Think Again: India's Rise - By Sumit Ganguly

"India Will Be the World's Next Great Power."

Not so fast. The dramatic opening of India's hidebound economy, substantial improvements in India-U.S. relations, and rapid, sustained economic growth for well over a decade have led most analysts and policymakers to conclude that India will easily emerge as one of the world's great powers in the 21st century. In 2010 while visiting India, U.S. President Barack Obama said, "India is not just a rising power; India has already risen." And just a few weeks ago, Defense Secretary Leon Panetta called India a "linchpin" in the U.S. "pivot" to Asia, while Secretary of State Hillary Clinton described the U.S.-India tie as a "critical bilateral relationship."

Certainly, there has been reason for such optimism. Until the recent global economic downturn, the Indian economy was the second-fastest-growing in the world, reaching a rate of 9.8 percent in October 2009. Poverty dropped 5 percentage points between 2004 and 2009, according to the widely accepted Indian National Sample Survey. Meanwhile, Indian firms have been going global. In 2006, Indian steel magnate Lakshmi Mittal purchased the French company Arcelor, creating the world's largest mining and steel firm. In 2008, the Indian conglomerate Tata purchased the iconic British Jaguar and Land Rover brands from Ford. And, despite some uncertainty now hovering over India's investment climate, key global firms continue to bet on India. In late June, Coca-Cola, which had left India in the early 1970s, decided to invest $5 billion by 2020. Similarly, Swedish furniture retailer Ikea announced that it would invest almost $2 billion in the next few years.

On foreign policy, India has shown growing global aspirations -- and capabilities. It is the fifth-largest player in the reconstruction of war-ravaged Afghanistan, and its reach extends well beyond its neighborhood. At the recent G-20 summit in Los Cabos, Mexico, Prime Minister Manmohan Singh pledged $20 billion to an endowment designed to shore up the IMF's lending capacity.

Unfortunately, the fascination with India's growing economic clout and foreign-policy overtures has glossed over its institutional limits, the many quirks of its political culture, and the significant economic and social challenges it faces. To cite but one example, at least 30 percent of Indian agricultural produce spoils because the country has failed to develop a viable supply chain. Foreign investors could alleviate, if not solve, that problem. But thanks to the intransigence of a small number of political parties and organized interest groups, India has refused to open its markets to outsiders. Until India can meet basic challenges like this, its greatness will remain a matter of rhetoric, not fact.