to the good, old-fashioned Deng maxim of “hide your strength, bide your time”. This isn’t Xi of the wolf warrior diplomacy phase. Maybe the thinking is that when your chief rival is losing friends and alienating people all over the world, why not position yourself as a quieter, level-headed and more responsible power that people can get behind. As much as many commentators believe this war shows China’s limitations on acting as a global superpower, it is possible they are waiting and playing the long game. Global Policy Watch #2: The Summit of AI’s ImpactGlobal issues and their impact on India—Pranay KotasthaneThe daily AI discourse has a familiar cadence. Who’s building the biggest models? Will there be chip export controls on chips going to China? How many GPUs has the Indian government empanelled? How will getting into Pax Silica change the game? These questions matter. But if they are the only questions we ask, we’re putting the cart before the horse. This is where Michael Mazarr’s new RAND report/book, A New Age of Nations: Power and Advantage in the AI Era, comes in. There are many books that claim to evaluate national competitiveness in the AI age. But most of these accounts fixate on narrow technological challenges, such as access to GPUs, data centres, and models. But Mazarr makes the case that “success in the AI Era is more a societal challenge than a technological one.” Countries that win the AI era won’t simply be those with the best models, but those that take the necessary steps to make their societies more competitive. The book begins by acknowledging the transformative power of a general-purpose technology like AI. Rooted in a thorough analysis of prior technological revolutions, Mazarr sets the problem statement quite nicely:
He makes the provocative point that goes against the current winds, with every country thinking of a technical AI strategy:
So, what determines a society’s competitive advantage? For this, Mazarr relies on a prior study for the US Office of Net Assessment, which identified seven societal characteristics that shape whether nations rise or decline in long-term rivalries. These are national ambition and will, unified national identity, shared opportunity, an active and engaged society, effective government institutions, a learning and adaptive intellectual climate, and diversity and pluralism. In A New Age of Nations, he applies this framework to AI, examining how artificial intelligence might strengthen or weaken each of these characteristics. This resonated with me deeply because the dominant narrative around AI still gravitates towards input controls on chips, compute, data centres, and models. These are the shiny objects of geopolitical commentary. But as I’ve argued repeatedly in this newsletter, if you think GPUs are the thing stopping a country from getting ahead, you’ve already lost the game. The real bottleneck is whether a society can absorb, deploy, and manage the effects of a powerful general-purpose technology. Nandan Nilekani has been making a related argument in the Indian context. He has long maintained that India will be the use-case capital for AI, and recently described diffusion—the ability to take technology from lab to field at population scale—as the real competitive edge. The Aadhaar example he frequently cites is instructive. Aadhaar didn’t succeed because India invented some breakthrough biometric technology. It succeeded because institutions were redesigned, and organisations across sectors absorbed the technology into their daily operations. Nilekani’s emphasis on diffusion is important but only addresses the ‘how’. Mazarr goes one step further to ask: what enables a society to diffuse effectively in the first place? His answer is the seven societal characteristics. Read through an Indian lens, these seven characteristics become a useful diagnostic tool. While the report is written primarily for an American audience, the framework is universally applicable. So let’s try to evaluate where India ranks on them. Start with national ambition and will. This is arguably India’s strong suit. The Viksit Bharat 2047 vision has done something that Mazarr considers essential. It has created a society-wide aspirational narrative that cuts across party lines and social strata. Whether one agrees with every policy detail or not, the idea that India should aim to be a developed nation by its centenary of independence is the kind of national ambition that Mazarr identifies as the fuel for sustained competitive effort. The AI mission, the semiconductor push, and the recent AI Impact Summit all sit within this broader narrative. India scores well here, and this is an underappreciated asset. A unified national identity is more complex. India has always had to negotiate unity amidst extraordinary diversity. Mazarr’s point is that societies with a shared sense of who they are can mobilise more effectively during technological transitions. India’s civilisational identity provides a bedrock here, but the centrifugal pressures of competitive populism and social polarisation are real. Add to that the recent divisive trends of growing communalisation and a State-backed caste census. The question is whether the AI transition can itself become a unifying project, like the way the space programme or the UPI story generated a sense of collective achievement. If AI is perceived as something that benefits everyone, it can strengthen national cohesion. Shared opportunity is where India has both its biggest promise and its biggest risk. The promise of AI is that it can increase access to expertise in healthcare diagnostics, legal assistance, agricultural advisory, education, etc. India’s scale means that even modest AI applications, if they reach the masses, can generate enormous value. That’s where the focus on building multilingual text-to-speech and speech-to-text also fits in. But the risk is that the benefits of AI accrue primarily to a thin layer of English-speaking, digitally fluent professionals in a handful of cities. Mazarr’s framework reminds us that societies in which the gains from technological revolutions are broadly shared tend to outperform those in which they are concentrated. An active and engaged society. What Mazarr describes as a society with a vibrant civic life and an entrepreneurial, energetic population is another area where India has underlying strengths. India’s sheer demographic energy points to a society that is anything but passive. The challenge is channelling this energy productively. A society where a significant portion of young people are either unemployed or underemployed is one where activity turns into frustration rather than innovation. Effective institutions. This, in my assessment, is India’s most acute weakness within the Mazarr framework. India’s State capacity constraints are well-documented. Deploying AI in governance requires not just buying software but fundamentally rethinking how government agencies process information, make decisions, and deliver services. The successful examples, such as GST’s data architecture, CoWIN during the vaccination drive, and the Direct Benefit Transfer infrastructure, work because they combined technology with institutional redesign. But these remain islands of excellence in an ocean of institutional mediocrity. A learning and adaptive intellectual climate presents a mixed picture. India produces a large number of STEM graduates and has a deep bench of AI researchers, many of whom go on to work in other countries. The deeper question is whether the education system fosters the kind of adaptive, critical thinking that a society needs to navigate a technological revolution. Credentialism won’t cut it in an era that demands continuous reskilling and intellectual flexibility. On the other hand, the explosion of online learning platforms, the growth of vernacular tech content, and the sheer hunger for upskilling among young Indians suggest that the demand for a learning culture exists. The supply side is what needs urgent attention. Finally, diversity and pluralism. Mazarr argues that societies which welcome diverse perspectives and allow open debate tend to be more innovative and adaptive. This is, in many ways, a natural Indian advantage. India’s diversity of languages, cultures, and viewpoints is a source of resilience and creativity. The challenge is ensuring that this diversity is genuinely leveraged. India’s multilingual AI efforts and the push for Indian-language models are steps in the right direction, but much more is needed. The balance sheet is neither as bleak as techno-pessimists suggest nor as rosy as summit declarations imply. Mazarr’s framework is valuable because it reframes the AI competition. India cannot out-invest the US and China in frontier AI research, and it doesn’t need to. What it can do is create the societal conditions that allow it to be an exceptionally effective adopter and diffuser of AI. But that requires a domestic reform agenda and not just a technology procurement agenda. This book is worth your time and attention. HomeWorkReading and listening recommendations on public policy matters
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