Trends India should Watch out for in 2018
Arvind Gupta, Director, VIF

The year 2017 will go down in history for two momentous developments that are shaping the future of India – the GST and digitalization, and formalization of Indian economy post demonitisation. The ruling party’s massive win in the UP assembly elections and the narrow win in Gujarat state elections set the stage for the general elections for 2019.Economic growth, youth aspirations, jobs, farmers’ distress, center-state relations, and perceptions about nationalism will drive the political agenda in the coming year.

Worryingly, the rather unexpected73-day long military standoff with China at Doklam near the India-Bhutan-China border tri-junction accentuated the uncertainties in India-China relations. If in 2016, it were the surgical strikes by the Indian Army that defined India’s new found nonsense approach to cross-border terrorism, in 2017 it was the Doklam standoff, which was eventually resolved diplomatically, that gave confidence to the Indians that India can stand firm in the face of Chinese pressures.

The Kulbhushan Yadav case riveted the imagination of the entire nation. While the outcome of the first round of International Court of Justice (ICJ) trial gave some comfort to the nation, the shabby treatment given by the Pakistani authorities to the family of Kulbhushan Yadav in Islamabad only raised disgust and doubts about Pakistan’s motivations. Even as the year was marked by unabated ceasefire violations along the Line of Control in J&K and numerous infiltration attempts, newspapers reported about a quiet meeting between the National Security Advisors (NSA) of India and Pakistan relation in Bangkok towards the end of December. This shows that India Pakistan relation remain extremely complex and simplistic approaches do not work.

The economic situation in the country showed mixed trends. While the GDP growth was reasonable 6.2 percent, the rise of the global crude oil prices marked the end of the era of easy prices. The growing stress in the Indian banking system on account of bad loans was also a cause of worry for depositors. The increasing current account deficit and less than satisfactory performance on export front would continue to be a cause of concern in 2018.

1. Global Trends: No Solutions in Sight on Major Global Issues

The US

President Trump consolidated his domestic and global standing well during 2017. But he remains unpredictable. Transactional style in diplomacy is now his hallmark. Buoyed at home by the success of massive tax reform which had not happened since 2010, he will vigorously pursue his ‘America First’ policy which causes unease among US allies about its commitment to their security and alliance obligations. The US is likely to give greater attention to internal balancing and build its economic and its domestic economy and strengthening the military. Even though the American economy is expected to grow at a healthy rate of over three percent, the US space for maneuver will shrink as it follows America First policies which is often at the expense of its allies.

Despite Trump’s soft corner for Russia, the relations between the two countries are unlikely to improve in 2018. Differences over Syria, Ukraine, North Korea, Europe, Iran are too wide to be bridged easily. In fact something akin to cold war between the two over military deployments in Europe in the context of INF treaty is likely to intensify.


In the year 2018, China will consolidate its position globally and regionally, using Belt and Road initiative (BRI) as an instrument. The current trends indicate that President Xi will pursue the policy of making China a global power as he promised at the 19thParty Congress. Its assertive policies towards neighbors are likely to continue. Most neighbors will find it difficult to resist the pitch for BRI.

Xi has a major job at hand – addressing some of the structural problems the Chinese economy has – i.e., the debt problem, regional inequalities, and environmental degradation. We will see many changes on the domestic front in line with the decisions taken at the 19th Party Congress in 2017. China will continue its hardline policies on the minorities at the same time making investments in Tibet and Xinjiang.

Both US and China harbor deep suspicions about each other but will try to manage their relations so as not to allow their tensions go out of control. The economic interdependence between the two will remain as strong as ever. China-US tango on global issues will gain tempo. China will try and make the yuan a global currency at the expense of the dollar.

North Korea

Tensions in the Korean peninsula will continue at a heightened level. The rising tensions in the North Korean peninsula may make the two countries collaborate as otherwise the tensions can get out of hand. If North Korea continues with its proactive nuclear and missile tests, the pressure on Japan and South Korea to reassess their respective security polices will buildup. The US attitude to North Korea imbroglio will be key to shaping the security environment in the region.


