A strong foreign policy has been instrumental in India’s rise as an emerging economic power. After gaining Independence from Britain, India has attained an important role in global politics through its distinctive policies. The relation between foreign policy and development, mainly in the economic sphere will be explained through three phases. The initial years which can be characterized mainly by NAM (Non-Aligned Movement), followed by the transition to an open economy during the 1990s. And finally, the Look East policy which has gained prominence due to PM Narendra Modi’s vision of India as an economic powerhouse.
Prime Minister Jawaharlal Nehru, armed with socialist faith and disdain for consumerism adopted economic socialism as the cornerstone of India’s policy. This model combined the economic planning of the communist states like China and USSR with the democratic elements of the West. Nehru sought financial and technical help from all industrialized countries to transform India into a giant of the heavy industry. India received generous help from the Soviet Union, benefitting in industrialization of steel industry and in sensitive areas of space and defense. Most of India’s public sector companies and institutions like IITs, IIMs were established with Soviet cooperation. The fierce competition of the Cold War induced Western assistance through the IMF and World Bank for long term infrastructure development. Indian diplomats were instrumental in facilitating both rivals for the benefit of Indias development through diplomacy.
India as a founding member of the Non aligned movement sought to identify itself as a neutral. This helped in creating a unique position for India away from the bipolar vision of the communists and capitalists. Much needed assistance was procured from both blocs to develop India in all spheres, discouraging foreign investment through import substituting industrialization. As a fragile new country, the foreign aid was off great benefit for India to survive adverse conditions created by colonial exploitation. Technical aid from the USSR and financial assistance of the West accelerated the growth in the socialist styled democracy. Majority of the countries involved with NAM looked upon India as a leader in the third bloc of developing countries, desiring to escape colonial domination.
Transition To An Open Economy
The 1991 balance of payment crisis led India to dynamically reform its trade policies. Loans were arranged through Bretton Woods Institutions for a period of structural adjustment. The Indian government had to reduce trade restrictions and allow foreign investment so that the Indian economy would not crash. Prime Minister Narasimha Rao and Finance Minister Manmohan Singh simplified the import/export licensing system and significantly reduced import tariffs. All these polices ushered India into the fully integrated world trading system shedding its image as an inward looking protectionist country. Special economic zones and trade facilitation centers were set up to improve multilateral trade.
India was one of the founding members of the World Trade Organization and started actively improving regional bilateral ties. Transaction costs were substantially reduced to facilitate more investment by foreign business. The era of economic cooperation opened doors for innovation in the domestic market and faster growth rates. Due to the exceptional growth rates as a result of economic reforms, India was able to attract attention at a global level strengthening its international profile. Indian government increased its engagement in forums like WTO and UN acting as the representative of the developing nations.
Another key factor of economic growth is based on energy security, India as country scarce of oil and gas resources is dependent on foreign nations to fulfill its energy requirements. India mostly depend on the Middle Eastern countries like Saudi Arabia, Qatar and Iran due to the geographical proximity. In recent decades the Arab world has become an important market for Indian products and the region also provide livelihood to about 7 million Indians. Any upheaval in the region will not only displace millions of Indians living there but also create enormous social and economic disruptions, with unpleasant consequences in India. The Gulf is Indias main source of expat remittance with Indian workers sending $40 billion in foreign exchanges. The engagements with these countries influence uninterrupted energy supply which is critical for the domestic economy. The volatile political landscape in the Islamic nations coupled with our frosty relations with Pakistan act as a hindrance for energy procurement. The Israeli Palestinian conflict further complicates our relations with the oil rich nations due to India’s close ties with Israel. All these factors act as a road block for India’s energy requirement.
This has opened up alternate avenues for active engagement with countries in Latin America and Africa which have been long ignored. A sustainable model can only be possible by diversifying imports and investing in oil exploration in other countries. In recent years bilateral trade with Brazil has grown substantially with cooperation extended to diverse fields such as space technology and pharmaceutics. India is also engaging with Brazil in various international forums like BRICS and IBSA to increase trade. Increased opportunities in Latin American is being utilized to attain energy security and fuel economic growth. India’s expertise in science and technology is also being used for collaboration to ensure sustainable mutual trade. Latin America and the Caribbean region are of enormous value to India’s future growth.
Look East And Modi Doctrine
PM Narendra Modi has positioned himself as a leader of a young aspiring nation that has much to offer in terms of culturally and economically. The declaration of June 21st as International Yoga Day and the numerous cultural gestures during oversea visits support this claim. Congress led governments always had been constrained by the Nehruvian legacy on foreign policy matters. BJP with Modi at the helm was able to carve a more appropriate role for 21st century India, with an innovative foreign policy. The BJP government was true to its 2014 manifesto linking economic diplomacy to achieve regional cooperation. Brand India is being used as the driver for the country’s effort to increase trade volume and foreign investment. The radical shift from a belligerent stance to a more proactive role has helped the promotion of India as a welcoming market for foreign players.
