India has seen tremendous growth since the beginning of the 21st century due to major reforms in critical sectors. But despite being the world’s fastest-growing economy, India has faced criticism in certain quarters of the world regarding the inclusiveness of the growth and whether it is performing on its full potential.

There is no doubt that India has the capacity and the capability to be among the key global players in world affairs, but it is facing serious barriers that are holding the country back from realizing to its full potential. There are certain key challenges faced by the country on political, economic and strategic fronts.

Current India and its problems

The fundamental reason behind India’s laggard performance is its federal democratic system. Federal democracy is an excellent thing overall but in the case of economic decision-making it can be a roadblock to growth. Indian democracy always faces the clash of ideas with regards to whether the country wants social justice or economic equality at the top of its agenda. Too many political voices result in fragmented societies that more often than not fail to build consensus. It’s one of the prime reasons that India has not achieved all of the objectives of its five-year plans.

These clashes of political ideology have helped in the creation of the political economy. A political economy is one in which decisions are always made in order to suit the political interests of respective vote banks rather than to fulfill the larger national interest. The existence of this political-economy structure can be attributed to the fact that India chose to be a mixed economy at the start of its independence from Britain. Two diametrically opposite organizing principles – that is, capitalism and collectivism – organized together into a coherent system will always produce chaos.

In a capitalist economy, competition forms the base of the economy, while cooperation forms the base of a socialist economy. But in the case of a mixed economy, the existence of cooperation as well as competition is highly illogical. Intervention becomes a tool to regulate and control the market, which affects efficiency compared with wholly state-backed or free-market economies.

The vision for 21st-century India

In spite all these drawbacks India does have certain qualities, such as political stability and a sound democracy. But in order to reach its aspirations to be a force of reckoning on the world stage, India needs to increase its influence and growth on three fronts – economic, strategic and cultural.

Much progress on these factors could be achieved if India changed the current political structure. India currently has a federal democracy where people at the top decide what’s best for the country. But a transition toward participatory democracy would put the power in the hands of common people, enabling more people to have a say in policy decision-making and making the system more transparent.

The aim of participatory democracy is to achieve more egalitarian redistribution of power and greater democratization of the political process at both at the national and the local level. It will remove corruption at both levels. The biggest achievement of being part of the participatory democracy is inclusiveness of growth rather than agenda-driven politics by parties, thus making growth a prime focus for everyone.

The path to economic renaissance

For any nation to succeed long-term, economic stability and growth play an important role. India has never seen consistent growth over a long period of time. The major problem lies in inconsistent economic policy as well as poor market regulation and the failure to establish better market forces despite the fact that the Indian economy has fairly strong economic fundamentals that have withstood internal policy failures or cohesion, but it has failed miserably in its response to external pressures.

In order to enhance its economic superiority, the Indian economy must withstand external pressures in terms of fluctuating exchange rates and so forth. The current massive rise in the global crude-oil price has started inflating its oil-import bill, which constitutes 80% of its energy requirements, which will help balloon the current-account deficit. It also results in a fluctuating currency, which directly affects prices of goods and services, further affecting purchasing power and draining  the country’s reserves.

In order to strengthen the economy against any external economic pressure or volatile conditions, India should be more capital-centric and work toward strengthening the rupee through the internationalization of its currency. The three prerequisites for internationalization of a currency are gross domestic product, volume of international transactions and substantial average growth. In order to fulfill all three objectives, India should pursue free-trade deals with neighboring nations with the rupee as the main mode of exchange.

Being labeled as one of the least open capital accounts among emerging nations, relaxation of capital controls is one of the best ways to attract foreign investment as well as being crucial for creating demand and stability of the rupee in the international market.

Ironically, India’s share of global trade is 1.7%, which is far below its potential. To increase this share, there are certain key reforms that need to be pursued, especially on infrastructure, banking and skills development, but foremost attention to the rural economy is required.

The rural economy forms a crucial engine for the country’s economic growth and contributes 50% of consumption and 70% of the workforce. The gap between rural and urban economic growth has almost touched double digits, pointing to weak rural activity.

In order to enhance the productivity of the rural economy as well as entry to the middle-income group of countries, India needs to focus on three key factors: competition, deregulation, and market access. The focus should be shifted to multiple income sources through various tertiary activities. The states should work in coordination with the central government in order to provide direct access for rural products to the urban economy through the Internet.

India needs to introduce various social programs that will enhance the purchasing power of the rural economy. This would directly increase demand in the economy, thus helping a major chunk of the population get out of poverty.

Military upgrade: need of the hour

The economic and political might of a nation is not justified until it has a military superiority to project its power beyond its shores. The Indian military does have this capability, but it primarily considers two state actors – Pakistan and China – as threats to its existence. In the future, the modern battlefield will be completely different, as it will no longer be on the borders but in our homes and critical infrastructure. It’s not going to be at any geographical location but in cyberspace.

State actors will be equally as threatening as non-state actors such as terrorist organizations, which will create havoc all across the world, displaying their cyber prowess by crippling infrastructure, both political and financial, of countries without deploying conventional violent means.

India needs to build its cyber-defense capabilities. It needs to establish a unified cyber-command and draft a new strategy for how Indian ground forces will operate, fight and campaign successfully across multiple domains – space, cyberspace, land, air and sea – against any enemy in the future. The new strategy must be based on super-empowered individuals and small groups that are mobile and can simultaneously fight in every domain of warfare, which will replace conventional large units. India needs to tap a pool of young talent to fortify its anti-cyber-warfare capabilities, not only for defensive purposes but offensive too.

Soft power potential

A country needs hard power to protect its integrity as much as it needs soft power in order to enhance the social and public perception of the country. Surprisingly, India ranks near the bottom in the annual list of London-based Portland Communications, which rates countries according to soft power. This is despite India having used its culture, including films and music, to spread its global influence across the world. This is particularly unfortunate because India has all the characteristics needed to be among the world’s leading soft powers.

India has a lot to share with the world and if it pursued the right strategies it would have a global impact. Multinational corporations and technology innovation could prove to be the major sources of promoting soft power. India should invest more in sports, and not only for the sake of winning more medals at the Olympics. As a large, topographically diverse country with unique talents and a large population, India should start contributing much to scientific growth and innovation as well as exploring new territories to promote its soft power.

The utopian idea about a new India as an emerging superpower will never be realized until the people, society and their leadership work in coordination with one another for their shared goals and feel responsible toward their contribution to the world’s growth and peace.