Thanks to Chinese assertiveness in South China Sea, ASEAN’s tight linkages with the Chinese economy and uncertainty caused by Trump’s policies, ASEAN will have shrinking space of maneuver vis-a-vis China. ASEAN ties with the US may fray.


It is too early to say how the idea of Indo-Pacific will shape up. The concept is as yet undefined and much will depend on whether the members of the Quad show some ambition and formulate a roadmap.


Fresh from an impressive election victory, Japan, under PM Abe may become more strident in its policies and provide some resistance to Chinese assertiveness in the region. The opportunities for India and Japan coordinating their activities in different regions of the world have opened up.


Putin is likely to win the Presidential elections for the third time. Russian resurgence is likely to be continue as oil prices remain at a higher level than in 2017. No significant improvement in US-Russia relations can be expected. Russia will continue to come even closer to China. Russia will Pursue with the military reforms aimed at strengthening is military power.

West Asia

The situation in the West Asia is changing rapidly. Many surprises can be expected due to the sharpening of the Iran-Saudi rivalry, the US decision to shift its embassy to Jerusalem, the strengthening of Assad’s position in Syria due to the weakening of Islamic State (IS), Turkish activism, the issue of the Kurds, the unending war in Yemen, and rapid changes in the Saudi political and economic landscape brought about by the young Mohamad bin Salman. The close cooperation between Saudi Arabia, the US and Israel motivated by the animosity to towards Iran will deepen in the year. This will be a major driver of change in the region. Qatar, isolated in the Gulf may get closer to Iran, which in turn will change the strategic balance in the Gulf.

Uncertainty about Iran’s nuclear programme will continue if JCPOA fails, and as Trump has promised, US unilaterally withdraws from the agreement. The Congress has to take a decision. If the US withdraws, the anxieties about Iran’s nuclear programme will resurface.


The Shanghai Cooperation Organisation (SCO), with India and Pakistan as new members, may think in terms of further expansion. Russia will promote Eurasia Economic Union to retain its sphere of influence in Eurasia. India should consider concluding a trade agreement with EEU.

European Union (EU)

The European Union is undergoing internal convulsions in the aftermath of Brexit. European countries are likely to grow at different speeds. The stresses in the EU are building as separatism and the right fundamentalism raise head in several countries. EU finds it difficult to have a global role. China has taken advantage of EU’s internal turmoil and has significantly enhanced its presence there by increasing investments, building infrastructure and acquiring plum European companies. EU-US relations are also not well. Tensions with Russia can be expected to grow. India EU relations are looking up but the momentum needs to be accelerated.

2. India’s Neighbourhood is Likely to be Unstable


Elections are due in Pakistan in 2018. Pakistan’s political landscape is changing. New leaders will emerge. Mainstream parties like Pakistan Muslim League-Nawaz (PMLN), Pakistan People’s Party (PPP) and Muttahida Qaumi Movement (MQM) are facing internal difficulties. The key development to watch will be whether the militant jihadi parties will find place for themselves in Pakistani politics and whether mainstream parties will lose their sheen. Pakistani army is emerging as a key player in Pakistani politics. It remains to be seen whether it will support the Islamic parties. Pakistani economy will face headwinds as debt servicing obligations grow. Pakistan is relying upon China Pakistan Economic Corridor (CPEC) but apprehensions are growing in Pakistan about the debt implications for the country.


Nepal is entering a new phase in its political development after the holding of first elections under the new constitution. The emergence of left alliance as the ruling alliance will change the politics of the country. There could be problems within the left alliance too. The future PM Oli has a tilt towards China and had been staunch opponent of the so called Indian blockade. India will have to find a way of dealing with the newly elected left alliance which is likely to follow the policy of strategic balance between India and China.

China’s influence in Nepal is set to grow. Indo-Nepal Relations will be put to new tests. India will have to deal with PM Oli who has a pronounced tilt towards China and Madhesis whose aspirations remain unfulfilled.

India provides considerable assistance to Nepal but is usually unfavorably compared to China when it comes to perceptions about timely delivery. India will need to address this problem of delivery.