Modi government has made it clear that India’s neighborhood is the top priority, PM had invited heads of neighboring states namely Bangladesh, Bhutan, Nepal, Pakistan and Sri Lanka for the swearing in ceremony. He has made efforts to build up regional trade by prioritizing the initial state visits to Bhutan, Nepal and Sri Lanka, to counter the growing influence of China. Of the ASEAN countries, Indonesia has become India’s largest trading partners, totaling a value of more than $19billion. SAARC countries including the newly admitted Afghanistan has agreed to collectively work for smooth flow of goods and services in the latest summit in New Delhi. South Asia is one of the least integrated regions in the world, India can act as a responsible leader in initiating transfer of technology and capital to regional countries. Cross border investment will be easier due to the cultural links among the participating nations with a vision of a united South Asian community.
The North Eastern states can also be developed as it is the only overland connection to mainland SouthEast Asia. The strategic utility of theses states can improve the connectivity and infrastructure of the seven sisters substantially. Due to Indias increased engagement with Myanmar and the high rate of growth in the region, open borders and economic integration can bring prosperity to all involved parties. As the chair of SAARC India has actively endeavored for effective regional cooperation, with initiatives like SAARC Development Fund, SAARC Food Bank hoping to create common economic development. Reconnecting the subcontinent through trade can help raise the living standard of people and create a common space for advancement. Many cross border projects like the India Myanmar Thailand Highway and the Delhi Hanoi rail link via Myanmar and Thailand envisions a highly connected region to facilitate trade and commerce. The free trade arrangements currently being negotiated among major Asian countries are seen as major building blocks that could gradually develop into a region wide trade benefiting all participants. The Look East policy has the potential to convert the NorthEast into thriving, well connected economic space linking India and the Southeast Asia. This has led to India explore sub regional initiatives in the East with Bangladesh, Bhutan, Nepal popularly known as the BBIN countries. The power sector of of all BBIN countries is connected to Indian National Power Grid, with talks on other connectivity links under discussion. India through its distinctive foreign policy has created a role as a credible balancing power to the dominating Chinese. Smaller countries in SouthEast Asia fearing the imposing unilateralism of China sees India as a security provider.
The LEP focuses not only on the ASEAN members but also expanded to include South Korea, Japan, Australia, New Zealand and other countries in the East. The policy has sought to significantly expand its geographical coverage to include other countries in East Asia, like Japan, Australia, South Korea, and Mongolia. Over the two decades, not only has India progressed from a dialogue partner to the present status of a strategic partner in respect to ASEAN but has also established strategic partnerships on a bilateral basis. The scope of strategic and economic cooperation is expected to follow an upward trajectory.
Japan is steadily evolving as a strategic partner to support India against the hegemony of Chinese domination. The proposed Comprehensive Economic Partnership Agreement is an important initiative with long term economic significance. Japan is a perfect partner due to the enormous technological strengths which can be utilized the by large market and talent pool in India. Japan is also considering joint projects with India in some of the ASEAN countries besides expressing its interest to invest in India’s North East. Examples of the blossoming strategic, economic, and technological partnership between the two countries include Japan’s commitment to invest $35 billion in India over five years (in infrastructure and smart cities, among other area).
Former Foreign Minister Salman Khurshid has called Vietnam one of the pillars of India’s “Look East” policy. India and Vietnam have recently signed a number of agreements that include allotment of seven oil blocks for exploration, enhanced defense and security cooperation, increased economic and people to people exchanges besides regional and multilateral cooperation. While Vietnam supports India’s LEP and its increasingly important role in regional and global forums, they also expressed the resolve to ‘foster the implementation of signed agreements’ and observed that cooperation in national defense was an important pillar in their strategic partnership. India is widely envisaged as a key power and one of the major stakeholders in the emerging East Asian security dynamic
Energy security is an important component of the Act East Policy of the Modi government, which has been manifested in the recent MoUs that India has signed with partner countries. New Delhi and Hanoi have moved forward in energy cooperation despite some objections by China. Vietnam is also exploring the possibility regarding procurement of naval weaponry. India has agreed to supply four off shore naval patrol vessels to Vietnam and Modi has announced that India will “quickly operationalize the $100 million Line of Credit that will enable Vietnam to acquire new naval vessels. India has developed a vibrant defense relationship with some of the Asean member states, with a regular holding of joint military exercises. The Navy has been the most active, considering the huge maritime dimension to India-Asean relations. Thus the Act East Policy has a very strong and effective agenda that can ensure peace and progress in the entire East and also the whole world in the true spirit of Vasudhaiv kutumbkam – “the world is one family” . It is fair to conclude that the progress India has achieved after Independence would not have been possible without the continuous efforts of diplomats and officials who dictate Indian policy.
By – Niranjan Jose
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