Bangladesh will go to the elections next year. But the election politics will heat up this year. The ruling Awami League is expected to face incumbency. The Bangladesh National Party (BNP) is also looking to have Indian understanding if not support. Radical trends in Bangladesh are growing. India would also need to be watchful of the radical groups using Indian territory to hide. The Rohingya refugee issue is a tricky one for India. India would need to tread careful path between Bangladesh and Myanmar.


The trend towards authoritarianism is growing in Maldives. Dissent is almost completely stifled and the opposition parties are facing the pressure from the government. Maldives under President Yameen has turned towards China, Saudi Arabia and Pakistan in its quest for support. Pro-China trend in Maldives is growing. India will need to ensure that China’s influence in Maldives is not at the expense of India.


India has excellent relations with Bhutan. The two countries came closer during the Doklam crisis. They stood firm against Chinese pressures in 2017. One should expect China stepping up its pressure on Bhutan in 2018, particularly on the boundary settlement. India and Bhutan should maintain coordination and synergy in their actions.


The situation in Afghanistan is likely to remain precarious. The level of violence was exceptionally high in 2017. The same trends are likely to continue. While the US military involvement in Afghanistan is likely to increase. If China-Pakistan -Afghanistan parleys in Beijing in December 2017 are any indication, China is likely to enhance its role in Afghanistan. China may extend the CPEC projects to Afghanistan.

3. Technology will Continue to Disrupt the World

Artificial Intelligence (AI), robotics, machine learning, data analytics, block chain technologies, quantum computing, solar and wind technologies, will evolve and cause further economic, social and even political disruptions. Block chain technologies are being adopted in numerous sectors, particularly in financial sector for better security and data protection. Internet of Things will spread, raising not only the extent of digitization of economic and social life but also raising concerns about cyber security.

Machines are becoming increasingly intelligent and acquiring the ability of taking decisions in real time. The rise of Lethal Autonomous Weapon Systems (LAWS) has drawn the attention of the UN and a Governmental Group of Experts (GGE) has been set up to examine the technological, military, legal, ethical and moral dimensions of the autonomous systems. The GGE will continue its deliberation in 2018. India is chairing the GGE and has the potential to steer the group in constructive direction.

The biggest apprehension from new technologies is about the job losses. Nearly 47 percent of jobs in the US are in jeopardy as machines begin to replace humans, first in routine jobs, and then in more knowledge intensive sectors like legal and healthcare. 3-D printing is set to revolutionize the manufacturing sector. Electric vehicles are likely to grow at exponential rate. Solar power will become even cheaper and more usable. Space tourism is on the anvil.

Cyber security trends are disturbing. Following the paralysing effect of the “Wannacry” worm attack, the fear of cyber extortions or ransomware has increased many folds. But more sophisticated cyber-attack weapons will be made. As a Mcafee’s report said: “adversaries will certainly employ machine learning themselves to support their attacks, learning from defensive responses, seeking to disrupt detection models, and exploiting newly discovered vulnerabilities faster than defenders can patch them.” Due to the lack of agreement on norms in cyber space states will be emboldened to protect their interests and take to development of cyber weapons.

Data is the new currency of power. Many countries are making stringent laws about data protection to safeguard personal data. This trend will grow. The EU general data protection regulation (GDPR) will be enforced in 2018 which will have huge implications for companies dealing with data. The EU GDPR has 99 articles setting out the rights of individuals which the companies must respect. A number of obligations are placed on organisations covered by the regulation. A fine of up to €20 million or 4% of global annual turnover, whichever is higher, will be imposed on any company which is found in breach of these provisions. The Indian companies doing business in Europe will need to be alert about these provisions.

The year 2018 is likely to see considerable global, regional and internal volatility. India will face the challenge of navigating the choppy waters of geopolitics, economy and technology dexterously. On the foreign policy front a lot of promises have been made and India needs to focus on timely delivery. On the domestic front, it should be ensured that the country approaches the sensitive 2019 elections calmly. Divisive issues should be eschewed by political parties. On the technology front, India needs to build a robust ecosystem of innovation. On the economic front policies should focus on job growth, agriculture, manufacturing and the stressed banking sector.

(Views expressed are of the author and do not necessarily reflect the views of the VIF)

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